2025 (1) TMI 534 - AT - Central Excise

Denial of SSI exemption - use of brand name SaBari , which belonged to others - invocation of extended period of limitation - interest - penalties. Whether the Appellant A1 is entitled to exemption of Notification No. 8/2003-C.E. as amended? - HELD THAT - The Appellant using the brand name of others did not own that particular brand name during investigation which according to the Revenue itself was the brand name registered for other different products. Evidently, these products had no business connection whatsoever with the Appellant herein. Further, the Department had not conclusively proved that the brand name for kitchen items has been used by the Appellant with the intention to establish a connection, or to indicate a connection, with others who are into business of dealing in other items other than kitchen articles. The use of brand name SaBARI in the instant case can be termed as fortuitous, there being no intention on the part of the appellant to use the said brand name to show a connection with the Assessee s goods and such other person - the Appellant is entitled to SSI exemption under Notification No. 08/2003 as amended. Quantification of duty payable - HELD THAT - It appears that invoice wise sale turnover for all the years has been arrived at by the investigation. But the reasons for not allowing deductions towards Bought out items, value of supplies to SEZs and post manufacturing expenses are not forthcoming. As such, for quantification of the duty, the issue is remanded to the Original Adjudicating Authority for arriving at the taxable turnover allowing the benefit of the SSI exemption. Invocation of Extended period of limitation - HELD THAT - The Sabari brand name was registered for different items by different persons and there is no clash of interest while using this brand name for manufacture and sale of kitchen appliances by the Appellant. The arguments that the Appellant is of genuine impression that he is eligible for SSI exemption is acceptable. As such, there is no justification for invocation of the extended period and demand for normal period only is sustainable in the facts of this appeal. Interest - HELD THAT - The Appellant is entitled to provide a Chartered Accountant s certificate supporting his claims to the Department and is directed to pay the duty amount along with applicable interest if any, for the normal period after crossing the threshold limit, under intimation to the department. The interest under Section 11AB of Central Excise Act, 1944 shall be applicable on such recalculated duty. Penalties - HELD THAT - The issue of eligibility for SSI exemption benefit and also Limitation have thus been decided in favour of the Appellant. As such, imposition of penalties on the Appellant A1 and Mr. Thangevelu, the Managing Director (A2) is not legal and so ordered to be set aside. Conclusion - i) The use of brand name SaBARI in the instant case can be termed as fortuitous, there being no intention on the part of the appellant to use the said brand name to show a connection with the Assessee s goods and such other person. The Appellant is entitled to SSI exemption under Notification No. 08/2003 as amended. ii) For quantification of the duty, the issue is remanded to the Original Adjudicating Authority for arriving at the taxable turnover allowing the benefit of the SSI exemption. iii) There is no justification for invocation of the extended period and demand for normal period only is sustainable in the facts of this appeal. iv) The interest under Section 11AB of Central Excise Act, 1944 shall be applicable on recalculated duty. v) The penalties set aside. The impugned Order-in-Original is modified to the extent of re-computation of duty payable after allowing the SSI exemption benefit for normal period. Thus, this appeal is allowed by way of remand.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the Appellant A1 is entitled to Small Scale Industry (SSI) exemption under Notification No. 8/2003-CE when using a brand name allegedly belonging to others.
• Whether the duty demand is affected by the limitation period.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to SSI Exemption

• Relevant legal framework and precedents: The SSI exemption under Notification No. 8/2003-CE is applicable to small-scale industries up to a certain turnover, provided they do not use the brand name of another person. The definition of a brand name includes any mark that indicates a connection in the course of trade with a person using the name.
• Court's interpretation and reasoning: The court examined whether the Appellant's use of the brand name "SaBari" indicated a connection with another entity. It was argued that the brand name was used since 2004 without objection, and the registration of the brand name was pending during the investigation period.
• Key evidence and findings: The court considered the continuous use of the brand name by the Appellant, the lack of objections from other parties, and the eventual registration of the brand name in 2017.
• Application of law to facts: The court applied the legal test from previous judgments, including Bhalla Enterprises and Hisaria Electronics, which focused on the intention to indicate a connection with another's goods. The Appellant's use was deemed fortuitous without such intention.
• Treatment of competing arguments: The Department argued that the brand name belonged to others, but the court found no evidence of an intention to indicate a connection with another's goods.
• Conclusions: The court concluded that the Appellant was entitled to the SSI exemption as the use of the brand name did not indicate a connection with another entity.

Issue 2: Limitation Period

• Relevant legal framework and precedents: The demand for duty is subject to a limitation period unless there is evidence of suppression of facts or intent to evade duty.
• Court's interpretation and reasoning: The court evaluated whether the extended period for demand was justified based on the Appellant's actions and disclosures.
• Key evidence and findings: The Appellant had disclosed the use of the brand name and had no objections from others, indicating no intent to suppress information.
• Application of law to facts: The court found that the Appellant's belief in their eligibility for the exemption was genuine and that there was no suppression of facts.
• Treatment of competing arguments: The Department's claim of intent to evade duty was not supported by evidence, according to the court.
• Conclusions: The court held that the demand for duty was not justified beyond the normal limitation period.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: "The Assessee must satisfy the Authorities that there was no intention to disclose any business connection or that the use of the brand name was entirely co-incidental or fortuitous."
• Core principles established: The entitlement to SSI exemption hinges on the absence of intent to indicate a connection with another's goods through the use of a brand name. The burden is on the Department to prove such intent.
• Final determinations on each issue: The Appellant was entitled to the SSI exemption, and the demand for duty was limited to the normal period, with penalties set aside.

The judgment ultimately remanded the case for re-computation of duty payable, allowing the SSI exemption for the normal period and setting aside penalties imposed on the Appellants.