2003 (8) TMI 454 - AT - Central Excise

Tribunal grants SSI exemption for 'Hose Assembly' with foreign brand name, penalties set aside.

The Tribunal ruled in favor of the appellants, concluding that the 'Hose Assembly' is a distinct product eligible for Small Scale Industry (SSI) ... SSI Exemption - Brand Name - Departmental clarification - Binding effect - Show cause notice - Scope of - Demand - Limitation - SSI Exemption - Brand name Issues Involved:1. Classification of 'Hose' and 'Hose Assembly' as identical or distinct products.2. Eligibility for Small Scale Industry (SSI) exemption based on the use of a foreign brand name.3. Validity of the show cause notices and adherence to procedural requirements.4. Invocation of the extended period of limitation under Section 11A.5. Imposition of penalties on the appellant company and its director.Detailed Analysis:1. Classification of 'Hose' and 'Hose Assembly' as Identical or Distinct Products:The Tribunal examined whether 'Rubber Hose' and 'Hose Assembly' should be treated as the same product or distinct entities. The Commissioner concluded that the 'Hose Assembly' is a new, distinct product that emerges from the process involving cutting, skiving, and fitting metal end fittings to the hoses. The Tribunal upheld this finding, noting that the 'Hose Assembly' has different uses and marketability compared to the raw 'Hose'. Therefore, the 'Hose Assembly' is a separate product, and duty must be charged accordingly.2. Eligibility for SSI Exemption Based on the Use of a Foreign Brand Name:The appellants were denied SSI exemption benefits under Notifications 175/86 and 1/93 on the grounds that they used the brand name 'Dunlop Hiflex' belonging to a foreign company. The Tribunal found that the markings on the 'Hose Assembly' were distinct from those on the imported 'Hoses'. The Tribunal referred to the CBEC Circular No. 88/88-Cx., which clarified that using a mark registered for certain articles does not disqualify another manufacturer from using it for different goods. The Tribunal also cited the Larger Bench decision in Fine Industries, which supported this interpretation. Consequently, the Tribunal concluded that the use of the brand name 'Dunlop Hiflex' on the 'Hose Assembly' did not disqualify the appellants from SSI exemption.3. Validity of the Show Cause Notices and Adherence to Procedural Requirements:The Tribunal noted that the show cause notices alleged the use of the brand name 'Dunlop Hiflex' on the hose assemblies. However, the Commissioner went beyond the scope of the notices by introducing the issue of the 'Flying D' logo on cellophane tapes used for packaging, which was not originally alleged. The Tribunal found this to be procedurally improper and held that the use of the 'Flying D' logo on packaging material did not constitute the use of a brand name on the goods themselves.4. Invocation of the Extended Period of Limitation under Section 11A:The Tribunal determined that the extended period of limitation under Section 11A was not applicable. The appellants had disclosed the use of the brand name 'Hiflex' in various documents submitted to the Department, including Modvat declarations and invoices. The Tribunal cited several precedents, including SPM Instrument India (P) Ltd. v. CCE, Hyderabad, which established that the classification list does not require indication of the brand name. The Tribunal also noted that the legal position regarding the use of foreign brand names was unsettled during the relevant period, further supporting the appellants' claim of bona fide belief.5. Imposition of Penalties on the Appellant Company and Its Director:Given the findings that no duty demands could be determined, the Tribunal held that there was no basis for imposing penalties on the appellant company or its director. The penalties were set aside accordingly.Conclusion:The Tribunal set aside the impugned order and allowed the appeals, concluding that the 'Hose Assembly' is a distinct product eligible for SSI exemption, the extended period of limitation was not invokable, and no penalties were warranted. The Tribunal ordered accordingly.