2019 (6) TMI 1244 - AT - Central Excise

SSI Exemption - Use of brand name - Department has been of the view that since the appellant have been using the brand name of other persons they should have got themselves registered with the Department since inception in July, 2011 and should have paid Central Excise duty on clearances of branded goods - HELD THAT - The investigations have brought it out very firmly and categorically that the appellants have been engaged in the manufacture of wall putty and decorative white cement and other cement paints etc. They have also been found using brand name Diamond Gold belonging to other person namely M/s. Diamond Waterproof Compound Pvt. Ltd. and even during the investigation, they have tried to mislead the proceedings by stating that the goods are being got manufactured on job work basis from some other manufacturers, however, it has been established that the goods were being manufactured by the appellants only. It can be seen that the price of Diamond Gold brand as well as for Suraksha Gold brand for 40Kgs packing of wall putty is same at ₹ 1050/-. The appellants have failed to adduce any concrete evidence to contradict the above findings of the adjudicating authority. There is nothing wrong in adopting the MRP which was found mentioned on the packing of finished goods which was put for seizure at the factory premises of the appellant for deciding the effective rate of clearance for the relevant financial years. The investigation has established beyond doubt that the appellants have been engaged in the manufacture of wall putty, decorative white cement etc. with the brand name of some other person and on the basis of record of clearances recovered by the investigation team, it is established that the appellants have crossed the exemption limit which is available for SSI units and therefore, they should have been taken a proper Central Excise registration from the Excise authorities. They were also required to make clearances of products manufactured and branded with other persons brand name on payment of Central Excise duty which they have failed. Appeal dismissed - decided against Appellant.

Issues Involved:
1. Non-registration with the Department and non-payment of Central Excise duty.
2. Incorrect valuation of goods for Central Excise duty.
3. Eligibility for SSI notification benefit.
4. Classification and assessment of decorative white cement.
5. Seizure and confiscation of goods.
6. Imposition of penalties under Central Excise Rules.

Issue-wise Detailed Analysis:

1. Non-registration with the Department and non-payment of Central Excise duty:
The appellant was engaged in manufacturing wall putty, decorative white cement, and exterior paints using the brand names of other persons. The Department contended that the appellant should have registered with the Department since July 2011 and paid Central Excise duty on the clearances of branded goods. The appellant failed to discharge the Central Excise duty on clearances exceeding the threshold limit for SSI notification, leading to a demand of ?1,40,11,254/- for the period 08.07.2011 to 23.07.2012, confirmed by the adjudicating authority.

2. Incorrect valuation of goods for Central Excise duty:
The appellant argued that the valuation of goods cleared under the brand name 'Suraksha Gold' and without any brand was incorrectly based on the higher MRP of 'Diamond Gold,' resulting in an inflated duty demand. The appellant claimed that 'Diamond Gold' products were of superior quality with higher MRP, while 'Suraksha Gold' and unbranded products had lower MRP. However, the Department found that the MRP printed on the seized goods was the same for all three types of products, justifying the valuation method used by the adjudicating authority.

3. Eligibility for SSI notification benefit:
The appellant claimed eligibility for SSI notification benefit for the financial year 2012-2013, asserting that the aggregate value of clearances did not exceed ?4 crores. They also argued that the value of traded goods should be deducted from the aggregate clearances. However, the investigation revealed that the appellant was engaged in manufacturing and using brand names of other persons, which disqualified them from SSI exemption. The total value of clearances, including traded goods, exceeded the threshold limit.

4. Classification and assessment of decorative white cement:
The appellant contested the classification of decorative white cement under heading 3214, arguing it should be under Chapter heading 2523 2100. They also contended that large quantities of wall putty sold in bags of more than 25 kg should be assessed under section 4 of the Central Excise Act, 1944, on 'transaction value,' not MRP. However, the Tribunal found this argument was raised for the first time before them and was not maintainable as it was not presented before the adjudicating authority.

5. Seizure and confiscation of goods:
The appellant argued that the seized goods valued at ?14,14,350/- were recorded in their private records and had not been cleared from the factory premises, thus should not be confiscated. However, the Tribunal found the goods were manufactured using the brand name of other persons without valid registration and cleared without payment of duty, justifying the seizure and confiscation under Rule 25 of the Central Excise Rules, 2002.

6. Imposition of penalties under Central Excise Rules:
Penalties were imposed on the appellant and its Directors under Rule 26 of the Central Excise Rules, 2002, and section 11 AC of the Central Excise Act, 1944. The appellant contested the penalties, arguing that the show cause notice did not establish their active involvement in evasion. However, the Tribunal upheld the penalties, finding that the investigation established the appellant's engagement in manufacturing and clearing goods without payment of duty, using misleading defenses.

Conclusion:
The Tribunal found no shortcomings in the Order-in-Original, confirming the findings and dismissing all appeals. The investigation firmly established the appellant's manufacturing activities, use of brand names of other persons, and non-compliance with registration and duty payment requirements. The valuation method, seizure, confiscation, and penalties were upheld as justified and legally sound.

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