ORDER
Moheb Ali M., Member (T)
Appeal Nos. 3241, 3242 and 3243/98 – Ashok India Engg. Works, Bhagwan G. Ranglani, Deepak G. Ranglani
1. M/s. Ashok India Engineering Works (M/s. AIEW) were manufacturers of fuses distribution boards etc. bearing a brand name ‘Ashok India®’ which for all intents and purposes belonged to M/s. Chimandas Ashokkumar Engg. Works. M/s. AIEW was a partnership firm at the material time, S/Shri Bhagwan Gangaram Ranglani and Deepak Gangaram Ranglani were its partners. M/s. Chimandas Ashokkumar Engg. Works, the brand owners, manufacture electric motors, pumps mono blocks and pump sets. The department’s contention is that in terms of para 4 of notification 1/93 the appellants are not eligible for concessional rate of duty/nil rate of duty as they manufactured goods with a brand name belonging to another person who is not eligible for SSI exemption. There is no dispute that the brand name used by the appellants belonged to another person who is not eligible for SSI exemption. The dispute however exists on the point whether para 4 of notification 1/93-CE is attracted in the appellants’ case as what they produced with the brand name ‘Ashok India’ were not the same goods produced by Chimandas Ashokkumar Engg. Works. Appellants’ contend that exception contained in para 4 of notification 1/93 does not apply to their case. The second bone of contention pertains to invocation of extended period of limitation while demanding central excise duty under Section 11A(1) proviso holding that the appellants have suppressed the fact that they were manufacturing goods with a brand name belonging to another. The appellants argue that there was no suppression with an intent to evade duty for three reasons: (a) That the department is well aware that they were using the brand name ‘Ashok India’ on their products, (b) That there was no column in the declaration to be filed under Rule 174 / 173(b) requiring them to mention the fact that they were using the brand name belonging to another person and (c) That during the relevant time Clause 4 of notification 1/93 was subjected to varied interpretation and nobody was certain whether using someone else’s brand name on products which were different from the ones manufactured by the person who owns the trade mark constitutes an exception under Clause 4 of notification 1/93.
2. The period of dispute is 1.4.1994 to 20.11.1995. In the impugned order, the Commissioner denied the benefit of notification 1/93 and demanded Rs. 9,93,752/- on the subject goods, involving larger period of limitation (show cause notice demanding the said amount was issued on 17.1.1996) imposed a penalty of Rs. 10 lakhs under Rule 173Q of the Central Excise Rules on the firm and imposed penalties of Rs. 50,000/- each on the partners under Rule 209A of the said Rules and demanded interest under Section 11AB of the Central Excise Act.
3. Heard both sides.
4. The learned advocate, Shri Rohan Shah appearing for the appellants, argued that invocation of larger period of limitation is not warranted as there was no suppression on the part of the appellants inasmuch as they had in their declaration (undated but received in the Central Excise office on 13.6.1995) made a full disclosure of the goods produced claiming the benefit of notification 1/93 and there was no column in the declaration form indicating that the declarant has to mention whether a brand name belonging to another person is being affixed on the goods produced. Therefore non-disclosure of such a fact cannot be held as suppression of facts. More importantly he argued that during the relevant time, Clause 4 of notification 1/93 was subjected to varied interpretations as evidenced by the judicial decision on the issue and Board’s clarification on the same and in such a state of flux suppression on the part of the declarant cannot be alleged. Further the learned advocate, relying on the decision in the case of Queen Electrical Industries v. CCE, Madurai, argued that non-mention of brand name in the declaration filed under Rule 174/173(b) cannot be a ground for invoking larger period of limitation. On merits he argued that the brand name used by the appellants is not known or identical in the trade of the appellants’ product with M/s. Chimandas Ashokkumar Engg. Works to cause any buyer to believe that these are products of the latter and therefore the judgments in Intercity Cables & Ball Products relied upon by the Commissioner can have no application. No penalty under Rule 173Q on the firm and under Rule 209A on both the partners is called for.
5. Shri Ajay Saxena appearing for the department, argued that the issue involved is no more res integra in view of the apex court’s decision in the case of CCE, Tricky v. Rukmani Pakkwell Traders (2004 [165] ELT 481 [SC]) and CCE, Chandigarh v. Mahaan Dairies (2004 [166] ELT 23 [SC]) wherein the apex court held that it makes no difference whether goods on which trade name is used are the same in respect of which the trade name is registered. Further the apex court ruled that mere use of additional words would not enable an assessee to claim benefit of exemption notification. The situation would be different if the assessee gets their trade name with additional words registered. The ratio of these judgments, he argued, squarely applies to the present case. In regard to limitation he reiterated the findings of the Commissioner. He submitted that penalty under Rule 173Q on the firm and on partners under Rule 209A are imposable as there is a contravention of the Rules with an intent to evade duty.
