1995 (10) TMI 88 - AT - Central Excise

Summary

Issues Involved
1. Eligibility for exemption under Notification No. 175/86-C.E.
2. Sustainability of demand confirmed by invoking the extended period u/s 11A of the Central Excises & Salt Act, 1944.

Summary

Issue 1: Eligibility for Exemption under Notification No. 175/86-C.E.

The appellants, engaged in manufacturing Electronic Push Button Dialer and EPABX systems, were denied exemption under Notification No. 175/86 (as amended) because they used the brand name "Shyam," owned by M/s. Shyam Antenna Electronics Pvt. Ltd. The Collector held that the appellants were ineligible for exemption as they affixed their products with a brand name owned by another entity, thus violating para 7 read with Explanation VIII of the said notification. The appellants contended that the brand name "Shyam" was registered for different products (Antenna Systems) and not for their products (Telephone and Telecommunication equipment), arguing that the exemption should still apply. They cited the Tribunal's decision in Precise Electronics v. Collector, which supported their interpretation. However, the Tribunal followed the Madras High Court's judgment in Bell Products Co. v. U.O.I., which held that using a brand name of another person, irrespective of the product category, disqualified the manufacturer from exemption. Thus, the appellants were not eligible for the exemption.

Issue 2: Sustainability of Demand Confirmed by Invoking the Extended Period u/s 11A

The Collector confirmed the demand by invoking the extended period u/s 11A, alleging suppression of facts by the appellants. The appellants argued that the department was aware of their use of the "Shyam" brand name and that there was no requirement under Rule 173B to declare the brand name in the classification list. They claimed to have acted on a bona fide belief that they were eligible for exemption, supported by the Board's letter and the Tribunal's decision in Precise Electronics. The Tribunal found merit in the appellants' argument, citing the Apex Court's rulings in Collector v. Champhor Drugs and Liniments and Padmini Products v. Collector, which emphasized that mere failure or negligence does not constitute suppression of facts. Thus, the extended period for confirming the demand was not sustainable, and the differential duty was recoverable only for the normal limitation period of six months.

Penalty

The Tribunal noted that the goods seized were found to be non-offending, and considering the non-sustainability of the suppression charge, reduced the penalty from Rs. 5 lakhs to Rs. 25,000.

Conclusion

The appeal was disposed of with the Tribunal holding that the appellants were not eligible for exemption under Notification No. 175/86 and that the demand for the extended period was unsustainable, thus limiting the recovery to the normal period of six months and reducing the penalty to Rs. 25,000.