2018 (9) TMI 492 - AT - Central Excise

Tribunal Overturns Duty Demand, Highlights Investigation Flaws

The Tribunal held that the show cause notice dated 14.6.2016 demanding duty on goods was not sustainable in law, following legal precedent. As a result, ... Validity of second SCN - Time Limitation - SSI Exemption - Use of Brand Name of Others - Nuloux - Ganak - Savstar - N/N. 8/2003-CE dated 1.3.2003 - Held that:- In this case admittedly, investigation was conducted on 22.1.2013 and during the course of investigation certain goods were seized. For seizure of the said goods, a show cause notice was issued on 19.7.2013 to the trading unit i.e. M/s Devika Enterprises wherein the allegation is that the manufacturing unit is engaged in manufacturing and clandestinely clearing the goods in brand name of others. The said manufacturing unit is named as M/s B.M. Enterprises, but no show cause notice was issued. Later on, after issuance of the second show cause notice, the show cause notice dated 19.7.2013 has been dropped against the appellants. The appellants are manufacturing branded goods of others and subsequent notice has been issued on the basis of same investigation on 14.6.2016 is not sustainable - Reliance was placed in the case of NIZAM SUGAR FACTORY VERSUS COLLECTOR OF CENTRAL EXCISE, AP [2006 (4) TMI 127 - SUPREME COURT OF INDIA], where it was held that When the first SCN was issued all the relevant facts were in the knowledge of the authorities. Later on, while issuing the second and third show cause notices the same/similar facts could not be taken as suppression of facts on the part of the assessee as these facts were already in the knowledge of the authorities. The show cause notice dated 14.6.2016 is not sustainable in the eyes of law - appeal allowed - decided in favor of appellant. Issues:1. Duty demand confirmed against M/s B.M. Enterprises2. Penalty imposed on M/s Devika Enterprises3. Validity of show cause notice issued to demand duty on seized goods4. Ownership of brand names Nuloux, Ganak, Savstar5. Allegation of suppression of facts by the appellant6. Sustainability of show cause notice dated 14.6.2016Analysis:1. The appeal concerned duty demand confirmed against M/s B.M. Enterprises and penalty imposed on M/s Devika Enterprises. A search conducted at M/s B.M. Enterprises revealed branded goods, leading to a show cause notice for confiscation and penalty issuance. However, a subsequent notice realized the mistake, leading to another show cause notice to both appellants for duty demand and penalty imposition.2. The appellant's counsel argued that the show cause notice dated 14.6.2016 for demanding duty on goods from both appellants was time-barred and unsustainable based on legal precedent. Citing the case of Nizam Sugar Factory, it was contended that the demands were not sustainable.3. Regarding the ownership of brand names, the appellant claimed to have the assignment deed for the Nuloux brand, making it ineligible as a third-party brand. For the Savstar brand, it was argued that the department lacked evidence of ownership by another party. The Ganak brand's ownership was disputed due to insufficient quantification of goods purchased.4. The department argued that the appellant concealed the manufacturing unit's identity during investigation, leading to the subsequent show cause notice. However, the Tribunal found that the investigation and subsequent notices were flawed, as the facts were already known to the authorities, citing the Nizam Sugar Factory case.5. After careful consideration, the Tribunal held that the show cause notice dated 14.6.2016 was not sustainable in law, following the legal precedent. Consequently, the impugned order was set aside, and the appeals were allowed with any consequential relief.This detailed analysis covers the duty demand, penalty imposition, validity of show cause notices, brand name ownership, suppression of facts, and the sustainability of the show cause notice in the mentioned legal judgment.