2018 (3) TMI 613 - AT - Central Excise

Manufacture - Whether the activity of quality checks, branding with CONA brand and packing of electrical parts and fittings received in loose condition amount to manufacture in light of note 6 of Section XVI of Central Excise Tariff Act and Section 2(f)(iii) of Central Excise Act and in respect of goods falling under Chapter 85.36, whether it amounts to manufacture in terms of IIIrd Schedule of Central Excise Act, 1944 w.e.f. 1-3-2003? - Held that - The product purchased by the appellant is already complete and finished. Merely a quality test, which is nothing but by connecting with the power plug for checking whether it is working or not but by this quality test there is no transformation of the product, which is already in the fully manufactured form, therefore all the electrical goods purchased by the appellant are completely in manufactured form - this so called activity of quality testing, branding and packing of the already manufactured goods will not be covered by note 6 of Section XVI of the Central Excise Tariff - the appellant is not engaged in the manufacturing of the goods, they are only doing trading activity of bought out goods. SSI exemption - brand name - whether the appellant is owner of brand CONA and consequently entitle for SSI exemption? - Held that - brand was transferred to the appellant by way of Assignment Deed dated 10-12-1996. Moreover, the appellant also made application to Trade Mark Registry on 20-12-1996 for ownership of CONA brand in their name which was registered in their name on 21-2-2003 but it was effective from 10-12-1996. These facts clearly establish that from 10/20-12-1996 appellant became brand owner of CONA - appellant is owner of the brand CONA and consequently entitle for the SSI exemption. Whether extended period under proviso to section 11A(i) and penalty under Section 11AC and/or redemption find are invokable/imposable? - Held that - the entire facts regarding use of brand name CONA as well as activity of the appellant was well within the knowledge of the department. Moreover after getting convinced initial proceedings was dropped therefore it cannot be said that there was any mala fide intention or suppression of facts on the part of the appellant - extended period not invokable - penalty also set aside. Demand is neither sustainable on merit nor on limitation - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Whether the activity of quality checks, branding with CONA brand, and packing of electrical parts and fittings amounts to manufacture.
2. Whether SSI exemption under various notifications is available when the appellant is a joint owner of the brand name CONA.
3. Whether the extended period under Section 11A(i) and penalties under Section 11AC and/or redemption fine are applicable.

Issue-wise Detailed Analysis:

1. Activity Amounting to Manufacture:
The adjudicating authority relied on Note 6 of Chapter XVI of the Central Excise Tariff Act and Section 2(f)(iii) of the Central Excise Act, 1944. Note 6 stipulates that converting an incomplete or unfinished article into a complete or finished article amounts to manufacture. Section 2(f)(iii) includes packing, repacking, labeling, or any treatment rendering the product marketable as manufacturing activities. The tribunal found that the appellant's activities of quality testing, branding, and packing did not transform the goods from an incomplete or unfinished state to a finished product. The goods purchased were already complete and finished, thus the appellant's activities did not constitute manufacturing.

2. SSI Exemption and Brand Ownership:
The appellant argued that the brand name CONA was originally registered to Shri. Naraindas M. Motwani and later assigned to the appellant through a Deed of Assignment. The brand was registered in the appellant's name effective from 10-12-1996. The tribunal held that the appellant was the owner of the CONA brand from 10-12-1996, and thus eligible for SSI exemption. It was also noted that even if a brand is registered to multiple entities, each entity can be considered an owner, and the condition that an assessee should not use another's brand name does not apply.

3. Extended Period and Penalties:
The tribunal found that the demand for the period 1-4-2001 to 31-3-2006 was time-barred as the show cause notice was issued beyond the normal period of one year. The appellant had disclosed their activities to the department, and previous proceedings on the same issue had been dropped without a show cause notice. The tribunal concluded that there was no suppression of facts or mala fide intention by the appellant, making the invocation of the extended period unjustified. Additionally, the value of clearances during the normal period was below the SSI exemption threshold, rendering the demand unsustainable.

Conclusion:
The tribunal set aside the impugned order, holding that the demand was not sustainable on merits or on limitation grounds. The appeal was allowed, and the order was pronounced in court on 22/02/2018.