By TIOL News Service

MUMBAI, JULY 10, 2017: THE appellants are engaged in the manufacture of Seals and 'O' rings. These products are manufactured by using the machine purchased from M/s. Economos, Austria. The said machine is also affixed with the logo "Seal Jet" by supplier.

The case of the department is that the appellant is using brand name "Seal Jet" which belongs to foreign company M/s. Economos, therefore, the appellant is not entitled for the SSI exemption.

Periodical SCNs were issued seeking to deny the benefit of SSI exemption under various notifications on the ground that they were manufacturing the goods with a foreign brand name.

The demands were confirmed and in appeal the same were sustained by the Tribunal vide order dated 09.04.2013. See 2013-TIOL-1415-CESTAT-MUM.

However, the Bombay High Court set aside the Tribunal's order and remanded the matter to determine whether the brand name "Seal Jet" was belonging to foreign company and also to consider the issue of limitation and penalty. See 2014-TIOL-541-HC-MUM-CX.

The matter was heard and decided recently by the CESTAT.

The appellant submitted that "Seal Jet" is not the brand name of Economos, Austria Gmbh and the same had been clarified by the said company;that the brand name was registered subsequently in their name by Indian trade mark authorities shows that brand name was not belonging to foreign company Economos, Austria; that the name "Seal Jet" is not fixed on the product but mentioned on the packaging of the goods manufactured by the appellant, therefore since the goods itself do not bear the name of "Seal Jet" it cannot be treated as branded goods; that only on the basis of logo appearing on the stationery, polythene bags, invoices, the SSI exemption cannot be denied, in view of the Supreme Court judgment in Superex Industries - 2004-TIOL-100-SC-CX. On limitation, it is submitted that the issue whether the product bearing brand name of foreign company will be ineligible for SSI exemption was very contentious issue and there were conflicting decisions, therefore, no suppression of facts can be attributed to the appellant.

While reiterating the findings of the impugned order, the AR added that the appellant's plea that "Seal Jet" is not brand name is not correct for the reason that "Seal Jet" in a particular design is mentioned on the machine which were purchased by the appellant from Economos, Austria for the manufacture of final product. As regards limitation, it is submitted that since the appellant did not disclose that the brand "Seal Jet" used by them belongs to some other person, the extended period was rightly invoked.

After considering the submissions, the Bench observed -

"6. We find that the fact is not under dispute that the goods manufactured by the appellant i.e. 'O' ring and Seals are sold duly packed in polythene pack which bear the logo "Seal Jet" in a particular form, therefore it is very clear that goods manufactured and sold by the appellant bears the brand name of "Seal Jet". Merely because the product itself does not bear the name of "Seal Jet" does not mean the product is not branded. In case of packaged goods the brand is always affixed on the packages and not on the product. We are of the clear view that goods cleared by the appellant is branded goods under the brand name of "Seal Jet". Now the issue whether the "Seal Jet" brand belong to some other person, we observed that factually the machine imported by the appellant from Economos, Austria bear the same brand in the same design i.e. "Seal Jet". This established that the "Seal Jet" brand belongs to Economos, Austria. As regard the various correspondence by which Economos, Austria denied that "Seal Jet" brand does not belong to them and they have no objection to use logo "Seal Jet" by any other person, we are of the view that even though Economos, Austria has stated above but the fact remains that "Seal Jet" brand was affixed on the machine supplied by Economos, Austria. This is sufficient to establish that the "Seal Jet" brand belong to Economos, Austria therefore various correspondence through which Economos, Austria denies the ownership of the brand will not make any difference to the fact that brand name "Seal Jet" belongs to the Economos, Austria. At the most it can be said that Economos, Austria have not registered the name "Seal Jet" but that does not make any difference, because notification prescribed that in order to avail exemption goods should not bear the brand name of another person whether it is registered or otherwise therefore in the present case appellant have used "Seal Jet" brand which belongs to Economos, Austria."

On the plea of limitation, the Bench observed -

"…The issue in dispute whether embargo of other's brand for availing SSI exemption will apply in case if brand belongs to foreign person has been finally resolved in larger bench decision, which establish that there is no suppression of fact on the part of the appellants. Therefore the extended period of limitation is not applicable. Accordingly demand of duty and corresponding penalties for extended period are set aside. For the same reason, penalties imposed for the normal period shall also not be imposable for the reason that the appellant have entertained bonafide belief that in the fact of the case they are eligible for SSI exemption and accordingly there is no malafide intention. We therefore set aside the penalties for the demand commensurate to duty for normal period of the limitation. The adjudicating authority may re-quantify the demand as per our above observations and recover the same forthwith…."

The Appeals were partly allowed.

(See 2017-TIOL-2349-CESTAT-MUM)