Customs, Excise and Gold Tribunal - Delhi
Siddarth Agarwal, Shri Atul Agarwal, ... vs Cce on 18 December, 2002
Equivalent citations: 2003(160)ELT195(TRI-DEL)
JUDGMENT
C.N.B. Nair, (T)
1. All these appeals were directed against the common Order i.e. No. 42/2001 dated 31.10.2001 passed by the Commissioner, Central Excise-I, New Delhi. Accordingly, they were taken up together for hearing and are disposed of by this common order.
2. The issue raised in these appeals is the eligibility of the appellant manufacturers to the benefit of small scale exemption in view of affixing the brand name 'REIZ' on the goods manufactured by them. The appellant M/s Reiz Electrocontrols Pvt. Ltd. (REPL for short) and M/s Reiz Enterprises (RE for short) both use the same brand name 'REIZ' on their goods and both availed themselves of the small scale exemption since the total value of the goods produced by each of them in a financial year remained within the prescribed limit under Central Excise Notification No. 1/93.
3. The facts leading to the present dispute are that M/s RE ia a proprietary concern of Shri Atul Agarwal and is engaged in the manufacture of Electronic Fan Regulators, Dimmers and Remote Control Switches under the brand name 'REIZ' since 1988. In the year 1993, M/s REPL was constituted with Shri Atual Agarwal and his two brothers Shri Siddarth Agarwal and Shri Ravindra Agarwal as its Directors. M/s REPL engaged in the manufacture of Electronic transformers. Both the units manufacture their goods under a common brand name of 'REIZ'. The impugned order has held that since the brand name 'REIZ' belonged to M/s RE till its transfer to REPL in 2000, the Electronic transformers manufactured under brand name 'REIZ' by REPL till the transfer were ineligible for small scale exemption, inasmuch as under the notification a manufacturer affixing the brand name of another person was ineligible for the exemption. Similarly, it has been held that M/s RE became ineligible for exemption once the brand name REIZ was transferred on 30.3.2000 to REPL.
4. It is a specific condition under Notification No. 1/93 that the goods manufactured under the brand name of another person is not eligible for exemption under that notification. Investigations have established that Shri Atul Agarwal on behalf of M/s RE had applied on 12.1.1993 for registration of brand name of 'REIZ' in respect of goods including electronic transformer. This registration application was allowed in his favour in 2000. It is well settled that registration of trade mark/brand name once granted relates back to the date of application. Thus, in respect of electronic transformer also Mr. Atul Agarwal, proprietor of RE became owner of the brand name 'REIZ' w.e.f. 1993. Therefore, the electronic transformers manufactured by M/s REPL with the brand name 'REIZ' impugned in the present proceedings being manufactured subsequent to 1993 became ineligible for small scale exemption on account of the use of brand name 'REIZ' which belonged to another person (RE). On account of the subsequent transfer of the brand name of REPL, RE has also become ineligible for exemption in respect of the goods produced under that brand name subsequent to the transfer.
5. The submission of the appellants in the present appeals is that M/s. RE never manufactured electronic transformer and therefore, in respect of that item, the brand name REIZ belonged to M/s. REPL. It is also submitted that REPL had applied for registration of that brand name in their favour for electronic transformer in 1995. It is contended on behalf of the appellants that in these circumstances, it has to be held that electronic transformers manufactured by the REPL were not manufactured under the brand name of another person.
6. The demands in the present cases have been raised under extended period permitted in the proviso to Section 11A of the Central Excise Act, on the ground that, the non-levy is the result of suppression of facts with intention to evade payment of duty. It is contended that there was no suppression of facts inasmuch as both the manufacturers had filed declaration before the Central Excise authorities that goods are manufactured under the brand name belonging to them and brand name of another person is not used. It is also stressed that both the units are located in the same building in the jurisdiction of same Central Excise Superintendent and therefore, the facts of the cases were known to the Central Excise authorities and a charge of suppression of facts is not maintainable.
