2002 (6) TMI 310 - AT - Central Excise

Misuse of Small-Scale Exemption in Voltmeter & Ampere Meters

The case involved manufacturers availing Small-scale Exemption under Notification No. 1/93 for Voltmeter and Ampere Meters. A show cause notice alleged ... SSI Exemption - Brand name - Interpretation of statute Issues:Manufacturers availing Small-scale Exemption under Notification No. 1/93 produced goods under brand names of other persons, show cause notice alleging misuse of exemption, confirmation of allegation, interpretation of brand names, connection between brand names and goods, disowning of brand names by alleged owners, duty demand reduction, penalty reduction.Analysis:The case involved manufacturers availing Small-scale Exemption under Notification No. 1/93 for Voltmeter and Ampere Meters, subject to the condition that goods are not produced under the brand name of another person. A show cause notice was issued alleging that goods were manufactured under various brand names belonging to traders who purchased from the appellants. During adjudication, most traders disowned the brand names except for one who admitted ownership of a brand name. The appellants argued that markings on goods were for identification purposes, not brand names. The impugned order confirmed the allegation based on the appellant's statement during investigation.The appellants contended that except for one brand name, the other names were not brand names but merely for identification. They referred to a CBEC Circular stating that a brand name must establish a connection in trade between goods and a person using the name. Since alleged owners disowned the brand names, the connection requirement was not met. The exemption was not available for goods under one brand name, leading to a reduced duty demand of Rs. 60,810 out of a total demand of over Rs. 2.5 lakhs.For the Small-scale Exemption, it was crucial that the brand name indicated a trade connection between the user and the goods. In this case, most alleged brand name owners disowned the names, raising doubts about the branding. Brand names are valuable assets, making disownment unusual. Without evidence showing the brand names belonged to specific traders, the finding that goods were produced under others' brand names could not be sustained. Consequently, the duty demand was reduced to Rs. 60,810 for goods under one brand name, leading to a penalty reduction to Rs. 6,000. The appeal was granted in favor of the appellants based on the lack of evidence establishing a trade connection between the alleged brand names and the goods.