2005 (10) TMI 167 - AT - Central Excise

Issues involved:
1. Clubbing of clearances of PEL, PIL, and LFFL for SSI exemption eligibility.
2. Use of code names as brand names belonging to another person.
3. Correctness of the value of flavours manufactured by LFFL.
4. Eligibility of PEL for SSI exemption for the year 92-93.

Issue-wise Detailed Analysis:

1. Clubbing of Clearances:
The primary issue was whether the clearances of PEL, PIL, and LFFL should be clubbed to determine their eligibility for SSI exemption under Notification No. 175/86 and 1/93. The Tribunal observed that despite the interdependence and interrelationship of the three companies, their clearances could not be clubbed for the period 88-89 to 92-93 due to Board's Circular 6/92 and the Supreme Court's decisions in Supreme Washers (P) Ltd. and Modi Alkalies & Chemicals Ltd. However, for the period from 1-4-93 to October 1993, the clearances could be clubbed, and the benefit of Notification No. 1/93 could be denied as the value of clearances exceeded the permissible limit of Rs. 200 lakhs.

2. Use of Code Names as Brand Names:
The Tribunal examined whether the code names used by LFFL for various flavours represented brand names belonging to another person. It was found that the flavours were developed by PEL and had specific code names known in the trade. The Tribunal held that the code names indicated a connection in the course of trade between the specified goods and PEL, making LFFL ineligible for SSI exemption for the products with code names G-44T, L-33A, T-IIPC, T-IIP, R-66M, and K-55T for the years 89-90, 90-91, 91-92, and 93-94. However, the flavour with the code name L-22L (CITRA) was found to belong to LFFL, and thus, the bar contained in para 7 read with Explanation VIII of Notification 175/86 or 1/93 did not apply to it.

3. Correctness of the Value of Flavours:
The Tribunal addressed the allegation that LFFL undervalued its goods by artificially restricting the profit margin and not including various expenses in the price. The Commissioner had rejected this allegation, and the Tribunal agreed, noting that the Department failed to provide quantifiable data to support the claim of undervaluation. The Tribunal emphasized that the Department cannot determine the extent of profit a business should earn and that the investigation did not reveal the extent to which the manpower belonging to another company was working for LFFL. The charge of undervaluation was thus dismissed.

4. Eligibility of PEL for SSI Exemption for the Year 92-93:
The Tribunal considered whether PEL was eligible for SSI exemption in the year 92-93. The Department had alleged that the value of clearances of PEL, when clubbed with those of LFFL and PIL, exceeded Rs. 200 lakhs in the previous year, making PEL ineligible for the exemption. The Commissioner had rejected this allegation, and the Tribunal upheld the finding, citing Board's Circular 6/92 and the Supreme Court's decisions. PEL was thus entitled to the benefit of Notification No. 175/86 for the year 92-93.

Conclusion:
The Tribunal partially allowed the Revenue's appeal, holding that the value of clearances of the three units could be clubbed for the year 93-94 (till October 1993) and that certain code names represented brand names belonging to another person, making LFFL ineligible for SSI exemption for the specified years. The issue of differential duty was remanded for recalculation and further proceedings. All other contentions of the Revenue were rejected. The appeals were decided by way of remand on the specified terms.

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