Customs, Excise and Gold Tribunal - Mumbai
Damnet Chemicals Pvt. Ltd., N.J. Danani ... vs Commissioner Of Central Excise on 22 December, 2004
Equivalent citations: 2005(182)ELT225(TRI-MUMBAI)
ORDER S.S. Sekhon, Member (T)
1. These appeals against the same order, by the Company (herein after referred to DCPL for short) its Managing Director and an employee are being disposed by the common order.
2.1 By an order dated 31/10/2003, Commissioner Central Excise, Mumbai - IV determined and demanded duty amounting to Rs. 79,25,316.80 by ordering confirmation of a total demand of duty made by thirteen notices issued from 12.02.93 to 3.04.2003 and imposed a penalty of Rs. 79,25,316.80 Under Rule 173Q on the appellants company (herein after referred to as DCPL for short). The land building plant machinery etc, and other things used in the manufacture and disposal of the goods were ordered to be confiscated Under Rule 173Q(2) and an offer to redeem the same was given to DCPL on payment of fine of Rs. 15 Lakhs ; 44 cans of 'CRC Acryform' found at the premises of M/s. Tri-Techno Services were ordered to be confiscated under Rule 173Q(1) with an option given to redeem the same on a fine of Rs. 10 Lakhs ; 15 cans seized at M/s. Nelco Dawane unit were ordered to be confiscated under Rule 173Q( 1) and be redeemed to them on a fine of Rs. 40,000/-. Penalties under Rule 209A were imposed on Shri. N.J. Damani, Managing Director and Shri. Herman Pinto, an employee of M/s. DCPL. Hence these appeal.
2.2 DCPL since 1983-887 were manufacturing products viz CRC 2-256 Aerosol and 'CR @ Acrylform Aerosol' under notfn. 120/84-CE for CRC 2.26 vide declaration notfn. 174/86 for the year 1987-88 to 1990-91 exemption were claimed under notfn 175/86 for CRC - Acryform: CR226 exemption was claimed 'CRC 2-26' was classified under 2710.99 and CRC Acryform under 3203.40. It appears that during a Transit check at lower Parel Mumbai, on 14.12.91 a lorry was intercepted with 'CRC-226' & 'CRC Acryform' cans and delivery challan No. 602, 603 & 654 all dated 14.12.91 accompanying the goods. On secrutiny, the officers noticed the consignment to be consigned to M/s Bharat Bijlee Ltd (herein after referred to as BBL) at New Delhi & Calacite, the outer cartoons were bearing the marks BBL. "CRC 226", "CRC Acryform: the cans had a logo and marks of BBL and words indicating "manufactured under Licence CBC Chemicals Europe" no making of the manufacturer viz DCPL were seen on cans.
2.2 Consequent to the enquiries made, a notice was issued to show cause as to why:
"a) they should not be treated as a dummy unit / façade created by Shri. N.J. Danani, Director of M/s. BBL and M/s. DCPL.
b) The benefit of Small Scale Industries exemption Notification No. 175/86 dated 1.3.86 as amended by Notification No. 223/87 dated 22.9.87 should not be denied of them on the grounds that the total turnover of M/s BBL on whose brand name the goods were manufactured exceeded Rs. 1.5 crores 2.0 crores as the case may be during the years 1986-87, 1988-89, 1989-90, 1990-91 as also the logo of M/s CRC Chemicals, Europe being affixed on the cap of the Aerosol can who was a foreign manufactures by M/s. DCPL.
c) The relationship between M/s. DCPL and M/s. BBL should not be treated as related persons under the provisions of Sections 4(4)(c) of the Central Excise and Salt Act, 1944;
d) The assessable value of the goods sold by them to M/s. BBL should not be determiced Under Section 4(1)(a)(iii) of the Central Excise and Salt Act, 1944.
e) The exemption Notification No. 120/84 dated 11.5.84 should not be denied to the product CRC 2-26 manufactures by them;
f) The Central Excise duty of Rs. 51,49,222.12 (Basis) Rs. 5,20,605.61 (Special) for the period from 26.02.88 to 24.10.92 should not be demanded and recovered from them Under Section 11A of the Central Excise and Salt Act, 1944 read with Rule 9(2) of the Central Excise Rules, 1944 as detailed in Annexure "A" to this. Total duty Rs. 56,69,827.80).
g) The goods seized under Panchnama dated 17.08.92 should not be confiscated under Rule 173Q ibid;
h) a penalty should not be imposed upon them in terms of the provisions of Rule 173Q and Rule 9(2) and Rule 52A, and Rule 210, and Rule 226 of the Central Excise, 1944;
They were also called upon to show cause as to why:
i) they should not be held as having created a façade dummy in the name and style of M/s. DCPL and exercised ioverall control over it for the purpose of evasion of duties of Central Excise;
ii) the duty amounting to Rs. 57,49,222.19 (Basic) - Rs. 5,20,605.61 (Special) for the period from 26.02.88 to 54.10.92 should not be demanded and recovered from them under Rule 221 of the Central Rxcise Rules, 1944.
Shri N.J. Danani, Director of M/s. DCPL and Director of M/s. BBL, Smt. R.N. Danani, Director of M/s. DCPL, Shri G. Narasimhan, Company Secretary of M/s BBL, Shri Herman Pinto, incharge of M/s. DCPL, M/s. Mistair home Products were called upon to show cause to the Collector - II, Central Excise, Bombay-I as to why a penalty under Rule 209A of the Central Excise Rules 1944 should not be imposed.
M/s. Tri-Techno Services and M/s. Nelco were also required to show cause to the Collector-II, central Excise, Bombay - I as to why the goods seized under Panchnama dated 14.12.1992 and 15.12.92 respectively should not be confiscated under the provisions of Rule 173Q and Rule 226 of the Central Excise Rules, as the same had been manufactured an cleare without payment od Central Excise duty."
And the matter adjudicated. In appeal the Tribunal remanded the matter for denovo adjudication vide order No. C-1/1933-937/WZB/1999 dated 11.05.99 2.3 The present order now (sic) consequent to the Denovo direction, now impugned - recapulates the remand decision of the Tribunal, as follows -
i) Claim of the buyer of the product and recommendation of M/s. Crompten Greaves regarding its uses for lubrication.
ii) Explanatory Note to Chapter 27.10 to HSN page 228 - 1996 edition that the oil were classifiable under this heading to which substances have been added to suitable for particular uses are classifiable of this heading provided the product contain by wight 70% or more of petro oils abtained from bituminous as basis and that these were not covered more specific and not any other heading in the nomenclarure, describinglubricating oils blended with varying quantities of other products for improving their lubricating properties such as anti-oxidants, rust preventives, anti-foam agents etc.
iii)The department have not dealt with the contention that extended period Under Section 11A would not apply in view of approved classificaton list.
iv) The department ignored the facts that the lease of the factory premises was earlier to the agreement and market rent as determined by independent surveyor was paid.
v) Interest was not payable on the duty demanded as Section 11AC was effective from Sept. 1996.