6. We have given our careful consideration to the rival contentions. We reject the plea of the appellants that since the products manufactured by the appellants are different from the ones manufactured by the brand name holder, the provisions of Clause 4 of notification 1/93 do not bar them from availing of the benefit of the said notification, in view of the apex court’s decisions cited supra. The appellants are not entitled to the benefit of the said notification in respect of the products where the brand name belongs to another person are affixed on the impugned products.
7. In regard to the contention that larger period of limitation is not invokable, we observe that the issue appears to have been fairly covered in favour of the appellant in the case of Intercity Cables System Pvt Ltd v. Collection [1995 (80) ELT 445 (T)] which was later upheld by the Apex Court. We are aware that the decision cited in Supra is in the context of Notification No. 175/86. All the same the issue involved is whether the declaration under 174/173(b) filed by the Declarant requires him to declare the brand name of the products manufactured by him. The ratio of the decision therefore applies. The show cause notice issued on 17/1/96 covers a part of the period under dispute, duty foregone is demandable under normal period of limitation under Section 11A(1) of the Central Excise Act. We uphold the demand to this extent. The appellant filed a written statement before us that the duty amount works out to Rs. 1,64,001/- during the normal period of limitation.
8. In regard to penalty imposed under Rule 173Q of Central Excise Rules on the firm, we hold that the Commissioner imposed a penalty of Rs. 10.00 lakhs on the firm, considering the duty evaded to be Rs. 9.93 lakhs. Now that we hold that duty is demandable on the goods only under normal period of limitation, such penalty is required to be reduced. That the appellant made the department believe that they are the owners of the brand name used on their products is evident from the correspondence/letterheads etc. Penalty is imposable under Rule 173Q of the Central Excise Rules, for contravention of Central Excise Rules with an intent to evade duty.
9. However, having regard to the circumstances of the case, we reduce the penalty to Rs. 80,000/- under Rule 173Q. Penalties imposed on the partners under Rule 209A are set aside. The Commissioner also demanded interest under Section 11AB. The period of dispute is prior to September 1996, interest under Section 11AB, which came into force in September 1996 is not demandable.
10. Thus the appeal of the firm is partly allowed. The appeals of the partners of the firm against penalties imposed on them are allowed in full.
(1) Demand for duty forgone during the normal period of limitation is only sustained. Such duty be recalculated by the Department on the basis of records maintained by the appellant. The appellant shall pay the duty so demanded.
(2) Penalty on the firm under Rule 173Q is reduced to Rs. 80,000/-.
(3) Penalties on the partners are set aside allowing their appeals.
(4) Interest under Section 11AB is not demandable.
11. The three appeals are disposed of in the above terms.
Appeals E/3244 to 3246/98 – Deelip Engg. Works, Bhagwan G. Ranglani, Jyoti D. Ranglani
12. Deelip Engineering Works was a partnership firm consisting of two partners. The firm manufactures Switches, Motor starters and parts thereof falling under Chapter 85 of Central Excise Tariff Act. The dispute pertains to the use of brand name belonging to another person on the products manufactured while claiming the benefit of Notification No. 1/93. The facts are identical to the facts of M/s. Ashok India Engineering Works. The further contention raised in these appeals is that the appellant firm has not used the brand name “Ashok India” on switches manufactured by them during the relevant period. This ground has not been raised by the appellant before the original adjudicating authority as could be seen from the written submission filed before him. The Commissioner also did not deal with that aspect, as it was not pleaded before him. It is not possible to entertain this plea at this stage. We therefore reject it. The appellants filed a written statement before us that duty amount works out to Rs. 3,01,514/-, if it is worked out taking the normal period of limitation into consideration.
13. Following the decision in the case of Ashok Engineering works supra, we pass the following order:
(a) Demand for duty is restricted to normal period of limitation (period of dispute 1/4/94 to 20/11/95. Show cause notice was issued on 17/1/96). Duty amount on the basis will be calculated and communicated to the appellant upon which the appellant shall pay the duty.
(b) Penalty on the firm under Rule 173Q of Central Excise Rules is reduced to Rs. 1,50,000/- (Rupees One lakh fifty thousand only).
