1993 (6) TMI 175 - AT - Central Excise

Issues Involved:
1. Entitlement to the benefit of Notification No. 175/86.
2. Alleged suppression of facts and misdeclaration.
3. Invocation of the larger period for demand.
4. Imposition of penalty.

Issue-wise Detailed Analysis:

1. Entitlement to the benefit of Notification No. 175/86:
The appellants claimed a concessional rate of excise duty under Notification No. 175/86 for their product "Starweld Welding Electrodes." The Collector of Central Excise, Ahmedabad, determined that the appellants were not entitled to this benefit because they affixed the brand name "Starweld," owned by M/s. Advani Oerlikon Ltd. (AOL), on their products. The Collector concluded that the appellants were using the brand name and logo of AOL, which disqualified them from the exemption under the notification. The Collector cited that the product was manufactured with technical know-how from AOL, and the raw material "flux" was exclusively supplied by AOL, thus creating a connection in trade between the goods and AOL.

2. Alleged suppression of facts and misdeclaration:
The appellants were accused of failing to fulfill the conditions of Notification No. 175/86, not determining the correct duty liability, and not filing the price list in the proper proforma. The Collector held that the appellants had concealed the technical collaboration agreement with AOL and the use of AOL's trade mark/brand on their products. Despite the appellants' contention that they had disclosed all relevant information to the department, including through their classification lists and annual reports, the Collector found that there was deliberate suppression of facts to evade central excise duty.

3. Invocation of the larger period for demand:
The department invoked the larger period for demand, alleging that the appellants had committed fraud and willful suppression of facts. The Collector extended the demand period based on the belief that the appellants had not informed the department about their collaboration with AOL and the use of AOL's logo. However, the Tribunal found that the department was aware of the technical collaboration and the use of the logo, as admitted by departmental officers during cross-examination. The Tribunal concluded that the larger period could not be invoked because the department had knowledge of these facts.

4. Imposition of penalty:
The Collector imposed a penalty of Rs. 10 lakhs under Rule 173Q of the Central Excise Rules, 1944. The appellants argued that there was no willful misstatement or suppression of facts and that all procedures had been followed. The Tribunal, considering the evidence and the fact that the department was aware of the technical collaboration and logo usage, found that the penalty imposition was not justified. The Tribunal partly allowed the appeal, restricting the demands to a period of six months prior to the date of the Show Cause Notice, and confirmed the impugned order otherwise.

Conclusion:
The Tribunal concluded that while the appellants were not entitled to the benefit of Notification No. 175/86 due to the use of AOL's logo and brand name, the larger period for demand could not be invoked as the department was aware of the relevant facts. The penalty imposed was also found to be unjustified. The appeal was partly allowed, limiting the demands to six months prior to the Show Cause Notice.

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