3.1 The issues to be decided are-
a) Whether CRC 2-26 is a lubricating oil wholly exempt under Notification 304-120/84, which exempts blended lubricating oils?
b) Whether it is wholly exempt under Notification 287/86, which wholly exempts "speciality oils", which is defined to mean any preparation made by blending compounding of minerals oils falling under chapter 27 with other oils or any other substance and is intended for industrial use (other than for use as lubricant) and the which the lubrication function, if any, is only secondary in nature?
c) Whether the Appellants (DCPL) is entitled to the benefit of notification 175/86 in respect of their product CRC Acryform.
d) Whether DCPL was a façade or dummy of Bharat Bijlee Ltd. (BBL) and/or whether DCPL and BBL are related persons Under Section 4 of the Central Excise Act, 1944?
e) Whether there was any suppression to justify invoking the proviso to Section 11A(1) as the Show Notice is admittedly issued for the period beyond six months from the date of the Show Cause Notice?
f) Whether the penalty can be imposed?
g) Assuming that all the issues on merot are decided aginst the DCPL, whether the duty demanded has been properly computed?
3.2 ON WHETHER CRC 2 - 26 IS EXEMPT UNDER NOTIFICATION No. 120/84 it is found -
a) It is on record that, CRC 2-26 as a blended lubricating oil it is sold and used as a penetrating lubricant oil by various companies including Government Companies, who use the same for lubricating ball and roller bearing, circuit breakers, connectors, contacts, switches, false, push buttons, solenoids, potentiometers etc. The product is filled in aerosol containers into which a propellant is injected, so as to create a spray of CRC 2.2 onto hard-to-reach surfaces. The product is found to mainly contains Petroleum Base Oil 25%, Mineral Oil - 72% and Rust Preventives - 3%. It is submitted, these ingredients are blended together with a stirrer until thoroughly mixed. The petroleum base oil, which is mineral oil has lubricating properties, it is the most important ingredient in CRC 2-26 which imparts main function, when sprayed on moving parts, the said product forms a thin film on the surface, this film lubricates the moving part. The film prevents direct contacts between the moving pats enabling them to slide over each other, the film forming property is lubricity. As corrosion and rust result in increased friction amongst moving surfaces, a small amount of proprietary rust preventives added would render and keep the surfaces rust free as far as possible for effective lubrication by the film. Preventing rust is not the primary function of the product it is to enhance the lubricating properties, and would thus be secondary function. It is seen from label on the container itself states that:
"CRC 2-26 is a precision blended multi-purpose lubricating oil that prevents malfunction due to the deteriorating effects of moisture and corrosion, extend operational life, claims, protects metal, reduces downtime and maintenance."
Under the heading DIRECTIONS IT, it is stated that CRC 2-26 is to be used to clean/lubricates/protect precision mechanism. Therefore having "anti-corrosive" property is not inconsistent with product being a lubricant. This is view funds support from the following:
i) The HSN Explanatory Notes, p.228 specifically states that oils classifiable under this heading remain classifiable even if various substance have been added to render them suitable for particular uses, provided the product contains by weight 70% or more of petroleum oils obtained from bituminous minerals as the basis and that they are not covered by a more specific heading. It gives examples of such oils:
ii) Lubricants consisting of mixture of lubricating oils with widely varying quantities of other products 9 e.g., products for improving their lubricating properties (such as vegetable oils and fats); anti-oxidents, rust preventives, anti-foam agents such as silicones)"
In the present before us there is no dispute of the product in question to be a preparation containing 70% or more of mineral oil; the aforesaid HSN Explanatory Notes apply proprio vigore to the present case. These aspects were noted by the CEGAT, in paragraph 8 of the earlier order dated 11.6.1999. CEGAT also held that the logical outcome of the fact that the Department consistently alleged that the product reduces friction, is that the product in question is a lubricant. There is no dispute on this aspect.
iii) The Government of India has in its order in the case of Geoffrey Manners and Co. India Ltd. 1982 ELT 549A (GOI) has held that the product would classifiable under the erstwhile, Tariff Item 11B, which specifically covered blended lubricating oils. The Government of India held that the product consist of mixing of mineral oils with a variety of materials ranging from animal, vegetable and fish or oils to sulphur soap and chemical compound to improve the lubricating properties of the oil and is therefore classifiable under Tariff Item 11B. "3-in-1 oil". A world-famous oil and was at one time manufactured in India by Geoffery manners and Co. Ltd. The product literature of that product specifically states that it lubricates, cleans and prevents rust. That product also contained rust preventives chemicals. It is therefore to be held that merely because rust preventives are added, that would not detract from the product being a lubricating oil.
iv) From the copies of material, on various products that merely prevent rust, placed befire us, it is evident that such products are only to be applied to the metal surfaces and not moving parts. As against this lubricating oils such as CRC 2-26 have to be applied to moving parts. The product with merely prevents rust may not have lubricating properties. The literature relating to various rust preventive products that are available in the market shows that these products are not penetrating lubricants for moving parts as the entity under consideration herein.
b) Notification No. 120/84 exempts blended or compounded lubricating oils and greases, that is to say, lubricating oils and greases obtained by straight blending of mineral oils or by blending or compounding of mineral oils with any other ingredients from the whole of the duty of excise provided that duty had been paid on such mineral oils. That the entity, herein, is a blend of duty-paid mineral oils, has never been disputed. No heading or a sub-heading is mentioned in the notification. The blended lubricating oils, other than those having a flashpoint about 94 degrees centigrade are classifiable under sub-heading 2710.99. That is clear from the latest judgment of the CEGAT in the case of Bharat Petroleum Corporation Ltd. V. Commissioner 2003 (154) E.L.T. 698, where CEGAT held that once the product satisfies the condition of the notification, namely that is a blend of duty-paid minerals oils, it must be entitles to the benefit of Notification No. 120/84, it was also held that blended lubricating oils, which have a flashpoint below 94 deegree C, would fall under sub-heading 2710.99. The classification of CRC 2-26 under sub-heading 2710.99 has never been disputed by the Department. CRC 2-26 is therefore, entitled to the benefit of Notification No. 120/84. The merefact that rust preventives are added for secondary function and improving lubrication, does not take the product out of the scope of the notification. This view would be also in conformity with the above-mentioned HSN Explanatory Notes.
c) It is well settled that in the absence of a definition the only test that is to be employed is:-
" How is the product understood in the trade and in commercial parlance?" as held in Shree Baidyanath Ayurved Bhavan Ltd. V. CCE 1996 (83) E.L.T. 492 (S.C.) proceeding to examine in this light, it is found.
