2019 (12) TMI 281 - AT - Central Excise

Benefit of N/N. 8/2003 CE dt. 01.03.2003 - use of brand name of others - the impugned order has mainly confirmed demand on the ground that the Appellant unit is not entitled for the SSI exemption as they have sold machines bearing the trade/ brand name Bhayani - whether the Appellant M/s Om Synthetics are entitled for the benefit of SSI notification No. 8/2003 CE dt. 01.03.2003 where the goods bearing brand name Bhayani was cleared by them and also whether demand of duty against both the Appellant is sustainable on alleged removal of goods without payment of duty? HELD THAT - In terms of co-ownership agreement entered into M/s Bhayani Engineering Co. on one part and M/s Om Synthetics and M/s Thakar Traders on second part for use of Trademark Bhayani on co-ownership basis. Thus it cannot be said that the said brand name is owned by others and hence the exemption cannot be denied. We also note that in case of M/s Thakar Traders, the other appellant the Appellate Authority has held that SSI exemption cannot be denied on ground of use of trade name Bhayani as it is co-owned - the Appellant are entitled for SSI Exemption on clearance of goods. Demand against M/s Thakar Traders - Supply of various types of wheels viz. Girder Wheels, Bruter wheels, Russian Wheels - HELD THAT - The demand has been made on ground that the clearances made by Appellant are liable for duty. The Appellant has contended that the Russian bruter wheel was sent for jobwork of grinding without following the procedure under central excise rule or job work exemption notification and the goods came into existence only after grinding of wheels were completed - The activity of manufacture as per Section 2 (f) of the Central Excise Act was completed and Russian Bruter wheel came into existence after the jobworker under took the process of grinding. In such case when the procedure as contemplated under Exemption Notification No. 214/86 CE dt. 01.03.86 was not followed the jobworker of the goods become liable for duty and the duty cannot be demanded from M/s Thakar Traders. We have also gone through the Annexure A . The goods detailed therein were for testing as appearing in seized record. No investigation was made as to why this record was maintained. In absence of any investigation it cannot be concluded that the record pertains to clandestine clearances. In such case the demands cannot be confirmed without corroborative evidence. No independent and corroborative evidence has been brought to show any excess procurement of raw material or clearance of goods to buyer which can show that the Appellant cleared goods clandestinely - the charges of any clandestine removal against the Appellant are not sustainable - the fines and penalties imposed upon the Appellants set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Entitlement to SSI Notification No. 8/2003-CE benefit for M/s Om Synthetics.
2. Sustainability of duty demand against M/s Om Synthetics and M/s Thakar Traders for alleged removal of goods without payment of duty.
3. Validity of evidence and statements used to support the duty demand.
4. Eligibility for SSI exemption based on the use of the "Bhayani" brand name.

Issue-wise Detailed Analysis:

1. Entitlement to SSI Notification No. 8/2003-CE Benefit for M/s Om Synthetics:
The primary issue was whether M/s Om Synthetics could avail of the benefit of SSI Notification No. 8/2003-CE while clearing goods under the brand name "Bhayani." The tribunal found that M/s Om Synthetics entered into a co-ownership agreement with M/s Bhayani Engineering Co. and M/s Thakar Traders for the use of the "Bhayani" trademark. Therefore, it was determined that the brand name was not owned by others, and the exemption could not be denied. This conclusion was supported by the fact that the Appellate Commissioner had already granted SSI exemption to M/s Thakar Traders under similar circumstances, and this decision had attained finality.

2. Sustainability of Duty Demand Against M/s Om Synthetics and M/s Thakar Traders:
The tribunal scrutinized the evidence used to support the duty demands against both appellants. It was noted that the demands were based on various annexures (A, B, C, and D) prepared from seized records and statements. However, the tribunal found significant issues with the evidence:
- The records seized from the residential premises of Shri Kishorbhai Bhayani predominantly bore the name of M/s Bhayani Engineering, not M/s Om Synthetics.
- The statements from Shri Kishorbhai Bhayani and other employees were contradictory and had been retracted.
- No independent or corroborative documentary evidence was found to substantiate the alleged clandestine removal of goods.

3. Validity of Evidence and Statements:
The tribunal emphasized that the duty demand could not be sustained solely based on retracted statements and documents seized from third parties without corroborative evidence. It was highlighted that:
- No excess raw materials or unrecorded finished goods were found during the investigation.
- No significant evidence of clandestine removal, such as seizure of goods or cash, was presented.
- The investigation failed to establish a clear link between the alleged clearances and M/s Om Synthetics.

4. Eligibility for SSI Exemption Based on the Use of the "Bhayani" Brand Name:
The tribunal ruled that M/s Om Synthetics was eligible for SSI exemption despite using the "Bhayani" brand name. This decision was based on the co-ownership agreement, which allowed M/s Om Synthetics to use the trademark. The tribunal referenced similar cases, such as MINIMAX INDUSTRIES, to support this conclusion.

Conclusion:
The tribunal set aside the impugned orders and allowed the appeals of both M/s Om Synthetics and M/s Thakar Traders. It was concluded that the demands and penalties were not sustainable due to the lack of corroborative evidence and the eligibility for SSI exemption based on the co-ownership of the "Bhayani" trademark. The appeals were allowed with consequential reliefs.