(c) Penalties on the partners of the firm are set aside.
(d) Demand for interest under Section 11AB is set aside.
Appeals E/3247, 3248 and 3249/98 – Deepti Electrical Products, Deepak G. Ranglani, Komal B. Ranglani
14. The appellant firm manufacture C.I. Coating Panel Boards and parts thereof using the brand name belonging to another person during the period under dispute (1/4/94 to 20/11/95). Facts are identical to the other appeals dealt with in this order. The further ground that some of the products manufactured by the appellants (switches and parts thereof) bear their own brand name “Deepti” is put forth before us for the first time. This plea was not raised before the adjudicating authority, as could be seen from the reply to the show cause notice. We reject the plea advanced before us for the first time. The appellant filed a written statement before us indicating that the duty amount works out to Rs. 1,24,928, if normal period of limitation is taken into consideration.
15. Having regard to our findings in Ashok India Engineering Works Supra the following order is passed.
(a) Demand for duty is restricted to normal period of limitation (period of dispute 1/4/94 to 20/11/95. Show cause notice was issued on 17/1/96). Duty amount on this basis will be calculated and communicated to the appellant upon which the appellant shall pay the amount.
(b) Penalty on the firm under Rule 173Q is reduced to Rs. 60,000/-.
(c) Penalties on the partners are set aside.
(d) Demand for interest under Section 11AB is set aside.
Appeals E/3253, 3254 and 3255/98 – Kiran Industries, G.C. Ranglani, B.G. Ranglani
16. Facts are identical to the facts in the appeals dealt with in this order. The ground that some products that on some goods manufactured by them they have affixed a brand name different from ‘Ashok India’ is a new ground put-forth before. As could be seen from the reply to the show cause notice/written submissions filed by the appellant before the Commissioner no such plea was raised. The appellants cannot take this plea now. The appellants indicated by filing a statement before us that duty demand works out to Rs. 2,42,008/- during the normal period of limitation. In view of findings in the appeal of Ashok Engineering Works we pass the following order.
(a) Demand for duty during the normal period of limitation is upheld. The Commissioner may indicate the duty amount accordingly and communicate the same to the appellants therefore are directed to pay the amount.
(b) Penalty on the firm under Rule 173Q is reduced to Rs. 1,20,000/-.
(c) Penalties on the partners are set aside.
Appeals E/3250, 3251 & 3252-R/98 – Prakash Polyvinyl Pvt. Ltd., P.G. Ranglani, P.P. Ranglani
17. The appellants manufacture PVC pipe fittings falling under Chapter 39 of the Central Excise Tariff and claimed benefit of notification 1/93-CE. The allegation is that the appellants are not entitled to the benefit of the said notification for the reasons discussed in M/s. Ashok Engineering Works’ case as discussed supra. The officers of Central Excise visited the premises, seized the goods (PVC pipe fittings) valued at Rs. 7,13,755/- lying in the appellants’ factory on the ground that they bear a brand name ‘Ashok India’ and would have been cleared without payment of duty contravening the provisions of Central Excise Act and Rules. The Commissioner in the impugned order confiscated the goods under Rule 173Q but allowed them to be redeemed on payment of a fine of Rs. 1,50,000/- (Rupees one lakh fifty thousand), demanded duty involving the larger period of limitation and imposed penalties on the firm and partners (Rule 173Q and 209A respectively). The period in dispute is March 1994 to 7.4.1996. Show cause notice was issued on 25.9.1996.
18. In regard to liability of the goods to confiscation, we observe that the appellant manufactured goods with a brand name belonging to another person claiming exemption under notification 1/93 which is not applicable to them. By claiming that they are declarants they have not obtained a registration under Rule 174. The goods manufactured without a valid registration of the unit are liable to confiscation as rightly held by the Commissioner.
19. In view of our findings in the appeal of M/s. Ashok India Engineering we pass the following order : The appellants filed a written statement before us indicating that duty amount when calculated invoking normal period of limitation comes to Rs. 24,000/-.
(a) Demand for duty during the normal period of limitation is only upheld. The Commissioner may indicate such amount towards duty to the appellants who thereupon shall pay the amount so indicated.
(b) Penalties on the firm under Rule 173Q is reduced to Rs. 12,000/-.
(d) Penalties on the partners is set aside.
(e) Confiscation of goods under Rule 173Q is upheld. Redemption fine is reduced to Rs. 50,000/-
20. Thus all the appeals arising out of the orders of the Commissioner are allowed partly.