i) That CRC 2-26 is known and used as a lubricating oil. DCPL produced numerous Testimonials / Certificates / Letters of Users showing that CRC 2-26 is used, by such users, as a lubricants for lubricating the moving parts of their equipment. The test report on CRC 2-26, carried out by Professor M.C. Dwivedi, Professor of the IIT categorically opines that CRC 2-26 is a blended lubricant and that the lubricating oil used in the formulation conforms with the requirements of the Bureau of India Standards requirements as poer IS-493 (Part II) 1981, General-purpose Machinery and spindle Oils-Light Grade VG 10. The department has not produced any material to contrary.
ii) The Istruction Manual issued by Crompton Greaves, in respect of its Bulk Oiul Circuit Breaker specifically states in paragraph 15(c) that "all hinged joints of mechanism linkages should be regulary cleaned with rust preventive solution such as Molykote Supergliss and apply lubricants such as Racold Grease , CRC 2-26 or Molykote Spray". It is thus very clear that CRC 2-26 is not used as a rust preventive but is used as the lubricant. This manual also specifies, that the circuit breaker is first cleaned with the rust preventiver solution and then lubricated with CRC 2-26. If CRC 2-26 was only a rust preventive, the Manual would not have stated what is stated therein.
iii) The Glossery of terms used in Petroleum Industry defines the term 'Lubricating Oil' as a fluid lubricant used to reduce friction between bearing surface. Petroleum lubricating oils may be produced either from, distillates or residues. Small amounts of other substances known as additivies may be added to impart or improve certain requires properties."has "lubricant" has been defined to mean ''an oil used to lubricate bearings by preventing contact between the beating surfaces and to cool the bearings."
"Lubrication " has been defined as "the reduction of friction between two relatively moving surfaces by the in alia-position of some other substances between the surfaces".
The term 'additive' has been defined to mean "an agent used for imparting new or improving existing characteristics of petroleum products. In the case of lubricants, some of the additives are extreme-pressure additives, oiliness additives, anti-oxidants, anti-rust additives, detergents, pour point depressives, viscosity index improvers and ami-foaming additives".
The ISI-GIossary of Petroleum Terms (Vol VIII, p. 76) defines a 'Lubricating Oil' as an "oil usually refined, primarily intended to reduce friction between moving surfaces".
There is no dispute that CRC 2-26 reduces friction. As it a blend of mineral oils containing 70% or more of mineral oils it has to be considered as a lubricating oil falling with the scope of the notification. It is clear, therefore, that the rust preventives are mere "additives" and CRC 2-26 clearly falls within the aforesaid definitions by application of the understanding of the terms.
iv) The Department themselves drew samples of the said product on three occasions, i.e. in 1984, 1990 and 1993. The Deputy Chief chemist in respect of CRC 2-26 has given the following test reports:
i) 1984 analysis communicated by letter dated 3.5.85:
"Sample is in the form of a liquid. It is composed of mineral oil and small amount of additives"
ii) 1990 analysis communicated by letter dated 15.4.91. "Sample is composed of mineral oils and additives, the % age of mineral oil is more than 70%."
iii) 1993 analysis communicated by letter dated 10.1.1994 stated:
"The sample is in the form of pale yellow coloured liquid, contained in the original aerosol container It is composed of Mineral Hydrocarbon Oil and additives. Mineral oil content is more than 70%. It is seen from the information printed on the container that CRC 2-26 penetrates and lubricates, prevents corrosion, displaces and seals out moisture and cleans releases rusted mechanism. Since it is recommended to be used for penetration and lubrication, it cannot be considered as specialty oil. In my opinion it is it product primarily used as lubricant though it has anti corrosive properties also. Sample is used up."' It is pertinent to note that the Department had requested the Chemical Examiner to test whether the product was exempt under Notification No 120/84. It is also clear that the Department was fully aware that the product contained rust preventives and that was specifically mentioned on the cans when samples were drawn, as also in the declarations as well as in various letters as also in the classification lists. Pursuant to these test reports of 1984 and 1991 the Assistant Collector accepted the Declarations filed under Notification No 1 1.1/78 and finally approved the classification lists. The 1993 test report is categorical that the product is a lubricating oil. It is well settled that the test reports given by the Chemical Examiner are binding on the Department and that the Department cannot now act contrary- thereto, especially when the Department has neither produced any evidence to rebut the same nor has it asked for a re-test. The analytical results cannot now be disputed (See Ciba Specialities v. CCE 2002 (119)E.L.T.358 (T) M.P. industries 2002 v. CCE (145) E.L.T.448 (T) CCE v. Cellulose 2002 (124) E.L.T. l133 (T) affirmed in 2002 (127) E.L.T.A 165 (SC) Polyglass v. CCE 2003 (153) E.L.T.276 (SC)
d) Commissioner has merely repeated, what the earlier Commissioner had held. Thus he has ignored the remand order of this Tribunal and also ignored the earlier orders of the Commissioner of Central Excise (Appeals) and abandoned the test Reports of the Chemical Examiner & the binding judgments of this Tribunal. The numerous testimonials, certificates and letters from its users, showing that CRC 2-26 is used-by such users as a lubricant. The conclusion arrived in the impugned order, that it is not a lubricating oil is based solely on the label of the product and that too by deliberately misreading the same. This is impermissible (see Subhash Chandranishat v. UOI 1979 E.L.T. (J212) (Bom). The constant refrain that the product label also states that the product improves electrical properties goes beyond the allegations in the show cause notice. The show cause notice merely alleged that the product was predominantly a rust preventive or anticorrosive. The fact that the label states that it improves electrical properties is onlyindicating to the consumer the benefit of using the product and does not indicate the functional properties of the product which have been separately mentioned on the label, namely, to penetrate and lubricates, clean etc. This additional property cannot dislodge the product from the benefit of the pricing use of Lubricating Oil. It is now well settled that the notification should be constructed strictly, once goods are found to satisfy the test by which it falls in the exemption notification, then it cannot be excluded from it by constructing the notification narrowly (see K.R. Steel Union Ltd 2001 (129) E.L.T. 273 (SC). In fact the Supreme Court in the case of Bombay Chemical Pvt Ltd. 1995 (77) E.L.T. 3 (SC) has held that the strict construction test applies at the entry that is whether a particular product is capable of falling in one or the other category but once it falls then the exemption notification has to be construed broadly and widely. The conclusion of the Commissioner, that the burden is on the claimant, is not applicable when the department is seeking to withdraw the benefit of the exemption Notification-see Naffar Chandra Jute Mills 1993 (63) E.L.T. 574 (Cal). The attempt to pick words from labels and literature is to try and deny the benefit of the Notification without evidence to show that the product is not used, known or understood in the trade as a lubricating oil, which they have not been done. The findings of the Commissioner are to be therefore set aside.
