2002 (2) TMI 618 - AT - Central Excise

Tribunal affirms duty demand & penalty against appellants for brand name use, upholds extended limitation period.

The Tribunal upheld the adjudicating authority's decision, affirming duty demand and penalty against the appellants. The Tribunal found no illegality in ... Suppression of material fact - extended period of limitation - entitlement to small scale industry (SSI) exemption - use of another person's trade mark/brand name - penalty under Section 11AC read with Rule 173Q and erstwhile Rule 9(2)Suppression of material fact - extended period of limitation - Whether the extended period of limitation was rightly invoked because the appellants suppressed the fact of using the brand name of another person while claiming SSI exemption - HELD THAT: - The Tribunal and the adjudicating authority found that the appellants did not disclose in classification lists, RT-12 returns or other statutory declarations that they were using the brand name of another person, and thus wilfully suppressed a material fact which was relevant to entitlement to SSI exemption. Prior visits, approvals of returns and earlier classification disputes did not amount to disclosure of that usage to the department. Reliance on decisions limiting invocation of extended limitation where department had knowledge was negatived by the Tribunal's largerbench authority holding that acquisition of departmental knowledge does not preclude extended limitation when there has been suppression, fraud or collusion by the assessee. The Board circular and other authorities cited by the appellants were distinguished on the ground that here there was positive misdeclaration by omission of the trademarks actually used, so the proviso to Section 11A(1) permitting extended limitation was properly invoked. [Paras 4, 5, 7]Extended period of limitation was correctly invoked because the appellants suppressed the material fact of using another's brand; extended limitation is invocable.Use of another person's trade mark/brand name - entitlement to small scale industry (SSI) exemption - Whether the appellants were entitled to SSI exemption notifications while using the brand name of another person - HELD THAT: - The question whether the appellants used another's brand name and thereby lost entitlement to SSI exemption had already been decided adversely to the appellants by the Tribunal in its earlier final order. This Court declined to reopen that factual and legal determination in the present appeal, noting that the appellants' challenge to that Tribunal order was pending before the Apex Court but its operation was not stayed. Consequently the adjudicating authority was justified in denying the benefit of the SSI exemption notifications to the appellants for the period in dispute. [Paras 2, 9, 11]Denial of SSI exemption on account of use of another's brand was upheld; the prior Tribunal finding stands and the question is not reheard.Penalty under Section 11AC read with Rule 173Q and erstwhile Rule 9(2) - Whether imposition of penalty (joint/assessees) under Section 11AC read with Rule 173Q and erstwhile Rule 9(2) was sustainable - HELD THAT: - Penalty was imposed mainly under Section 11AC equal to the duty amount, with supporting application of Rule 173Q and erstwhile Rule 9(2) for the relevant part of the period including the time from September 1996 when Section 11AC came into force. The adjudicating authority's imposition of penalty was held to be permissible; authorities relied upon by the appellants to resist joint penalty were found inapplicable to the facts of the case. It was not mandatory to impose penalty on employees as a precondition for imposing penalty on the assessee. [Paras 10, 11]Imposition of penalty under the cited provisions was sustainable and correctly upheld.Final Conclusion: The impugned order confirming duty and imposing penalty for the period April, 93 to March, 98 is upheld; the appeal is dismissed. Issues Involved:1. Entitlement to the benefit of small scale exemption Notification No. 1/93 and Notification No. 16/97.2. Invocation of the extended period of limitation under Section 11A(1) of the Central Excise Act.3. Legality of joint penalty imposed under Section 11AC, Rule 173Q, and erstwhile Rule 9(2).Detailed Analysis:1. Entitlement to the benefit of small scale exemption Notification No. 1/93 and Notification No. 16/97:The appellants were engaged in manufacturing textile printing adhesive and were using the foreign brand name ATR. The Tribunal had previously determined that the appellants were not entitled to the benefit of small scale exemption Notification No. 1/93 and Notification No. 16/97 because they used the brand name of another person. This finding was based on the fact that the appellants had a technical collaboration with M/s. TR St. Moritz AG, Switzerland, and were affixing labels bearing the foreign brand name ATR on their products. The appellants' contention that they did not use another's brand name was rejected, and the Tribunal's decision was pending appeal before the Supreme Court without a stay on its operation.2. Invocation of the extended period of limitation under Section 11A(1) of the Central Excise Act:The appellants argued that the longer period of limitation could not be invoked as the excise department had full knowledge of their activities since 1983. They cited various instances where the department had verified their claims and issued demand notices. However, the Tribunal found that the appellants had suppressed the fact of using another's brand name in their classification lists, RT-12 returns, and other declarations. The Tribunal held that the suppression of this material fact justified the invocation of the extended period of limitation. The Tribunal referred to the larger bench decision in Nizam Sugar Factory v. CCE, Hyderabad, which stated that the department's knowledge did not preclude the extended period of limitation when there was suppression, fraud, or collusion by the assessee.3. Legality of joint penalty imposed under Section 11AC, Rule 173Q, and erstwhile Rule 9(2):The appellants contended that joint penalty under these provisions was not permissible. However, the Tribunal upheld the penalty, stating that it was mainly imposed under Section 11AC, which could be read with Rule 173Q and erstwhile Rule 9(2). The Tribunal found that for the period starting from September 1996 onwards, when Section 11AC came into force, and for the earlier period, the penalty could be imposed under the relevant section and rules. The Tribunal dismissed the appellants' argument by citing the cases of Punjab Recorder Ltd. v. CCE, Chandigarh, and M/s. Monica Electronics Limited & Ors. v. CCE, New Delhi, which were not applicable to the appellants' case.Conclusion:The Tribunal upheld the adjudicating authority's order, affirming the duty demand and penalty against the appellants. The Tribunal found no illegality in the impugned order and dismissed the appeal, reiterating that the appellants were not entitled to the benefit of the small scale exemption notifications due to their use of another's brand name and that the extended period of limitation was rightly invoked due to suppression of material facts. The penalty imposed under Section 11AC, Rule 173Q, and erstwhile Rule 9(2) was also upheld.