2005 (3) TMI 369 - AT - Central Excise

Tribunal denies SSI exemption due to brand name ownership issue

The Tribunal upheld the denial of Small Scale Industry (SSI) exemption to the appellant under Notification No. 1/93-C.E. due to the use of a brand name ... Stay/Dispensation of pre-deposit - SSI Exemption - Brand name Issues:1. Denial of SSI exemption under Notification No. 1/93-C.E.2. Interpretation of para-4 of the Notification regarding brand name ownership.3. Appellant's entitlement to use brand name of Sri Lankan company.4. Financial position of the appellant for pre-deposit of duty amount.Analysis:1. The judgment deals with a demand of duty on the appellants due to the denial of Small Scale Industry (SSI) exemption under Notification No. 1/93-C.E. The lower authorities found that the goods were cleared under a brand name belonging to a Sri Lankan company, making them ineligible for the notification's benefit. The appellant argued that being a subsidiary of the Sri Lankan company, they were entitled to use the brand name. The issue revolved around the interpretation of para-4 of the Notification.2. The Tribunal examined a letter from the Sri Lankan company assigning the right to manufacture and market products under the brand names to the appellant-company. It was noted that the letter did not indicate ownership of the brand name by the appellant-company. The Tribunal distinguished a previous case cited by the appellant's counsel, emphasizing the lack of a strong prima facie case. However, considering the appellant's financial difficulties, the Tribunal directed a reduced pre-deposit amount of Rs. 5,00,000/- instead of the full duty amount.3. The key contention was whether the appellant had the right to use the brand name of the Sri Lankan company as their own. The Tribunal noted that while the appellant had permission to manufacture and market products under the brand name, there was no indication of ownership of the brand name by the appellant. This lack of ownership impacted the eligibility for the SSI exemption under the Notification.4. In assessing the appellant's financial position for the pre-deposit of duty, the Tribunal considered the appellant's net losses for the year 2003-04 amounting to Rs. 51 lakhs. Despite finding the financial position unsound for the full deposit, the Tribunal adopted a lenient approach by directing a reduced pre-deposit amount of Rs. 5,00,000/- within a specified timeline, taking into account the appellant's financial hardships. Compliance was required to be reported by a specified date.