e) Reliance on the parameters of lubricating oil as mentioned in the Concise Chemical and Technical Dictionary of McGraw Hill clearly travels beyond the scope of the Show Cause Notice, as no such parameters were relied upon in the show cause notice. Had DCPL been given an opportunity it would have been able to show to the Commissioner that in fact the film that forms has a thickness of more than 10. In fact literature annexed to the show cause notice itself under the heading 'Specifications,' contains as it is stated, the film thickness is 0.75 to 2.00 microns. One micron is equal to 10 which is more than 10 cms by a factor of 10. The reliance placed by Commissioner therefore cannot be upheld.
f) Reliance on dictionary meanings, is wholly irrelevant, as the notification itself defines lubricating oil. Thus the correct test is, has the product adopted by straight blending of mineral oils or by blending or compounding mineral oils with any other ingredients. There is no dispute that CRC 2-26 has been obtained by the straight blending of mineral oils and is classifiable under sub-heading 2710.99. The ingredients are not disputed. The logical outcome therefore is that it is a lubricating oil as held by this Hon'ble Tribunal in the case of Bharat Petroleum Corporation v. CCE 2003 (154) E.L.T. 698 (T). This judgment refers to a Larger Bench judgment which laid down two tests both of which are satisfied, namely (i) whether the impugned product satisfies the definition the Notification and (ii) whether the goods are ordinarily used as lubricants.
g) The product consists of only 3% of rust preventives the rest in all mineral oil and it is the mineral oil which gives the product its lubricating properties and is the most important ingredient. Commissioner has on his own ipse dixit presumed that the product has no lubricating properties and has purported to rebut the evidence only on the basis of his own presumptions without any technical knowledge. h) This question is therefore to be answered in favour of the appellants by upholding the exemption eligibility.
h) This question is therefore to be answered in favour of the appellants by upholding the exemption eligibility 3.2 Whether in the alternative CRC 2-26 is exempt under Notification No 287/86
a) If the lubrication properties of the entity are secondary, as contended by the Deopartment, then it must be considered as "specially oil" which is fully exempt under Notification No 287/86 Speciality oil has been defined in the Notification, to mean:
"Any preparation made by blending or compounding of mineral on falling under chapter 27 of the Schedule to the Central Excise Tariff Act, 1985 which are the oils and of any other substance and is intended for industrial use (other than for use as lubricant) and of which the lubrication function, if any, is only secondary nature."
CBEC had issued a Circular No 89/1/73 -C.X. dated 23/8/1973 giving a list of speciality oils which fell under the erstwhile Tariff item 11 B. Item 27 of the list includes Corrosion preventive oil and compounds. The CBEC also stated that speciality oils are generally treated as non-lubricants and a primary function is other than lubrication and a lubrication function, if any, is only secondary. Collector (Appeals) in his order dated 18,5.1994 in this assesses case specially held an under:
"From the definition of "speciality oil'" contained in the explanation to the notification, the Appellant appears to me to have a strong case for the eligibility of the notification for the product, in case the Assistant Collector's view that the product is primarily anti corrosive and only secondarily use as a lubricant is correct".
It is therefore to be held that the entity can be considered as a speciality oil, which is fully exempt under the notification 287/86. Commissioner has repeatedly held that lubrication properties of the oil are only secondary nature. Assuming this to be true then the natural outcome would be that it must be considered as a speciality oil and fully exempt under Notification No 287/86. The Explanation to the Notification specifically states that speciality oil means any preparation obtained by blending or compounding of mineral oils falling under chapter 27 with oils or any other substance and is intended for industrial use (other than for use as lubricant and in which the lubrication function, if any is secondary nature. It there has to be considered as speciality oil. This is also clear from CBEC dated Circular where Corrosion Preventive Oil and Compounds had been listed as specialty oils.
b) There is no dispute that the entity is for industrial use. Therefore, once the Commissioner of Central Excise came to the conclusion that the lubrication property is secondary, it necessarily became a specialty oil as understood in this notification. This was also what both the Commissioner of Central Excise (Appeals) held in their orders. In any case, whether the rust preventives were secondary or not was a wholly irrelevant criteria. In any case the Notification does not say that it has to be the main function.
In the circumstances in any view of the matter CRC 2-26 is fully exempted from duty under the two notifications i.e. 120/84 & or 287/86. No duty demands could be therefore effected.
3.3 WHETHER NOTIFICATION 175/86 AS AMENDED BY NOTIFICATION No. 223/87 WAS AVAILABLE TO CRC ACRYFORM.
a) The benefit of Notification No. 175/86 has been be denied to 'CRC Acry form' on the ground that labels of CRC Acryform carried the logos "B" of BBL and "CRC" of M/s CRC Chemicals Europe. In fact, the Collector (Appeals) in his earlier order dated 11.5.1994 specially held after considering that DCPL had been given a non-transferable, exclusive, right and licence to use the words "Acryform" and "CRC Acryform" that this strikes at the very basis of the Department's case. and set-aside the order of the Assistant Collector dated 29/9/1993 denying the benefit of Notification No. 175/86 on the same ground.
b) Neither "Acryform" nor "CRC Acryform" are the brand names or trademarks of M/s CRC Chemicals Europe. This is clear from the Affidavit and Certificate of Mr. Basile Repapis - Middle East Marketing Manager of NV CRC Chemicals Europe produced on by any other person including M/s CRC Chemicals Europe. DCPL had been using this mark as its own since 1987. Further, DCPL had after long use, in 1992 applied to the Trademarks Registrar for Registering the Trademark. The Trademark Registrar has registered CRC Acryform as DCPL's trademark on 14/10/1992. This trademark is effective from 1987. This is clear from the Certificate given by De Penning & De Penning, Trade Mark Attorneys. It is now well settled that the ownership of a brand name flows either from registration or use. DCPL I the only company entitled to use the brand name CRC Acryform in India's and has become the owners of the brand name by continued use of the same. As the Trade Mark is registered in DCPL's name they are entitled to the benefit of the notification (see CCE v Mahan Dairies 2004 (166) ELT 23 at 25(SC)
c) Since the trademark has been registered by the Trademarks Authorities in the Appellants' name, the Appellant has acquired an exclusive right to the use of the trade name in relation to the goods in respect of which the trademark is registered and the Appellants are entitled to relief against any person in respect of India, in the manner provided by the Trade and Merchandise Act. Therefore, no person other than DCPL is entitled to use the trade name / brand-name "CRC Acryform" in India. There is no question of there being any other person having any right to the trademark in respect of these goods. That there is a foreign company with the name NV CRC Chemicals Europe is altogether immaterial to the Appellants claim towards the trade mark. In the present case not only has the foreign company not raised a claim to the trademark but has in fact given an affidavit stating that it has no ownership, title or light in the names "Acryform" or "CRC Acryform". (see Rathi Transport Private Limited v. CCE 2003 (153) E.L.T. 59(T)
d) There is nothing on record to show that NV CRC Chemicals Europe legally owned or used the brand-name / trademark "CRC Acryform" to the exclusion of other manufacturers. In fact in the present case the said trademark has been registered in DCPL's own name. Had somebody else when the owner of the brand-name in question, he appropriate authorities would not have registered the same in the name of the Appellant. This Tribunal in the case of Laxmi Enterprises v. CCE 2004 (167) E.L.T. 408 (T) has held that the aforesaid factors were exceedingly relevant and that in view of the same the SSI benefit could not be denied. When CBEC Circular No. 213/41/88-CX 6 dated 30.12.1988 where in it is stated that as per section 8 of the Trade and Merchandise Marks Act, 1958 are trademark can be registered in respect of any or all goods and that the trademark need not necessarily be in respect of all goods unless the registration has been so acquired is applied would grant the benefit to the assessee. Revenue cannot be heard to argue against their proposition of CBEC.
