1995 (12) TMI 108 - AT - Central Excise

Issues Involved:
1. Eligibility for exemption under Notification No. 175/86-C.E.
2. Ownership of the brand name 'ARK'.
3. Affixation of the brand name on goods versus containers.
4. Applicability of extended period for the demand.
5. Onus of proof regarding eligibility for exemption.
6. Time-bar of the demand.

Detailed Analysis:

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

The primary issue was whether M/s. Khanna Industries was eligible for exemption under Notification No. 175/86-C.E. The exemption was denied by the Collector on the grounds that the goods were affixed with the brand name of another person, M/s. Arksan Pvt. Ltd., who was not eligible for the exemption. The Tribunal noted that the relevant paragraph of the Notification denies exemption where specified goods are affixed with a brand name or trade name of another person who is not eligible for the grant of exemption. The Tribunal concluded that the goods were indeed affixed with the brand name of another person, i.e., Arksan Pvt. Ltd.

2. Ownership of the Brand Name 'ARK':

The appellants contended that the brand name 'ARK' was owned by M/s. Khanna Industries and not by Arksan Pvt. Ltd. They provided evidence, including a letter from the Dy. Registrar of Trade Marks, recommending the stylized trade mark to be treated as an associated trade mark of M/s. Khanna Industries. However, the Tribunal found that the stylized logo was developed for Arksan Pvt. Ltd., who paid for its development. The evidence, including advertisements and statements from the advertising company, indicated a connection between the stylized logo and Arksan Pvt. Ltd. Thus, the Tribunal upheld the Collector's finding that the brand name in stylized form belonged to Arksan Pvt. Ltd.

3. Affixation of the Brand Name on Goods versus Containers:

The appellants argued that the stylized trade mark was affixed only on the cardboard containers and not on the goods themselves, and thus, should not attract disqualification under the Notification. The Tribunal rejected this argument, stating that the brand name can be affixed on the goods or on the containers. The Tribunal emphasized that the relevant paragraph of the Notification should be interpreted to include the affixation of the brand name on containers, as excluding it would render the condition meaningless for goods that cannot have a brand name affixed directly on them.

4. Applicability of Extended Period for the Demand:

The appellants argued that the extended period could not be invoked as they were under a bona fide belief that they were entitled to the exemption. The Tribunal noted that the Department was aware of the facts after the investigation started in January 1993, but the Show Cause Notice was issued on 10-2-1994, covering the period up to April 1993. The Tribunal did not make a definitive ruling on this issue but indicated that it is intrinsically linked with the question of eligibility for exemption.

5. Onus of Proof Regarding Eligibility for Exemption:

The Tribunal highlighted that the onus of proving that M/s. Arksan Pvt. Ltd. was not eligible for small-scale exemption rested with the Revenue. The Tribunal referred to case law, including the decision in Collector v. K. Mohan & Co. Exports, which established that the burden of proving that goods are covered by the exclusion to exemption is on the Department. The Tribunal found that the Revenue had not discharged this burden and thus remanded the matter for a de novo decision on this issue.

6. Time-Bar of the Demand:

The appellants contended that the stylized brand name was not used prior to April 1992, and thus, the demand was time-barred. The Tribunal noted that the Collector had not properly dealt with this argument and had not given a definite finding on this question of fact. The Tribunal instructed the Collector to arrive at a definite finding on this issue upon remand.

Conclusion:

The Tribunal set aside the impugned order and remanded the matter to the Collector for a de novo decision. The Collector was instructed to determine the eligibility of M/s. Arksan Pvt. Ltd. for exemption under Notification No. 175/86, as amended, and to provide a definite finding on the use of the trade mark from April 1992 and other related matters concerning the time-bar. The appeals were allowed by way of remand.

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