Whether putting initials on product lead to denial of SSI exemption ?

PJ/CASE LAW/2016-17/3151

Case:-COMMISSIONER OF C. EX., ROHTAK VERSUS YATHARTHA YANTRA UDYOG

Citation:-2016 (334) E.L.T. 117 (Tri. - Del.)

Brief Facts:-The respondents are manufacturer of bolts under sub-Heading 7318.10 of Central Excise Tariff Act, 1985. The period of dispute is from 1-4-1998 to 30-8-2001. During the period of dispute, they were availing SSI exemption. Certain quantities of bolts were cleared to their customers by putting their initial - VF, RE, TVS, DECENT, H.F., J.P.F. and POOJA FORGE. The department was of the view that these marks have to be treated as trade name or brand names belonging to other persons and hence the goods bearing these marks would not be eligible for SSI exemption and it is on this basis that the show cause notice was issued to the respondent for denying SSI exemption in respect of the goods bearing marks mentioned above, the demand of duty along with interest and also for imposition of penalty. The matter was adjudicated by the Joint Commissioner who vide Order-in-Original dated 10-6-2004 dropped the proceedings holding that the marks - VF, RE, TVS, DECENT, H.F., J.P.F. and POOJA FORGE are not the brand names but are only marks for the purpose of identification of the goods consigned to the customers.
Aggrieved with this order, the Revenue filed an appeal before the Commissioner (Appeals) against the Joint Commissioner’s order. The Commissioner (Appeals) vide Order-in-Appeal dated 3-3-2006 rejected the appeal of the Revenue. Against this order of CCE (Appeals), this appeal has been filed by the Revenue.
None appeared on behalf of the respondent, though the notice of hearing was issued to them well in time. Accordingly, in terms of Rule 21 of CESTAT (Procedure) Rules, 1982, so far as the respondents are concerned, the matter is being decided ex parte.

Appellant Contention: The learned Departmental Representative assailed the impugned order of the Commissioner (Appeals) and cited the decision of the Apex Court in the case of Unison Electronics Pvt. Ltd. v. CCE, Noida - 2009 (235) E.L.T. 206 (S.C.) wherein the Apex Court upheld the Tribunal’s order holding that when the goods were bearing stickers with words UTS and TSN which were brand name of others, the same would not be eligible for SSI exemption. He, therefore, pleaded that the impugned order is not correct.

Reasoning of Judgment: We have considered the submissions of learned DR have gone through the records of this case. The respondent have cleared certain quantity of bolts manufactured by them to their customers by affixing the marks - VF, RE, TVS, DECENT, H.F., J.P.F. and POOJA FORGE. There is no dispute that these marks are the initials of the customers. For example, RE is the initial for M/s. Renuka Enterprises, PF is the initial for M/s. Precision Forging & Stamping, VF is the initial for M/s. Vignesh Fasteners, etc. In the case of Unison Electronics Pvt. Ltd. (supra), the assessee was clearing the goods to United Tele Shopping (UTS) and Teleshopping Network (TSN) by putting the stickers with marks of - UTS and TSN and in that case, the Tribunal held that marks UTS and TSN have to be treated the brand name of other persons. This judgement of the Tribunal has been upheld by the Apex Court. In Tribunal’s view, the judgement of Apex Court in the case of Unison Electronics Pvt. Ltd. (supra) is applicable to the facts of this case.
Following the judgement of the Apex Court, we hold that the Commissioner (Appeals)’s order is not correct and the goods with marks - VF, RE, TVS, DECENT, H.F., J.P.F. and POOJA FORGE have to be treated as the goods bearing the brand name of other persons and the same would not be eligible for SSI exemption. Besides this, we also find that the Apex Court in case of Grasim Industries Ltd. reported in 2005 (183) E.L.T. 123 (S.C.) has held that the cement manufactured and cleared by M/s. Dharani Cements Ltd., a subsidiary of M/s. Grasim Industries Ltd. will not be eligible for exemption Notification No. 5/98-C.E., as the bags manufactured and cleared by them were marked “manufactured by Dharani Cements Ltd., a subsidiary of Grasim Industries” and these words on the cement bags cleared by M/s. Dharani Cements Ltd. are to be treated as use of brand name of M/s. Grasim industries Ltd. In that case, the benefit of Notification No. 5/98-C.E. was subject to be condition that the cement bags cleared do not bear the brand name/trade name, whether registered or not, of another person. This judgement of the Apex Court is also squarely applicable to the facts of this case. In view of this, the duty demand of Rs. 9,55,181/- against the respondent is confirmed alongwith interest on it under Section 11AB and besides this, penalty of equal amount is imposable on them under Section 11AC. The seized goods valued at Rs. 39,600 and raw material valued at Rs. 34,725/- is also ordered to be confiscated with an option to redeem the same on payment of redemption fine of Rs. 5,000/-. Since the penalty has been imposed under Section 11AC, no penalty is imposable on the proprietor of the respondent company under Rule 26. The Revenue’s appeal is accordingly allowed.

Decision: Appeal allowed.

Comment:The gist of the case is that affixing initials on the product also indicate use of brand name of other and consequently, the benefit of SSI exemption is not available as defined in notification no. 08/2003-CE. This view is supported by decision given in the case of Unison Electronics Pvt. Ltd. and Grasim Industries Ltd.

Prepared by: Mahesh Parmar

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PJ/CASE LAW/2016-17/3151

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