1994 (5) TMI 81 - AT - Central Excise

SSI Exemption - Brand name of other manufacturer affixed on goods not eligible for SSI exemption

Summary

Issues Involved:
1. Entitlement to the benefit of exemption under Notification No. 175/86-C.E.
2. Time-bar issue regarding the demand raised in the show-cause notice.
3. Whether the goods were correctly classified and the duty correctly calculated.
4. The validity of penalties and fines imposed.

Issue-Wise Detailed Analysis:

1. Entitlement to the Benefit of Exemption under Notification No. 175/86-C.E.:

The appellants contended that they were entitled to the benefit of the exemption under Notification No. 175/86-C.E., arguing that the embossing of the brand names 'Escorts' and 'B.M.' occurred at the casting stage, which were not the specified goods. They claimed that the castings fell under Heading 73.25 and were exempted under Notification No. 217/86-C.E. when used as inputs for manufacturing final products. They asserted that no trade name was affixed during the manufacture of the final products, and thus, the exclusion clause of Notification No. 175/86-C.E. did not apply.

The Collector, however, rejected this argument, stating that the castings were used to manufacture parts exclusively for M/s. Escorts Ltd. and M/s. Bandhu Machinery (P) Ltd., and the brand names were prominently embossed, making the connection between the manufacturers and the specified goods evident. The Collector concluded that the appellants were not eligible for the exemption under Notification No. 175/86-C.E.

On appeal, the Tribunal's majority held that the benefit of Notification No. 175/86-C.E. was not available to the appellants as the specified goods (motor vehicle parts and printing machinery parts) bore the brand names of other entities. The Tribunal emphasized that the affixing of the brand names at the casting stage was immaterial since the goods assumed trade significance only upon becoming specified goods, thus falling within the mischief of Clause 7 of the Notification.

2. Time-Bar Issue Regarding the Demand Raised in the Show-Cause Notice:

The appellants argued that the demand was time-barred as the department had full knowledge of their activities, including the embossing of brand names, due to regular inspections and audits. They contended that there was no intention to defraud the revenue, and the non-mentioning of the brand names in the classification list did not amount to suppression or mis-declaration.

The Collector rejected this plea, stating that the appellants had not declared the embossing of brand names in their classification list, constituting suppression of facts. The Tribunal, however, found that this aspect required further verification and inquiry. The matter was remanded to the original authorities for de novo adjudication to determine whether there was conscious and positive suppression of facts or if the department was aware of the embossing of brand names.

3. Whether the Goods Were Correctly Classified and the Duty Correctly Calculated:

The appellants contended that the goods were in an unfinished stage when seized and had not been delivered to the parties, arguing that the calculation of the duty was incorrect. They also claimed that some seized pieces did not bear any brand names.

The Tribunal did not specifically address this issue in detail, as the main focus was on the applicability of the exemption notification and the time-bar issue. However, the Tribunal's decision to remand the matter for further inquiry on the time-bar issue implicitly acknowledged the need for a thorough examination of the classification and duty calculation.

4. The Validity of Penalties and Fines Imposed:

The Collector imposed penalties and fines on the appellants for contravening the Central Excise Rules by using brand names of other entities and not declaring them in the classification list. The appellants argued that they were under a bona fide belief that they were not affixing brand names on specified goods and that there was no intention to evade duty.

The Tribunal's majority decision to remand the matter for further inquiry on the time-bar issue also affected the validity of the penalties and fines. The final determination of whether the penalties and fines were justified would depend on the outcome of the de novo adjudication regarding the time-bar issue and the appellants' intent.

Conclusion:

The Tribunal's final order, based on the majority opinion, held that the benefit of Notification No. 175/86-C.E. was not available to the appellants due to the provisions of Para 7 of the said notification. The matter was remanded to the lower authorities for de novo adjudication on the extension of the larger period for the demand, considering the appellants' arguments and the need for further verification and inquiry. The appeal was disposed of in these terms.