e) As laid down by the Supreme Court in Union of India v. Paliwal Electrical Pvt Ltd 1996 (83) ELT. 241 (SC) the object underlying paragraph seven of the notification is to enable small manufacturer to survive in the market in competition with any ineligible manufacturer. In the present case there is no ineligible manufacturer who manufactures the aforesaid product. As DCPL are the registered owners of the trademark they are entitled to use the same relying upon CCE v. ESBI Transmissions Pvt Ltd 1997 (91) ELT. 292 (Cal). Commissioner has disbelieved the Affidavit of Mr. Basile Repapis as according to him under the license agreement dated 30/9/86 DCPL were given the exclusive license to manufacture CRC Acryform and were also permitted to use the logo according to the relevant conditions. These contentions are ex facie untenable as:
i) No multinational company or responsible officer would just gift away its valuable trademark or brand-name by filing a false affidavit and giving a worldwide disclaimer that the company does not own the trademark or brand-name.
ii) In any case he cannot disregard it without cross-examination.
iii) The aforesaid letter merely grants an extension to the license agreement dated 1/10/1983 for CRC 2-26 and in addition permits the manufacture of CRC Acryform staring from the concentrate on to label it is such. The original License agreement for CRC 2-26 specifically states that CRC 2-26 is the trademark of CRC Chemicals Europe. Neither the original License agreement nor the extensions as that CRC ACryform is the trade mark or brand-name of M/s CRC Chemicals Europe. The extension letter merely says that whatever was applicable from the original License agreement for CRC Acryform would apply. The clause relating to trademark of CRC 226 can therefore have no application to CRC Acryform. As they did not own the trademark the question of giving any permission did not arise and the Certificate of Trade Mark Attorneys which Commissioner has brushed aside the aforesaid certificate of De Penning and De Penning on the specious ground that the Search report of the Trademark Authority is limited to the Indian Republic.
f) The reliance by the Commissioner on the case of Kemfin Chemicals 2003 (162) KL.T. 458 (Tri-Del) is misconceived as in the present case there has been no sale of the brand-name. In that case there was a sale of the brand-name and therefore it was accepted that the brand-name belonged to another. DCPL are the registered proprietors or owners of the trademark and have the exclusive right to use the same & in view of the uninterrupted user since 1987 DCPL are deemed to be the proprietors and owners of the trademark. Permitting a manufacture under the license agreement is wholly distinct from the use of the trademark. Therefore the conclusion that M/s CRC Chemicals Europe could not have permitted a manufacture of the product or supplied the concentrate without having title to the trademark is untenable & is not upheld.
g) The Commissioner has stated that he has seen the logo of CRC on the cans. There is no such logo found, nor a finding what was actually seen. The product CRC Acryform bears the mark CRC Acryform which is the name and style shown in the trademark certificate. Commissioner has relied on only a part of the trademark CRC Acrayform to hold that DCPL is using the logo of CRC. The product cannot contain two trademarks on the same product which indicates a connection in the course of trade between such product in the person using the name or trademark.
h) It was submitted that the monogram B of BBL is only a house mark, that was used till 1990. It was not prominently displayed as falsely contended by the Commissioner. This house mark is only 0.196 square centimeters whereas the size of the trademark CRC Acryform is 71.38 square centimeters, i.e. 360 times the size of the house mark 'B'. This house mark is also on the rear and no rational person could come to the conclusion that it was prominent) displayed. This house mark does not establish any relationship between the market and the contents & this Tribunal and the Supreme Court have noted the difference between an house mark and a trademark in the following judgments:
CCE v. Aarem Enterprises 2003 (153) E.L.T. 111 (T) Astra Pharmaceuticals Pvt Ltd v. CCE 1995 (75) EL.T. 214 (SO followed in Weigand India Pvt. Ltd. 1997 (94) ELT. 124 (T) and Rajdoot Paints Ltd. v. CCE 2001 (134)ELT. 281.
It is well settled that an SSI exemption is not deniable merely by fixation of a portion of a symbol or monogram or logo and something more is required these items must create an impression in the mind of the purchaser that the product is that of another person. By using the monogram 'B' of a marketing company or distributor who does not manufacture the goods cannot indicate any indication or connection in the course of trade between "CRC Acryform" and the marketing company. It is therefore to be held that merely because there is a connection in the course of trade between the aforesaid house mark 'B' and BBL cannot disentitled DCPL from the benefit of the Notification as it does not indicate a connection in the course of trade between the specified goods and the personal owns the mark relying upon.
Emkay investments Private Limited in 2000 (124) ELT. 741 VI John Beuty Tech v. CCE 2002 (143) ELT 148 approved in 2003 (157) ELT A210 (SC).
i) When there is already a mark on the product, namely CRC Acryform, the logo of BBL cannot fall within the mischief of paragraph 7 of notification 175/86 read with Explanation VIII thereof relying upon CCE v. Aarem Enterprises 2003 153 EL. T. 111 (T). In any event since May 1990, other products manufactured by DCPL have not been labelled with the house mark of BBL. Despite the same the Commissioner has confirmed the demands in the 12 subsequent show cause notices which are for the subsequent period. Moreover merely putting the name of the distributor cannot deny the benefit of the Notification relying upon SPM Instrument India Pvt Ltd V. CCE 2003 (152) EL T. 115 (T) RaidootPaints Ltd v. CCE 2001 (134) ELT. 281 (T). In the circumstances it is to be held that it is untenable to allege that DCPL are not entitled to the benefit of notification 175/86 in respect of CRC Acryform. Duty demands cannot therefore be determined.
