2015 (12) TMI 203 - AT - Central Excise

Denial of SSI Exemption - Clubbing of clearances by the proprietorship firm holding 90% in the Limited Company - Whether own brand name assigned to others and SSI unit cannot claim the exemption - Held that - Board has specifically stated and clarified that Limited Companies whether public or private are separate entities and partnership firm is separate entity than the Ltd. Company. In the case in hand, the Limited Co. being separate entity and distinct from shareholders, it cannot be said that Shri Venkatesh having 90% of shares in ICPL by virtue of being proprietor of Venky & Co., the clearances could be clubbed. In our view Revenue is arguing against their own Circuar which is incorrect. This view was taken by the Hon ble High Court of Madras in the case of Campion Plastic Industries Ltd - 1996 (2) TMI 146 - HIGH COURT JUDICATURE AT MADRAS . Accordingly, we hold that the clearances effected by the sole proprietorship firm Vinky & Co. and ICPL cannot be clubbed for arriving at the total clearances of ICPL. Brand name Irony was registered with the authorities in the name of Venky & Co. and from the deed of assignment it could be deduced that the said Brand name was assigned to the appellant ICPL in this case. Nothing is brought on record to show that even after assigning the Brand Irony , Venky & Co. were using and clearing the products with the said Brand name. In the absence of any such evidence we have to hold that by virtue of being Brand assigned to them, ICPL is entitled to avail the benefit of small scale exemption. - clearances effected by ICPL under the Brand Irony are eligible for exemption while the clearances effected on the Brand Terminator are not eligible for exemption and the appellant is required to discharge duty liability on the goods cleared with Brand name Terminator and interest thereof. The lower authorities are directed to quantify the amount of duty to the appellant. Reason to interfere with the impugned order as the adjudicating authority has given an option to redeem the same on payment of fine of ₹ 50,000/- which, in facts of this case is seems to be reasonable - appellant could have entertained a bonafide belief and the issue being interpretation of Notification the penalties imposed on the appellants are harsh and needs to be set aside - Decided partly in favor of assessee.

Summary

Issues:
1. Clubbing of clearances for exemption limit calculation.
2. Eligibility for small scale exemption based on Brand name usage.
3. Confiscation of seized goods.

Clubbing of Clearances:
The issue revolved around whether two entities, Venky & Co. and ICPL, should have their clearances clubbed for calculating the exemption limit. The Tribunal disagreed with the lower authority's decision to club the clearances based on the distinct legal entities of a sole proprietorship firm and a Private Limited Company. Referring to CBEC Circular No. 6/92, the Tribunal highlighted that Limited Companies are separate entities from partnership firms. The Tribunal held that the clearances of Venky & Co. and ICPL cannot be clubbed due to their separate legal identities and geographical locations.

Eligibility for Small Scale Exemption:
Regarding the usage of Brand names "Irony" and "Terminator," the Tribunal found that the Brand "Irony" was assigned to ICPL by Venky & Co. through a deed of assignment. As the Brand was registered in ICPL's name and there was no evidence of Venky & Co. continuing to use it, ICPL was deemed eligible for the small scale exemption for clearances under the "Irony" Brand. However, since there was no evidence of assignment for the "Terminator" Brand, ICPL was held ineligible for the exemption on clearances under that Brand.

Confiscation of Seized Goods:
The Tribunal upheld the decision on the confiscation of seized goods, allowing redemption on payment of a fine. The Tribunal considered the fine amount reasonable in the circumstances. Additionally, the Tribunal set aside the penalties imposed on the appellants, noting that the issue involved interpretation of a Notification and the penalties were deemed harsh.

In conclusion, the Tribunal ruled that clearances under the "Irony" Brand were eligible for exemption, while those under the "Terminator" Brand were not. The Tribunal upheld the confiscation of seized goods with an option for redemption and set aside the penalties imposed on the appellants due to the nature of the issue.