2015 (2) TMI 787 - AT - Central Excise

Tribunal upholds duty liability, interest, sets aside penalty under Section 11AC - Central Excise Act

M/s. Sheetal Clothing Co. Pvt. Ltd. Versus CCE Mumbai I

The tribunal upheld the duty liability and interest but set aside the penalty imposed on the appellant under Section 11AC of the Central Excise Act, 1944. ... SSI exemption - use of brand name of others - - Imposition of interest - Penalty u/s 11AC - Assessee were affixing/stitching labels of registered brand Sheetal on the children s garments purchased from non-duty paying SSI units and cleared the same without payment of Central Excise duty - Held that:- it is seen that the appellant has admitted that the brand Sheetal is of Shri Dhiren B. Shah hence should have sought clarification from department as to correct position of law. Be that it may, we uphold the duty liability and the interest thereof as there is no serious contest. - Demand of duty confirmed. Levy of penalty - Held that:- Appellant could have entertained a bonafide belief that the brand Sheetal being their own; as it is undisputed that Shri Dhiren B. Shah was the Director of the Company, and the brand was registered in his name and the appellant has also made an application with the Trade Mark authorities to register the brand in their name; and they did not pay excise duty as they were only affixing label of a seller. Since there could be confusion on this issue and the period involved in this case being the time when these provisions were introduced for the first time we find the appellant’s submission of there being no intention to evade duty has a strong force. Escapement of duty, if any, in the facts and circumstances of this case, may be due to bonafide belief of the appellant of interpretation of Notification 38/2003-CE. On this ground, we set aside the penalty imposed on the appellant in this appeal - penalty waived - Decided partly in favour of assessee. Issues:1. Central Excise duty liability on affixing/stitching labels of a registered brand on garments purchased from non-duty paying units.2. Imposition of penalty under Section 11AC of the Central Excise Act, 1944 based on alleged suppression of facts regarding the affixing of the brand label.Analysis:Issue 1: Central Excise duty liabilityThe appellant, engaged in manufacturing readymade garments, was found affixing labels of a registered brand on children's garments purchased from non-duty paying SSI units without paying Central Excise duty. The lower authorities issued a show-cause notice demanding duty, interest, and penalty. The appellant contended they were affixing price tags, seller names, or usage instructions, not the registered brand label. The appellant had already paid the duty liability and interest before the show-cause notice. The tribunal noted discrepancies in whether the brand label was affixed on all garments sold. Despite the confusion, the tribunal upheld the duty liability and interest as there was no serious contest.Issue 2: Imposition of penalty under Section 11ACThe penalty was imposed on the appellant for allegedly suppressing the fact of affixing the brand label without informing the department. The appellant argued they believed the brand was their own, covered under a specific Notification. The tribunal examined the Notification and found ambiguity regarding the duty applicability when affixing labels. Considering the appellant's belief that the brand was their own due to the director's association and trademark application, the tribunal accepted the appellant's bonafide belief defense. The tribunal concluded that any duty evasion was unintentional due to confusion around the interpretation of the Notification. Consequently, the penalty was set aside, and the appeal was allowed on this ground while rejecting the contest on duty liability and interest.In summary, the tribunal upheld the duty liability and interest but set aside the penalty imposed on the appellant under Section 11AC of the Central Excise Act, 1944, due to the appellant's bonafide belief regarding the brand label affixing.