3.4 WHETHER DCPL IS A DUMMY OR FACADE OF BBL?
a) The allegations in the show cause notice that (i) DCPL is a dummy/facade of BBL and(ii) that DCPL and BBL are related persons, are ex facie contradictory and destructive of each other. A dummy company or a facade is a company that exists on paper alone. A dummy unit is a unit, which is not in existence in reality, but it is merely created on paper only. In other words, the physical existence of such a unit is not to be found in terms of investment of capital, machinery and labour. The unit, which creates such a dummy unit, utilizes the dummy unit for the purpose of tax evasion and the profit of the dummy flows to its creator. Therefore, the courts have clearly distinguished on facts each of the cases and have now settled the issue by holding that mere evidence of Directors being common or utilization of telephone, labour or machinery by itself is not a ground to consider a unit as a dummy unit of the other. Alpha Tovo Ltd v. CCE 1994 (71) RUT. 689 (T).
b) In the present case, the Commissioner has not disputed the following facts:
i) That DCPL is a wholly independent and separate company incorporated under the Companies Act 1956 on 21/5/1983 having two directors, namely Mr. N.J. Danani and his wife,
ii) That DCPL was a registered small-scale unit,
iii) That it has its own investment of capital, machinery and labour,
iv) It has its own financial resources and credit facilities. It has no borrowings or loans from either BBL or any other manufacturing unit. All loans and borrowings are from banks.
v) It has purchased all machineries owned by them as also all of raw materials and packing materials required for manufacturing and packing the products from their own resources (copies of invoices for purchase etc are at Vol l,pp 141-216).
vi) That all salaries and wages are paid by DCPL from its own sources of finance,
vii) That DCPL had their own import licences to import raw materials used in the manufacture of the products,
viii) That DCPL looks after its own business and that there is no supervision or managerial control by BBL.
ix) That DCPL has total control and supervision over their own manufacturing operations. Mr. H. Pinto and before him Mr. Mehta, both employees' of DCPL looked after and supervised all manufacturing operations under the control and guidance of Mr. N. J. Danani.
x) That DCPL's ledgers and various other financial statements, etc clearly showed that no payments were made to Bharat Bijlee. In fact, it is BBL that paid DCPL the purchase price of the products,
xi) That DCPL has its own Sales Tax on Income Tax Registrations, Shops and Establishments Registration, BMC Store Facilities and SSI Registration.
xii) That DCPL has its own import license,
xiii) Thai DCPL paid its own electricity bills,
xiv) Though BBL owns the gala in which DCPL's factory exists, BBL paid a market rent for the same,
xv) That before fixing the quantum of rent and before entering into a lease agreement BBL had on each occasion obtained a Valuation Report from an Independent Valuer. It thereafter passed a Board Resolution authorizing BBL to enter into a lease agreement with DCPL. It was only thereafter that the Lease Agreements were entered into between DCPL and BBL in 1984, 1987 and 1993.
xvi) That this rent was paid from DCPL's own sources of finance.
xvii) That BBL was only their National Distributors and that as the National Distributor, BBL was bound to incur expenses on marketing.
xviii) That as BBL was reselling the products its selling price was bound to be higher than its purchase price.
xix) That DCPL received nothing more than the price and that all profits any or to DCPL only.
xx) That BBL does not hold any shares in DCPL or vice versa.
xxi) That no other Director of BBL owns any shares in DCPL. DCPL does not have any shares in Bharat Bijlee.
xxii) That BBL does not manufacture varnishes and lubricant but manufactures elevators, motors etc. xxiii) That BBL is a company having seven directors.
xxiv) That Mrs. Danaqi, the other Director of DCPL, was neither an employee nor a Director of BBL.
In the circumstances, one cannot uphold the allegation that DCPL is a dummy unit or a facade, created by BBL.
c) Commissioners conclusion that Mr. N.J. Danani, as the Managing Director of BBL had created DCPL for the manufacture of CRC products because BBL would not be entitled to the benefit of Notification No. 175/86. This conclusion shows total non-application of mind, it is contrary to the facts on record. DCPL was incorporated in 1983. At that time Mr. N.J. Danani was only an employee of BBL and the fact that N.J. Danani only became a Director of BBL in June 1988 and was one, out of seven directors. For this purpose, the Appellant produced the Annual Report of BBL Ltd for the years 1983-84 and in 1987-88. Further, DCPL first started manufacturing "CRC 2-26" in the year 1984. For the manufacture of this product the Appellants had not claimed the benefit of Notification No 175/86. This Notification was only claimed for the product "CRC Acryform". DCPL commenced the manufacture of "CRC Acryform" after September 1986, but well before Mr. N.J. Danani became a Director of BBL Ltd. Mr. N.J. Danani could never therefore have created DCPL merely to enable BBL to get the benefit of Notification No. 175/86.
3.4 THE PARTIES WERE RELATED PERSONSOR THAT THERE WAS MUTUALITY OF INTEREST BETWEEN DCPL AND BHARAT BIJLEE LTD.
a) Commissioner has arrived at the following reasons to hold.
i) That transactions were not a principal-to-principal basic because DCPL did not pay for Security and because the keys to the gala were kept with the security staff and that the security staff opened and closed the gala. This ground is manifestly untenable as these factors cannot establish that DCPL and BB1 had any interest direct or indirect in the business of each other.
ii) That the transaction between the parties was not a simple relationship of manufacture and seller, because DCPL manufactured the product but did not mention its name on the product or carton, but mentioned that the product was being marketed by BBL and put the logo of BBL thereon and that BBL Ltd did not pay any consideration to DCPL for this purpose, and that therefore there was a hidden flow back.
This contention is untenable. DCPL's name was in fact mentioned on the product. This is clear from the labels annexed to the show cause notice. Without prejudice to the aforesaid there is no necessity for a manufacturer to mention his name. In any event the same can never lead to the conclusion that the buyer and the seller are related persons nor can it lead to the conclusion that DCPL has interest in the business of BBL or vice versa. Interest in the business whether direct or indirect, has to be mutual and cannot be one-sided.
iii) That mutual interest and flow back does not always have to be openly visible or traceable.
It was submitted that the Commissioner has not given any tangible explanation as to what invisible or untraceable flowback existed. It was submitted that the Commissioner has not given any tangible explanation as to what invisible or untraceable flowback existed. It was submitted that this is just a mere bald allegation without any substance whatsoever. We agree and reject the same.
iv) That DCPL supplied free cost of leaflets, brochures, literature and that this was done to enable either side to benefit from the relationship. That BBL saved money on printing and DCPL benefited by not paying for security and by saving on marketing expenses in exchange for mentioning their name and logo and that this clearly brings out that the parties had mutual interest in each others business and also that there was hidden flow back of money between them (Appeal Memo, p. 109-110) The afore said facts, can neither show mutuality of interest in the business of each other, nor can it show any alleged hidden flow back. DCPL is the manufacturer and therefore is bound to incur the expenses for printing the leaflets, brochures, literature. Had DCPL not done so, it would have been alleged by the Department that these are advertising expenses and should be included in the value of the goods. The industrial gala is owned by BBL and all security is carried out by them. DCPL pays a market rent to BBL. Whilst fixing the rent, various aspects were taken into consideration including providing for security, for keeping the keys etc.
v) DCPL had a list price beyond which BBL could not sell and the arrangement between the parties was that BBL would be billed at 60% of the list price and that the difference in the prices would recover the cost incurred by BBL for providing security services, for opening/closing their factory and for expenses incurred by DCPL for putting the logo and name of BBL as also the cost of printing the leaflets, brochures and literature and advertising material provided to BBL.
