Appellant wins SSI exemption for mineral water cleared under brand names SAFE and YES

CESTAT NEW DELHI allowed the appeal challenging denial of SSI exemption for mineral water clearance under brand names. For brand SAFE, appellant purchased rights through unregistered sales agreement from another entity. Tribunal held department failed to prove brand belonged to another person, citing precedent that onus lies on department. For brand YES, appellant cleared goods to specific buyer under agreement where buyer provided packaging materials and sold to customers knowing brand ownership. CESTAT found appellant entitled to exemption as brand indicated no trade connection with appellant. Penalties on appellant and individuals were set aside. Commissioner (Appeals) order dated 17.05.2019 was overturned.

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Issues Involved:
1. Demand of central excise duty on mineral water cleared under the brand name 'SAFE'.
2. Demand of central excise duty on mineral water cleared under the brand name 'YES'.
3. Imposition of penalties on the appellant, Tapan Rai, and Manju Jain.

Issue-Wise Detailed Analysis:

1. Demand of Central Excise Duty on Mineral Water Cleared Under the Brand Name 'SAFE':
The first issue concerns the demand confirmed on mineral water cleared as the "SAFE" brand during the period February 2012 to August 2016. The Assistant Commissioner confirmed the demand on the grounds that the brand "SAFE" was not owned by the appellant as it was not registered in their name and was allegedly owned by another person. The appellant contended that the brand "SAFE" was indeed owned by them, having purchased it from Abhay Kumar Jain, proprietor of M/s Siddhi Corporation, Jodhpur, under a sales agreement dated 06.06.2008.

The exemption notification dated 01.03.2003 stipulates that the exemption can be denied only when the goods bear the brand name of another person. The onus was on the department to bring evidence to substantiate that the brand name was owned by another person. The Tribunal in Mukur Pharmaceuticals Co. P. Ltd. vs. Commissioner of Central Excise, Chandigarh 2001 (135) E.L.T. 569 (Tri.-Del.) held that the department must prove that the brand name belongs to another person. In this case, no such evidence was provided by the department.

2. Demand of Central Excise Duty on Mineral Water Cleared Under the Brand Name 'YES':
The second issue pertains to the demand on mineral water cleared under the brand name 'YES' during the period from October 2014 to August 2016. The appellant argued that the mineral water with the 'YES' brand was cleared to M/s. Bhagwati Beverages, Jodhpur under an agreement that allowed the appellant to process, pack, and sell mineral water with the brand name 'YES' to them exclusively, not to consumers or the market. Thus, the appellant claimed entitlement to the exemption under the notification, as the goods were sold only to M/s. Bhagwati Beverages, who knew that the brand name did not belong to the appellant.

The Tribunal found that the appellant would be entitled to the exemption under the notification dated 01.03.2003, as the brand name 'YES' did not indicate any connection in the course of trade between the specified goods and the appellant.

3. Imposition of Penalties on the Appellant, Tapan Rai, and Manju Jain:
Given the findings on the first two issues, the penalties imposed on the appellant, Tapan Rai, and Manju Jain under the Central Excise Rules were also found to be unsustainable. The Tribunal concluded that the penalties could not be upheld as the demands themselves were not justified.

Conclusion:
The impugned order dated 17.05.2019 passed by the Commissioner (Appeals) was set aside. All three excise appeals were allowed, and the demands and penalties imposed were annulled. The judgment emphasized the necessity for the department to provide substantial evidence when denying exemptions based on brand ownership and clarified the conditions under which exemptions can be claimed under the notification dated 01.03.2003.

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