By TIOL News Service

NEW DELHI, DEC 19, 2013: BRIEF FACTS : M/s. Quantum Instruments & Electronics Bhopal (Respondent) were manufacturing Electrical Transformers, falling under chapter heading 8504 of the Central Excise Tariff in technical collaboration with Baroda based M/s. Silcher Electronics Ltd. (SEL in short) during the period February, 97 to March, 99 and they were availing small scale exemption in respect of the goods manufactured by them. It was found by the department that they were pasting one sticker on the body of the Transformers displaying the technical specification of the product and also mentioning the fact of "Mfgrs. manufactures By Quantum instruments & Electronics, Bhopal in Technical Collaboration with Silcher Electronics Ltd." and also their Logo.

Show Cause Notice was issued by the department demanding the duty denying the small scale exemption for the period Feb, 97 to March, 99. The Show Cause Notice was confirmed by the Original Authority and demand of Rs.2 ,53,821 /- along with interest was confirmed against the respondents and equal amount of penalty was imposed on the respondents. The penalty of Rs.10 ,000 /- under Rule 173Q of the Central Excise Rule was also imposed. The respondent filed an appeal before Commissioner of Central Excise (Appeal), who vide the impugned order has allowed their appeal and the Order-in-Original was set aside. Revenue has filed this appeal against the impugned order in appeal.

The issue involved in the present appeal is whether the respondents are eligible for exemption under Notification No.1/93-CE as they are mentioning the Logo of M/s. Silchar Electronics Ltd. on the goods. The other issue is whether the extended period can be invoked and interest and penalty is impossible on the respondents.

Member (T): observed, This is fact that the goods R-Core Transformers manufactured by respondents are having a sticker with description "manufactured by Instruments & Electronics, Bhopal in Technical Collaboration with SEL" and also showing the logo of M/s. SEL. The fact is that the logo of SEL mentioned on the goods indicates a connection between the goods manufactured by the respondents with the Silcher Electronics Ltd. In the case of Grasim Industries Hon'ble Supreme Court has held that in the context of trade name, a name or any writing would cover the name of the company so long as it is used in relation to the product and is used for the purpose of indicating the connection in course of trade between the product and the other person. In the present case the name of Silcher Electronics Ltd. and logo of SEL is mentioned on the goods manufactured by the respondents. The logo indicates a connection between the M/s. SEL and the goods manufactured by the respondents. Following the decision of Hon'ble Supreme Court the respondents therefore are not entitled to the small Scale exemption.

On limitation, he recorded his finding as :-

As regards the suppression of facts we find that Shri. Shaheryar Khan. partner of the respondents in his statement dated 27.07.1999 has stated that they have manufactured the products with logo of SEL from Feb, 97 to May, 97 and stopped use of stickers with logo of SEL from May, 97. We find that on further investigation by the Revenue it was found that respondents continued to use of logo of SEL up to Mar, 99. This stands collaborated by Shri. Nirmal Mitna Managing Director of Bhopal Switchgear (P) Ltd. in his statement dated 01.11.2001. He admitted that they purchased Transformers from the party during the period Aug, 98 to Mar, 99 and those goods were also having the sticker affixed on the Transformers showing the logo of SEL along with description "manufactured by Quantum Instruments & Electronics, Bhopal in Technical Collaboration with SEL". Therefore statement given under section 14 of the Act by the partner of the respondents was not true and he suppressed the facts. The Original Authority has rightly invoked extended period and imposed the penalty under section 11AC of the Central Excise Act.

Member (J): did not agree with Member (T) on limitation, though she agreed with him on merits. She observed,

The justification for invocation of longer period of limitation would depend upon the fact of suppression, misstatement etc. with an intent to evade payment of duty. The above statement made by the partner relates to some factual discrepancies and in no way reflects that they were aware of the fact of non-availability of SSI exemption notification on account of use of somebody else s brand name and still continued to clear the goods with a guilty mind to evade duty.

If we go through the provisions of Section 11A the language used is suppression, fraud, collusion, willful default with an intent to evade payment of duty. The said phrases used in section 11A(1) has been the subject matter of various decisions of Hon'ble Supreme Court. In the case of Pushpam Pharmaceuticals Company reported in [1995 (78) ELT 401 (SC)] = (2002-TIOL-235-SC-CX) , it stands observed by the Hon'ble High Court that word 'suppression' having been used in the company of such strong words as fraud, collusion, willful default has to be construed strictly and it has to be a deliberate act. Similar views stand expressed by the Hon'ble Supreme Court in the case of CCE vs. Chemphar Drugs & Liniments [1989 (40) ELT 276 (SC)] = (2002-TIOL-266-SC-CX).

Apart from the above, I find that Commissioner himself has granted relief to the respondents. When an officer of the level of Commissioner (Appeals) can interpret the notification in a manner different than the one adopted by the Revenue, and can grant relief to the assessee, I find no reasons to hold that the assessee could not have entertained a belief in the similar fashion.

As such, I am of the view that demand having been raised beyond the period of limitation is barred by limitation and on the above ground the Revenue's appeal fails.

Difference of Opinion

(i) Whether the appeal filed by Revenue is to be allowed as held by Member (Technical)

or

(ii) The Revenue appeal is to be rejected on the ground of demand being barred by limitation. As held by Member (Judicial)

Third Member : observed :-

Applying the ratio of the judgment of the Apex Court to the facts of the present case, since in this case the Respondent were availing of SSI exemption and for assessment of duty payable by a unit availing of SSI exemption, the fact as to whether or not the unit is using the brand name/logo of another person is a necessary input for the Assessing Officer to determine as to whether the duty self assessed, as reported in the ER-1 Returns, is correct or not and since in this case the Respondent, while using the logo of SEL, Baroda, had not informed the Department in this regard and since the language of SSI exemption on the point of use of another person's brand name/logo is absolutely clear and unambiguous and on the issue involved in this case, there were no conflicting judgments or circulars, the Respondent's omission to inform the Department about use of logo of M/s. SEL, Baroda on the R-Core transformers being manufactured by them cannot be said to be bona fide, as no evidence has been produced by them to prove their bona fide.

In view of the above discussion, I hold that the R-Core Transformers manufactured by the Respondent and which were being cleared by them by affixing the brand name and logo of their collaborator "SEL, Baroda" were not eligible for SSI exemption and extended limitation period under proviso to Section 11A(1) is applicable to the facts of this case. Accordingly I agree with the judgment recorded by Hon'ble Member (Technical).

FINAL ORDER NO.

In view of the majority order, the impugned order is set aside and Revenue's appeal is allowed.

(See 2013-TIOL-1882-CESTAT-DEL)