The Commissioner has apparently contradicted himself. In the earlier paragraphs, Commissioner has concluded that the printing of leaflets, brochures etc by DCPL was an indirect flow back for the security provided and marketing expenses incurred. If that is so, the difference in the prices cannot also be for the same thing. These printing charges are borne by DCPL and not by BBL as is admitted in the earlier paragraphs by the Commissioner. It is therefore beyond comprehension as to how the bulk discounts given by DCPL to BBL was for compensating BBL for expenses which it never incurred. Further, BBL was the National Distributor of the products. It was therefore necessary to mention its name as marketing company. This cannot amount to any hidden flow back. It cannot amount to mutuality of interest and certainly cannot make the transactions are other than at arms length.
b) The above findings cannot be upheld as BBL as a bulk buyer to DCPL was entitled to a discount. DCPL did not take any loans or advances from BBL. The 40% discount was therefore a normal trade discount and a permissible trade discount. In Metal Box India Ltd v. CCE 1995 (75) KJLT. 449 (SC) the Supreme Court held that giving of large discount (up to 50% in that case) are a commercial factor especially when the buyer is a bulk buyer and that merely because of such large discounts are by cannot be considered as a favored buyer. Therefore, in the present case, the fact that BBL received a discount of 40% for lifting the entire production cannot make BBL a related person. Such discount is not proved to be an abnormal rate/practice for a large buyer There is no explanation or reasoning for the conclusion that such discounts cannot be treated as normal trade discounts.
c) & The comparison of the price at which BBL sold the goods with the price at which DCPL sold the same products to BBL to come to the conclusion that DCPL's price was low is not only unsustainable but cannot lead to the conclusion that there was mutuality of interest. It also failed to consider that DCPL sold to BBL ex-works whereas BBL resold the products inclusive of taxes, freight marketing and distribution expenses. It is not logical to hold that discounts were given merely to remain within the limits of the exemption notification (this would be applicable only for 1 product-CRC Acryform as no benefit of small-scale exemption was claimed for CRC 2-26). There could, therefore, be no question of undervaluing CRC 2-26 as it was fully exempt.
d) Further, bearing in mind that the total shareholding in BBL by Mr. Danani was less than 1% and in 1984 when DCPL started it was 0.73%. DCPL could have derived no benefit by giving such a large discount, as admittedly there was no flow back.
e) It was submitted that DCPL never took the benefit of Rule 173C (11). This has been repeatedly pointed out to the Commissioner as well as his predecessor. However, both Commissioners have blindly repeated this allegation that was made in the show cause notice. This exhibits a biased approach if not non application of mind. Such orders cannot be upheld.
f) The list price indicated the price is beyond which BBL could not sell the goods. DCPL gave BBL a discount from this list price and the difference between the price at which DCPL sold the goods to BBL and the price at which BBL resold the goods, was the income of BBL. The Appellants received nothing other than the price charged to BBL. Whatever profit was made by BBL did not flow to DCPL. It is therefore beyond comprehension as to what flow back the Commissioner is referring to.
The Appellants did not fix the price at which BBL could & did sell the goods but fixed the maximum price at beyond which it cannot sell. There is no notice material to controvert this submission. As a manufacturer, Department it was perfectly & it was reasonable to do so. These are commercial decisions, they cannot ipso facto result in mutuality of interest in the business of each other.
g) It is submitted that merely because there is a common registered office, it cannot lead to the conclusion that the parties are related, & that has to be accepted.
h) As regards the finding that under agreement with BBL Ltd, they were to determine the quality of the product to be brought to them and that this showed that BBL controlled the quality of the product.
It is observed that there was no control by BBL over the quality of the product and even assuming there was this could not lead to the conclusion that the parties were related. Merely because one buyer on one occasion made inquiries with BBL the marketing company cannot lead to the conclusion that the parties are related. It is marketing companies interest to keep the quality parameters in control as they have to answer the buyers.
i) DCPL and BBL are therefore not related persons It is now settled that in order to be a related person three criteria required to be fulfilled:
i) that they are a holding company or subsidiary company,
ii) the buyer is a relative and a distributor.
iii) have mutuality of interest in the business of each other, In the present case DCPL and BBL do not hold shares in each other. The question therefore of holding company or subsidiary company does not arise. Therefore, the first criterion is not applicable at all. BBL is not a relative as defined under the Companies Act. It is only a distributor. In Union Of India v. Atic Industries 1984 (17) E.L.T. 323 (SC) the Supreme Court held that the words relative and a distributor have to be read conjointly. Merely because a person is a sole distributor cannot make him a related person. Thus the fact that BBL was the sole purchaser of the products manufactured by DCPL could not make BBL in DCPL related persons. Therefore, the second criterion is also not applicable at all. The interest in the business has to be mutual. In the present case BBL has no interest in the business of DCPL and neither does DCPL have any interest in the business of Bharat Bijlee. It has been held in the aforesaid judgment of Atic Industries as well as recently by the Tribunal in the case of South Asia tyres Ltd v. CCE 2002 (149) ELT 1107 (Vol VTII, p.2237) that interest-free loans, share participation and constitution of Board of Directors of the Appellant company indicated a presence of interest by the buyer companies in the affairs of the Appellant company but did not show any interest of the Appellant company in the business of the buyers. It was held therefore that even if a company has interest in the business of another that would not suffice, as it must be showing that the other also has interest in the business of the company. In other words there has to be mutuality of interest and one-sided interest is not enough. Therefore, assuming whilst denying that BBL had created DCPL it would only show that BBL has an interest in the DCPL's business. No evidence is produced showing DCPL's interest in BBL. In Alembic Glass Industries Ltd v. CCE 2002 (143) KL.T. (SC) the Supreme Court held that merely holding shares in each other and having a common chairman and some common Directors can not mean that one company has an interest in the business of the other. It is pertinent to note that in this judgment they have disagreed with an earlier judgment of the Supreme Court in the case of Calcutta Chromotype Ltd v. CCE 1998 (99) E.L.T. 202 (SC). The Tribunal has also held the same in Mahalaxmi Glassworks Ltd v. CCE 1991 (S3) E.L.T. 120 (T). Union of India v. Playworld Electronics Private Ltd 1989 (41) ELT. 368 (SC) the Supreme Court held that merely because the entire production is sold to a buyer the sales could not be treated as sales to related person. It is also clear from the order of the CEGAT dated 11th June 1999 in the present case that there has been no indication as to how any of the factors relied upon by the department show interest in the business of each other. Therefore it is clear DCPL and BBL cannot be considered to be related persons.