7. The appeal also raises the grounds that the computation of duty demand has been done incorrectly inasmuch as the sale price has been treated as assessable value and due adjustment has not been given towards the eligible modvat credit in respect of the inputs used in the manufacture of impugned goods.
8. We are not able to find any merit in the appellants' contentions on the ground of limitation. The Notification specifically bars the goods bearing the brand name of another person from the benefit of small scale exemption available to a manufacturer. The records of the case, particularly, the registration under the Trade Mark Act clearly show the infringement of this provision of Notification. A contention which is contrary to the registration cannot be accepted. On the question of suppression of facts it is seen that each manufacturer made declarations like "we use brand name 'REIZ' which is owned by us", "we are not manufacturing goods affixed with brand/trade mark of another person" and availed of the exemption. It was nowhere stated that brand name REIZ belonged to RE in respect of electronic transformers or that RE had in 1993 applied for the registration or that brand name under Trade Mark Act in respect of electronic transformer. The application for registration was filed by Shri Atul Agarwal, proprietor of M/s RE as early as in the year 1993 and Shri Atual Agarwal is a Director of M/s REPL alongwith his two brothers. Therefore, while claiming the exemptions the appellants were fully aware of the true facts about the ownership of the brand name. Still, claims for exemptions were made after suppressing true facts. In such circumstances, the claim made to Central Excise authorities that M/s REPL was not manufacturing goods under the brand name of another person or that the goods were produced under their own brand name can be treated only as clear misdeclarations. These misdeclarations had been filed to avail themselves of the Central Excise duty exemption without disclosing the fact about the application for registration of 1993. Therefore, we have no hesitation in rejecting the plea that there was no suppression of facts and duty demand is beyond the period of limitation. Since it was a case of suppression of facts with intent to evade payment of duty the extended period was clearly attracted. The Show-cause Notice was issued within the extended period and the demand was made within the period provided under proviso to Section 11A.
9. The submission that RE was riot manufacturing electronic transformer and therefore, brand name 'REIZ' belonged to REPL in respect of electronic transformer also has not merit. A brand name owner need not be a manufacturer of the goods in respect of which he owns the brand name. Also, whoever manufactures goods under a particular brand name, does not become the owner of that brand name too Ownership of brand name does not follow manufacture of goods under that brand name.
10. However, there is merit in the appellant's claim that the price at which the goods were sold should be treated as cum-duty. This issue remains settled in favour of the appellants by the decision of this Tribunal in the case of Srichakra Tyres v. CCE, Madras, 1999 (108) ELT 361. Similarly, the impugned order itself has noted that party can avail the benefit of modvat credit on the inputs used by them in the manufacture of electronic transformer on production of legal document. Nevertheless, demands have been computed without making adjustment towards modvat credit. The appellant manufacturers deserve relief on both these counts.
11. Further, penalties have been imposed on both the appellant manufacturers at amounts equal to the duty demanded by invoking Section 11AC of the Central Excise Act. These penalties would require re-consideration in the light of the re-computed duty liabilities. Further, penalties need not invariably be equal to the amount of short levy. Consequential relief in penalty is also warranted. Separate penalties on Shri Atual Agarwal and Shri Siddarth Agarwal are not warranted in the fact of the present case. The role of Shri Atul Agarwal and Shri Siddarth Agarwal in the present case is that they are persons in charge of manufacturing units and not as persons who dealt with offending goods by purchasing, linking, transporting etc. Therefore, the imposition of penalty on them under Rule 209A of Central Excise Rules is not permissible. Therefore, the individual penalties imposed on them are set aside.
12. The demand for interest under Section 11AB of the Central Excise Act has been correctly made in the facts of the case and is payable as the short-levy in the present case comes squarely within the terms of that Section.
13. In the result, the impugned order is upheld in regard to the denial of small scale exemption to REPL and RE, demands of duty from them and imposition of penalty on them. Demand for interest is also confirmed. However, the case is remanded to the jurisdictional Commissioner for re-computing the duty demands and re-determining the penalty afresh in the light of our observations on those subjects. Penalties imposed on Shri Atual Agarwal and Shri Siddharth Agarwal under Rule 209A are set aside.