2006 (11) TMI 5 - SC - Central Excise

Central Excise Benefit of SSI exemption under Notification No. 175/86-CE dt. 1.3.1986 is not allowable to respondent as they used brand name of trader and not the manufacturer of goods Case remanded for extended period of limitation has not been considered by CEGAT

Summary

Issues:
- Correctness of judgment by CEGAT granting exemption under Notification No. 175/86-CE
- Eligibility of M/s. Arkson Pvt. Ltd. for exemption
- Imposition of duty and penalty on respondents
- Interpretation of brand name usage and eligibility for exemption
- Consideration of extended period of limitation

Analysis:
1. Correctness of CEGAT Judgment: The Revenue challenged the CEGAT judgment granting respondents exemption under Notification No. 175/86-CE. The CEGAT found that the respondents were eligible for the exemption, specifically noting that the brand name "ARK" was considered a trade name of M/s. Arkson Pvt. Ltd. within the scope of the notification.

2. Eligibility of M/s. Arkson Pvt. Ltd.: Initially, the Collector, Central Excise denied exemption to the respondents, alleging the use of another person's brand name and suppression of facts. However, the CEGAT remanded the matter to determine the eligibility of M/s. Arkson Pvt. Ltd. under the notification. Subsequently, the Additional Commissioner confirmed duty demand and penalty, citing M/s. Arkson Pvt. Ltd.'s lack of eligibility due to not holding a specific license.

3. Imposition of Duty and Penalty: The Additional Commissioner upheld duty demand and penalty on the respondents, emphasizing non-compliance with rules and the exceeding sales figures of M/s. Arkson Pvt. Ltd. during specific years. The Commissioner (Appeals) later set aside this decision, considering the classification of goods under the notification and the compliance of SSI unit conditions.

4. Interpretation of Brand Name Usage: The issue of brand name usage and its impact on exemption eligibility was central. The CEGAT endorsed the Commissioner (Appeals) view, emphasizing the distinction between different brand names and the compliance with Rule 174. The Revenue contended that the small-scale industry's eligibility for exemption is contingent on being a manufacturer of specified goods.

5. Consideration of Extended Period of Limitation: The question of the extended period of limitation was raised but not conclusively addressed by the CEGAT. The respondents argued against its applicability, urging a decision on this matter.

6. Legal Interpretation: The Supreme Court clarified that the notification's focus is on 'specified goods,' necessitating eligibility for exemption in respect of those goods. The Court emphasized that the manufacturer must be eligible for exemption under the notification for the specified goods, rejecting interpretations that could render the notification redundant.

7. Decision and Remand: The Court acknowledged the distinction between M/s. Arkson Pvt. Ltd. and M/s. Arkson Engg. Co., affirming that the former's status as a trader impacts the exemption claim. The Court cited relevant legal precedents, including the Namtech Systems Ltd. case, to support the disqualification of exemption for goods affixed with an ineligible manufacturer's brand name.

8. Final Ruling: The Court allowed the appeals to a certain extent without costs, remanding the matter to the CEGAT for a specific consideration of the extended period of limitation, which was not adequately addressed in the previous judgments.