3.5 WHETHER THERE WAS AMY SUPPRESSION TO JUSTIFY INVOKING THE PROVISO TO SECTION 11A (1)
a) It is now well settled that when the department has knowledge of all the facts or ought to have had the knowledge, the department cannot invoke the proviso to Section 11A (1). The department has been informed right since the beginning that CRC 2-26 had anti-corrosive properties. This is clear from the letter dated 6th November 1984. Along with this letter DC PL and enclosed the literature. This literature made it very clear that the product amongst other things prevents corrosion. The department in fact drew samples for testing in November 1984 itself. The label of the can contained the aforesaid information. In March 1985, once again DCPL informed the Superintendent of Central Excise that they were the manufacturers of CRC 2-26, which was a blended lubricant comprising of various anti-corrosive Chemicals and solvents blended with mineral turpentine oil and that the same was fully exempt other Notification 120/84. It was also stated that as they did not have their facilities to repack in aerosol containers the same was being sent any fully manufactured condition to M/s Mistair Home Products for filling. On 10.5.1990 DCPL recorded the visit of the Excise Inspectors to their factory. It was pointed out that CRC 2-26 was a blended lubricating oil manufactured by blending turpentine oil with anti-corrosive agents in a base of petroleum oil. The weight of petrol oils is more than seven 70% and that the same was fully exempt under Notification No. 120/84. Copies of the labels were enclosed. Samples were again drawn in 1990 and 1993 to determine whether or not the product was a lubricating oil. The Superintendent was requested to confirm whether the same was in order. The Superintendent asked for the process of manufacture and the percentage of the ingredients. The DCPL gave this information pointing out that the product contained 3% of rust preventives. In the Annexure to the Declarations filed from time to time, it was specifically mention under the Process of Manufacture and under. "Blending of various Ami Corrosive chemicals and solvents were minimal turpentine" (see page 46 of the SCN). A mere persual of the classification list filed in 1991 would show that DCPL disclosed that CRC 2-26 was a blended lubricating oil manufactured by blending mineral turpentine oil with anti-corrosive agents in a base of petroleum oil. The chemical test reports obtained by the department are unequivocal. On the basis of these test reports the Declarations claiming the benefit of Notification 120/84 and subsequently the classification lists themselves were approved. At no stage did the department asked for retest or dispute the same. As the department was fully aware that the product, inter alia, prevents rust and has anti-corrosive properties and as this fact was never suppressed form the department, it cannot now alleged that there was any suppression of facts with intent to be duty. The entire demand therefore in respect of CRC 2-26 must be considered to be wholly time-barred.
b) Further, the department themselves went in appeal against the approval of the classification list. This appeal was set aside as the entire matter was remanded. We are informed, Till date there has been no order passed by the Assistant Commissioner on these classification lists with regard to the claim of the benefits of the Notification. In the circumstances it is not open for the Commissioner to allege suppression and demand duty, when the issue itself is still at large has not been decided by the Assistant Commissioner.
c) The conclusion, that DCPL had suppressed the fact that CRC 2-26 was not a lubricating oil by describing the product as predominantly a lubricating oil is manifestly untenable & will not constitute suppression since it is so. The Appellants had bona fide belief that the product is a lubricating oil and have therefore described the same in accordance with the belief. This cannot amount to suppression of facts.
d) The conclusion that DCPL never disclosed to the department that the product was actually used for general maintenance of electrical equipment is, cleaning and prevention of rust etc is equally untenable as these facts are written on the labels and literature. In any case, it is now well settled that mere nondisclosure would not amount to suppression of facts. Even otherwise it is now well settled that in order to invoked the proviso to Section 11A(1) something positive other than mere in-action or failure on the part of a manufacture of producer is necessary. There has to be a conscious or deliberate withholding of information when the manufacturer knew otherwise. This has to be established by the Department before the longer period of limitation can be invoked. In the present case when the Department was fully aware of all facts, any inaction by DCPL, which is based on their bona fide belief that they were not using anyone else's brand name or logo that would fall within the mischeif of paragraph 7 read with Explanation VIII of the Notification cannot be called suppression with intent to evade duty. In such a case the longer period of limitation cannot be invoked.
e) The fact that CRC Acryform was manufactured under license from CRC Chemicals Europe is mentioned on the label of the product as also the literature. Copies of these labels were given to the Department of the time of filing declarations and classification lists right from September 1986 onwards. The labels of CRC 2-26 also contained the same information and the department had taken samples of these cans with the aforesaid information thereon on several occasions. The Department was therefore Hilly aware that CRC Acryform was being manufactured under license from CRC Chemicals Europe.
f) Non mentioning of the license agreement in the classification lists cannot lead to the conclusion that there has been suppression as it is now well settled that Rule 173B does not require the disclosure regarding a brand-name.
Queen Electrical Industries v. CCE 2002 (150) RLT. 284 SPM Instrument India Pvt LTd v. CCE 2003 (152) E.L.T. 115(T)
g) It has also been held in of Vora Products 2002 (143) E.L.T. 84 that the approval of the classification list granting the benefit of the small-scale Notification presumes the necessary inquiries were conducted by the department as would entitle the assessee to exemption and therefore the larger period of limitation can be invoked.
h) In any case there has to be something positive i.e. a conscious or deliberate withholding of information when the manufacture knew otherwise. This has to be established by the department Padmini Products v. CCE 1989 (43) KL.T. 195 (SC)& the department has failed in this respect.
3.6 Whether the Department Can Demand Penalty
a) As there has been no suppression of facts whatsoever and as the duty demanded is time-barred and as the Show Cause Notice is itself manifestly misconceived, on merits there can be no question of imposing any penalty either Under Rule 173Q or any other provision.
b) The only ground for imposing penalty is that the Appellant had suppressed-the facts and thus evaded payment of duty. In the present case when there has been no suppression whatsoever found therefore no penalty can be imposed.
c) In any case, in the remaining 12 show cause notices then was no allegation of suppression and therefore the aforesaid ground could not have been used by the Commissioner for imposing penalty in respect of the duty demanded under these 12 show cause notices.
d) There has been no mens rea by either the company or Mr. N.J. Danani all Mr. Herman Pinto. None of them were aware that any goods were liable for confiscation. The penalties on them are therefore ex facie perverse.
e) The Commissioner has also increased the penalties as compared to the previous Commissioner whose order was set-aside without any justification. This is also unsustainable in law.
f) Penalty are therefore not called for and are to be set aside.
4.1 In view of the findings arrived it is to be held-
i) The benefit of exemptions is available under notification to both the products as arrived at herein above.
ii) The duty demands are not upheld and are to be set aside.
iii) Penalties are not called for and are to be set aside.
5.1 The order is to be set aside and appeals allowed with consequential relief.
6.1 Ordered accordingly.
(Pronounced in Court on 22.12.2004)