2024 (8) TMI 991 - AT - Central Excise

Clandestine removal - SSI exemption - clubbing of clearances - brand name Parrot which belongs to another (M/s Premier fireworks defunct) - Department has not produced any document to establish unaccounted purchase of raw material, use of extra labour, receipt of unaccounted sale proceeds - HELD THAT - From the excerpts of SCN, it can be gathered that the case of the department is that the partnership firm founded by the father with his two sons continue even after his death. Though both sons are independently manufacturing and selling fireworks, as the original Vadivel Fireworks remain and continue, their independent clearances should be considered as manufacture and clearance from a single factory i.e; the original Vadivel Fireworks. This allegation is totally erroneous as original Vadivel Fireworks cannot remain and continue to exist after the death of a partner (Shri Vadivel) unless there is evidence to show that other partners have agreed to constitute and continue the new partnership. No such evidence is forth coming. Even by the case of department both sons have shared 10 sheds each and are doing manufacture and selling of fireworks separately. The clearances of each manufacturer is eligible for SSI exemption. These aspects have not been examined at all. By clubbing the clearances of both premises (20 sheds) the demand of duty has been raised, which in our view cannot sustain. The department has mainly relied on 711 invoices seized from the premises. In the impugned order the Commissioner (Appeals) has not rendered any finding as to how these 711 invoices are admissible and acceptable in evidence. Further, if such large quantities of fireworks are alleged to be manufactured and sold, there should be proper evidences for purchase of raw materials. The impugned order does not reason this out - The confirmation of duty on the basis of these 711 invoices therefore cannot sustain. Use of brand name Parrot which belongs to M/s. Premier Fireworks which was run by Shri. Vadivel as sole proprietorship - HELD THAT - After his death this firm has become defunct. So it cannot be said that the brand name Parrot belongs to M/s. Premier Fireworks. This allegation also to deny the SSI exemption cannot sustain. The confiscation of goods, demand of duty and penalties imposed cannot sustain. However, it requires to be stated that the original authority vide Order-in-Original dated 13.03.2002 has confirmed duty demand of Rs.5,828.00 and equal penalty. The appellant has not filed any appeal against this order - As the appellant has not filed any appeal against this order, it has attained finality. The impugned order is set aside and the Order-in-Original dated 13.03.2002 and 26.03.2002 are restored - The appeals are partly allowed.

Issues Involved:
1. Validity of the show cause notices issued to the original M/s. Vadivel Fireworks post the death of a partner.
2. Clubbing of clearances of M/s. Vadivel Fireworks and M/s. Premier Fireworks.
3. Eligibility for SSI exemption for goods bearing the brand name "Parrot."
4. Allegations of clandestine removal of goods and the validity of 711 invoices seized.
5. Confirmation of duty demands and penalties imposed.

Detailed Analysis:

1. Validity of the Show Cause Notices:
The primary contention was whether the show cause notices issued to the original M/s. Vadivel Fireworks were valid after the death of the partner, Shri. Vadivel, in 1993. According to Section 42(c) of the Partnership Act, 1932, a partnership dissolves upon the death of a partner. The Tribunal noted that the department issued show cause notices to the original Vadivel Fireworks, claiming it continued to exist post the death of Shri. Vadivel. The Tribunal found this contention erroneous, as there was no evidence showing that the other partners agreed to continue the partnership. Consequently, the show cause notices were deemed invalid.

2. Clubbing of Clearances:
The department argued that the clearances of M/s. Vadivel Fireworks and M/s. Premier Fireworks should be clubbed, treating them as a single entity. However, the Tribunal found that both sons, Shri. V. Selvaraj and Shri. V. Arumugasamy, were independently manufacturing and selling fireworks from their respective sheds. The Tribunal held that the clearances of each manufacturer should be eligible for SSI exemption and that clubbing the clearances to raise duty demands was unsustainable.

3. Eligibility for SSI Exemption for Goods Bearing the Brand Name "Parrot":
The Tribunal examined whether the use of the brand name "Parrot," originally owned by M/s. Premier Fireworks, disqualified the appellant from SSI exemption. It was found that after the death of Shri. Vadivel, the brand name "Parrot" did not belong to anyone. Citing precedents like Unjha Ayurvedic Pharmacy and Hem Paints, the Tribunal held that if a brand name is not owned or registered by anyone, it could be used by anyone, and SSI exemption could not be denied. Thus, the use of the brand name "Parrot" did not disqualify the appellant from SSI exemption.

4. Allegations of Clandestine Removal of Goods and Validity of 711 Invoices:
The department's case relied heavily on 711 invoices seized from the premises, alleging clandestine removal of goods. The Tribunal noted that the authenticity of these invoices was not established, as the person who prepared and signed them, Shri. Prasad, was not examined. Additionally, there was no evidence of unaccounted raw material purchases or sale proceeds. The Tribunal found that the confirmation of duty based on these invoices could not be sustained due to insufficient evidence.

5. Confirmation of Duty Demands and Penalties Imposed:
The original authority had confirmed a duty demand of Rs.5,828.00 and an equal penalty in its Order-in-Original dated 13.03.2002. The appellant did not appeal against this order, and thus it attained finality. The Tribunal decided to set aside the impugned order and restore the original orders dated 13.03.2002 and 26.03.2002, which had dropped the remaining proceedings.

Conclusion:
The Tribunal set aside the impugned order and restored the Order-in-Original dated 13.03.2002 and 26.03.2002, thereby partly allowing the appeals with consequential reliefs. The Tribunal found that the show cause notices were invalid, the clubbing of clearances was unsustainable, the use of the brand name "Parrot" did not disqualify the appellant from SSI exemption, and the allegations of clandestine removal were not substantiated by sufficient evidence.

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