1998 (5) TMI 253 - AT - Central Excise

Issues:
1. Eligibility of the Appellants for exemption under Notification No. 175/86 and Notification No. 1/93.
2. Interpretation of para 7 of the Notifications regarding brand name/trade name.
3. Justification for invoking a longer period under Section 11A of the Central Excise Act for demanding duty.
4. Demand of duty on notional interest on advance received by Appellants Precision Scales.
5. Breach of Central Excise Rules and penalty imposition on the Appellants.

Issue 1: Eligibility for Exemption under Notifications:
The Appellants, engaged in manufacturing electronic weighing machines, were found to have supplied weighing scales to another entity with a brand name not eligible for exemption under the Notifications. The Central Excise Officers seized goods and issued a show cause notice for demanding duty and penalty. The Commissioner confirmed duty demand and imposed penalties, leading to an appeal. The Appellants argued that the brand name was pre-existing in the software and not physically affixed by them, citing a Tribunal decision. However, the Tribunal ruled that the exemption applies to specified goods bearing an ineligible person's brand name, regardless of physical affixation. The Supreme Court's judgment in a similar case supported this interpretation, leading to the Appellants being held ineligible for exemption.

Issue 2: Interpretation of Para 7 of the Notifications:
Para 7 of the Notifications aims to prevent misuse of exemptions by ineligible persons affixing their brand names on specified goods manufactured by SSI units. The Supreme Court clarified that the exemption is intended to support small manufacturers competing with ineligible ones. The emphasis is on goods bearing an ineligible person's brand name, not just physical affixation by the SSI manufacturer. The Appellants' argument that physical affixation was necessary was rejected as the brand name appeared on the display and in the instruction manual, indicating clearance with the brand name. The Tribunal's decision was upheld, emphasizing the objective of preventing misuse of exemptions.

Issue 3: Justification for Demanding Duty under Section 11A:
The Department invoked a longer period under Section 11A of the Central Excise Act to demand duty due to the conscious arrangement between the Appellants and the Korean supplier resulting in the display of an ineligible brand name. The Appellants were deemed aware of the implications but failed to disclose it earlier. This justified the longer period for demanding duty, as the arrangement was not disclosed until the Department's visit.

Issue 4: Demand of Duty on Notional Interest:
The demand of duty on notional interest received by the Appellants was set aside as the advance was considered a security deposit and not shown to influence product pricing. The Department failed to demonstrate any price depression due to the advance received, leading to the rejection of this demand.

Issue 5: Breach of Central Excise Rules and Penalties:
The charges of breaching Central Excise Rules in relation to the confiscated goods were established with satisfactory evidence, justifying the confiscation and penalties imposed on the Appellants. However, considering the circumstances, the penalties were reduced from Rs. One lakh to Rs. 50,000 for Precision Scales and from Rs. 50,000 to Rs. 25,000 for Avery India. The appeals were disposed of accordingly, maintaining the confiscation and reduced penalties.

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