CX - Mentioning part number on Air shaft/Air chucks and brand 'TIDLAND' on letterhead, invoices and catalogues does not amount to use of 'brand name' so as to be held ineligible for benefit of SSI exemption notification: CESTAT
By TIOL News Service
MUMBAI, JAN 23, 2017: THE appellant Assessee manufactures 'air shaft' and 'air chucks' under exclusive licence to manufacture and sell these products under arrangement with M/s Tidland Corporation, USA who, along with M/s Kohli Converting Machines Pvt. Ltd., are equal shareholders in the registered company.
Goods manufactured by assessee are sold to 'original equipment manufacturer's (OEMs) or buyers of equipment who require replacements, as these are tailor-made for the OEMs. The appellant had been availing benefits of SSI exemption under notification(s) 8/1998-CE, 8/1999-CE, 8/2000-CE, 8/2001-CE, 8/2002 and 8/2003-CE.
On the ground that the assessee has been using an ineligible brand on the products cleared by them, the benefit of SSI exemption was sought to be denied for the period March 1999 to September 2003.
The demand of CE duty of Rs.28,34,832/- was confirmed by the CCE along with imposition of an equivalent penalty on the assessee and also a penalty of Rs.3 lakhs on the Director.
Before the CESTAT, the appellant submitted that the brand 'TIDLAND' was not affixed on any of the products cleared by them and that the name was to be found only on letterheads, clearance invoices and catalogues which is not a restriction in the said notifications. The plea of the demand being hit by limitation is also taken by the appellant.
The Bench adverted to the conclusion by the adjudicating authority that for custom-made products, mere printing of brand name on document is sufficient to deny eligibility under the notifications and that the use of the 'part number' on the finished product is intended to establish the origin of the product and remarked that these conclusions do not appear to have any basis in the content of statutory instrument whose application has been denied by the impugned order.
Inasmuch as they appeared to be philosophical musings on the nature and purpose of the restriction in the exemption notifications without a forthright conclusion to the effect that this interpretation must, unerringly, lead to denial of exemption, the CESTAT added.
Coming down heavily on the reliance placed on the contents of the 'support' menu in the website of the overseas collaborator and the inferences drawn there from, the CESTAT observed -
| "6. These, undoubtedly, are admirable sentiments and could well be a manifesto for action in particular context. As background note for a strategic recommendation, it may well be deserving of encomiums. However, adjudicating of tax disputes are intolerant of such intellectual forays and, most often, recall us to the path of strict adherence where an exemption notification is the cause of action. We are, therefore, compelled to swerve from the enjoyable perusal of a literary ramble and return to the uncompromising legalese of the exemption notification." |
After extracting paragraph 4 of the SSI notification(s) and referring to the decision in Otto Blitz (India) Pvt. Ltd. - 2015-TIOL-217-SC-CX, the Bench further observed -
++ It is amply clear that it is the goods that must be affixed with the ineligible brand name for the exclusion to take effect. There is no allegation that this is so.
++ It would not be in accord with the intent of the notification if the part/serial number were to be considered as 'brand name' as the definition of "brand name" cannot, by any stretch, be intended to encompass what, at best, can be described as an aid to manufacture or assembly.
++ We also take note that the agreement confers exclusive rights to the appellant-assessee to use the 'trademark' and, from this, it would appear that the impugned mark is no longer that of the overseas collaborator for the purpose of the specified territory but is that of the appellant-assessee.
The impugned order was set aside and the appeals were allowed.
(See 2017-TIOL-201-CESTAT-MUM)
