2013 (12) TMI 1342 - AT - Central Excise

Respondents lose small scale exemption due to logo use, penalties imposed for suppressing facts. Court rules in favor of Revenue.

COMMISSIONER OF CENTRAL EXCISE Versus M/s QUANTUM INSTRUMENTS & ELECTRONICS

The respondents were found ineligible for the small scale exemption under Notification No. 1/93-CE due to the use of another company's logo, indicating a ... SSI Exemption - Brand Name – Mentioning of logo on the goods – Held that:- The goods R-Core Transformers manufactured are having a sticker with description 'manufactured by Instruments & Electronics, Bhopal in Technical Collaboration with SEL' and also showing the logo of M/s. SEL - The fact is that the logo of SEL mentioned on the goods indicates a connection between the goods manufactured by the respondents with the Silcher Electronics Ltd. – Following COMMISSIONER OF CENTRAL EXCISE, TRICHY Versus GRASIM INDUSTRIES LTD.[2005 (4) TMI 64 - SUPREME COURT OF INDIA] - in context of trade name, a name or any writing would cover the name of the company so long as it is used in relation to the product and is used for the purpose of indicating the connection in course of trade between the product and the other person - The logo indicates a connection between the M/s. SEL and the goods manufactured by the asseessee and they are not entitled to the small Scale exemption. Extended period of limitation on interest and penalty u/s 11AC of the central excise act 1944 – Held that:- Assessee continued to use of logo of SEL up to Mar, 99 - statement given under section 14 of the Act by the partner of the respondents was not true and he suppressed the facts - The Original Authority has rightly invoked extended period and imposed the penalty under section 11AC of the Central Excise Act – R-Core Transformers manufactured by the Respondent and which were being cleared by them by affixing the brand name and logo of their collaborator 'SEL, Baroda' were not eligible for SSI exemption and extended limitation period under proviso to Section 11A(1) is applicable to the facts of this case - Decided in favour of Revenue. Issues Involved:1. Eligibility for Small Scale Exemption under Notification No. 1/93-CE.2. Invocation of the extended period for demand and imposition of interest and penalty.Detailed Analysis:1. Eligibility for Small Scale Exemption under Notification No. 1/93-CE:The primary issue was whether the respondents were eligible for the small scale exemption under Notification No. 1/93-CE despite using the logo of M/s. Silchar Electronics Ltd. (SEL) on their products. The department argued that the use of SEL's logo indicated a connection between the goods and SEL, thus disqualifying the respondents from the small scale exemption as per the Supreme Court's decision in Grasim Industries. The respondents contended that their use of the logo was permissible under their technical collaboration agreement with SEL, and the Commissioner (Appeal) had rightly allowed their appeal based on the Tribunal's decision in HOD Laboratories.The Tribunal found that the logo of SEL on the goods indeed indicated a connection between the goods and SEL. It was held that the use of another company's logo or trade name disqualified the respondents from availing the small scale exemption, following the Supreme Court's ruling in Grasim Industries. Therefore, the respondents were not entitled to the small scale exemption.2. Invocation of the Extended Period for Demand and Imposition of Interest and Penalty:The second issue was whether the extended period for demand could be invoked and whether interest and penalties were applicable. The original authority had invoked the extended period and imposed penalties based on the finding that the respondents continued to use the SEL logo beyond the period they had declared, thereby suppressing facts.The Tribunal noted that the partner of the respondents had initially stated that the use of the SEL logo ceased in May 1997, but further investigation revealed its use continued until March 1999. This discrepancy was deemed a suppression of facts, justifying the invocation of the extended period and imposition of penalties under Section 11AC of the Central Excise Act.Separate Judgment by Archana Wadhwa, J.:Judge Archana Wadhwa agreed with the legal issue but differed on the point of limitation. She argued that during the relevant period, the law was not clear, and there were conflicting judgments. She cited the Tribunal's decision in HOD Laboratories and the Supreme Court's decisions in Vikshara Trading & Invest P. Ltd. and Mamma Products to support that the respondents could have had a bona fide belief in their eligibility for the exemption. Therefore, she opined that the extended period of limitation should not apply, making the demand time-barred.Final Order by Rakesh Kumar, J.:Judge Rakesh Kumar, resolving the difference of opinion, held that the respondents were not eligible for the small scale exemption and that the extended period for demand was applicable. He emphasized that the respondents' failure to disclose the use of SEL's logo amounted to suppression of facts with intent to evade duty. Thus, he agreed with the judgment of the Member (Technical) and allowed the Revenue's appeal.Conclusion:The impugned order was set aside, and the Revenue's appeal was allowed, reinstating the original authority's order. The respondents were found ineligible for the small scale exemption due to the use of SEL's logo, and the extended period for demand, along with penalties, was justified due to suppression of facts.