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2010 (12) TMI 26 - SC - Central ExciseSSI Exemption - Clubbing - User of brand name - Aggregate value of turnover - The flavours are researched and developed by PEL, but were allowed to be manufactured by the appellant with the code names given by PEL. The flavours are used in the manufacture of beverages like Gold Spot, Limca, Rimzim etc. - Held that - three companies in question were intertwined in their operation and management - Therefore it would likely seem that the purported fragmentation of the manufacturing process was but a mere ploy to avail of the SSI exemption. Piercing the corporate veil, when the notions of beneficial ownership and interdependency come into the picture, are no longer res integra. - turnover to be clubbed. Regarding brand names, The appellant herein manufactures flavours which fall within the ambit of the code names and it is a fact on record that these codes are key to identifying the flavours which are commercially transferable. - Since the appellant was not the owner of the said brand names in question, the Tribunal was justified in holding that the appellant will not be entitled to the benefit of SSI exemption
Issues Involved:
1. Clubbing of value of production/clearances of three companies for SSI exemption eligibility. 2. Denial of SSI exemption based on the use of product code names as brand names. Issue-wise Detailed Analysis: Issue I: Clubbing of Value of Production/Clearances The primary contention was whether the value of production/clearances of the appellant and two other companies (M/s PEL Ltd. and M/s PIL Ltd.) could be clubbed for determining eligibility for SSI exemption under Notification No. 1/93 CE dated 28.02.93. The Tribunal's decision was based on the precedent set by the Supreme Court in *Modi Alkalies and Chemicals Ltd. and Ors*, which emphasized that Circular 6/92 had no relevance post the commencement of Notification No. 1/93. The Tribunal found that the companies were interdependent and interrelated through financial and management control, thus justifying the clubbing of clearances. The Tribunal concluded that the companies were effectively controlled by a common core of directors and financial resources, including an interest-free loan from M/s PEL to the appellant. The Tribunal's decision to club the clearances was affirmed by the Supreme Court, which noted overwhelming evidence of interdependency and financial control, thereby rejecting the appellant's claim for SSI exemption from 1.4.1993 to October 1993. Issue II: Denial of SSI Exemption Based on Product Code Names as Brand Names The second issue was whether the product code names used by the appellant could be considered brand names under Explanation VIII of Notifications No. 175/86 and No. 1/93. The Tribunal held that the code names indicated a connection in the course of trade between the specified goods and the person using such names, which in this case was M/s PEL Ltd. The Tribunal found that the code names were used commercially to identify the flavours, which were originally developed by M/s PEL Ltd. and subsequently manufactured by the appellant. The Tribunal concluded that the appellant was not entitled to the benefit of the said Notifications for products with code names G-44T, L-33A, T-IIPC, T-IIP, R-66M, and K-55T, as these belonged to M/s PEL Ltd. This conclusion was supported by the fact that M/s PEL Ltd. had transferred the rights to these codes to M/s Coca Cola Company in November 1993, indicating their ownership. Conclusion: After thorough consideration, the Supreme Court dismissed the appeal, affirming the Tribunal's decision. The Court found no merit in the appellant's arguments and upheld the denial of SSI exemption based on both the clubbing of clearances and the use of product code names as brand names. The parties were ordered to bear their own costs.
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