SSI exemption and brand name use: amended notification covers goods bearing another person's mark, but bona fide belief barred penalty.

Amendment of the SSI exemption notification broadened the disqualification from goods physically affixed with another person's mark to goods merely bearing that brand name, so authorisation to use the brand did not preserve eligibility; the exemption was therefore unavailable and the duty demand stood. Penalty was nevertheless unsustainable because non-payment arose from a bona fide belief based on earlier interpretations of the unamended provision, and such conduct was not treated as contumacious.

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Issues: (i) Whether the assessee was entitled to small scale industry exemption under Notification No. 1/93 when the goods bore another person's brand name by authorisation and the name was not physically affixed on the goods; (ii) whether penalty could be sustained when the non-payment of duty was under a bona fide belief about eligibility to exemption.

Issue (i): Whether the assessee was entitled to small scale industry exemption under Notification No. 1/93 when the goods bore another person's brand name by authorisation and the name was not physically affixed on the goods.

Analysis: Paragraph 4 of Notification No. 1/93, as amended by Notification No. 59/94-CE, denies the exemption to goods bearing the brand name or trade name of another person. The amendment substituted the requirement of affixation with the broader expression 'bearing', so the decisive test is whether the goods carry the brand name of another person, not whether the manufacturer physically affixed it on the goods. On the facts, the goods were manufactured and marketed under the brand name of another person pursuant to authorisation, and the Tribunal had proceeded on the unamended text.

Conclusion: The assessee was not entitled to the exemption and the duty demand was rightly restored.

Issue (ii): Whether penalty could be sustained when the non-payment of duty was under a bona fide belief about eligibility to exemption.

Analysis: The record showed that the assessee entertained a bona fide belief that duty was not payable because earlier Tribunal decisions had taken a different view on the unamended exemption provision. In these circumstances, the failure to pay duty was not treated as contumacious conduct warranting penal consequences.

Conclusion: The penalties were set aside.

Final Conclusion: The duty demand was upheld, but the penal component was annulled, resulting in only a partial success for the Revenue and corresponding partial relief for the assessee.

Ratio Decidendi: After amendment of the SSI exemption notification, the relevant test is whether the goods bear the brand name of another person, and physical affixation by the manufacturer is not necessary; however, penalty may be denied where non-payment of duty is due to a bona fide belief arising from an arguable interpretation of the exemption.

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