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of <h1>Exemption under Notification No. 8/2003-CE applies; department failed to prove brand belonged to another person, demand set aside</h1> <h3>M/s. Aashish Enterprises Versus Commissioner of GST and Central Excise, Chennai</h3> CESTAT held that the exemption under Notification No. 8/2003-CE applies because the Department failed to prove the brand on the electronic gas lighters ... Denial of benefit of SSI Exemption under N/N. 8/2003 CE - denied on the grounds that the brand name of other persons was used on the final products i.e. electronic gas lighters - incidents happened in April 2005 whereas the Investigation was taken up only in 2009 - invocation of extended period of limitation - penalty - HELD THAT:- Para 4 of N/N. 8/2003-CE excludes from exemption goods “bearing a brand name or trade name (whether registered or not) of another person” — unless an exception applies. The core question is whether the brand belongs to another person. The notification (and Explanation) must be read to ascertain whether a mark indicates a connection in the course of trade between the goods and some other person. The burden to establish that the brand actually belongs to “another person” and that the use indicates a connection, rests with the Department. The Supreme Court and Tribunals have consistently held that If the appellant owns the brand (including by assignment) or the alleged owner denies/does not own the brand (i.e., there is no “other person”), the prohibition does not apply and the exemption is available. The ratio of the above decisions is squarely applicable in this case, and following the principle of judicial discipline, it is inclined to follow the same - The Supreme Court has repeatedly held that the mere use of a word which may have been used elsewhere does not automatically attract Para 4 unless such use indicates a connection with another person or the mark is demonstrably the brand of a third party. If the name is generic/common and there is no evidence of exclusive ownership or intention to indicate a connection, the appellant may still claim exemption. The use of brands by the Appellant cannot be considered to communicate a connection in the course of trade with the person who purportedly owns the brand name and there are no hesitation to hold that the Appellant is eligible for the benefit of exemption notification and the entire demand is not sustainable and ordered to be set aside on merits. As the demand fails to survive on merits, there is no requirement to go into the aspect of limitation and invocation of extended period. The question framed is decided in favour of the Appellant - Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether use of the brand names 'GANGA', 'NATIONAL' and 'SHINGHVI' by a small-scale manufacturer disentitles the manufacturer to SSI exemption under Para 4 of Notification No. 8/2003-CE on the ground that such brands are the 'brand name or trade name (whether registered or not) of another person'. 2. Whether the extended period of limitation is invokable and whether imposition of penalty is justified (considered only if the substantive demand survives). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Effect of using brand names on entitlement to SSI exemption under Para 4 of Notification No. 8/2003-CE Legal framework - Para 4 of Notification No. 8/2003-CE excludes from SSI exemption goods 'bearing a brand name or trade name (whether registered or not) of another person'. The Notification contains exceptions (e.g., components supplied as original equipment, goods manufactured in rural factories, specified government-owned brands, certain specific products and packing materials) and an Explanation that the brand must indicate a connection in the course of trade between the goods and some other person. Precedent treatment - Tribunal and apex authority decisions have held: (a) the onus lies on Revenue to prove that a brand belongs to another person and that the assessee's use indicates an intention to communicate a trade connection with that other person; (b) generic or floating brand names not owned by any particular manufacturer do not attract Para 4; (c) assignment or transfer of a brand to the SSI unit (whether by registered trademark assignment or by unregistered deed/affidavit) converts the unit into the brand owner and removes the 'another person' bar. The Board's circular recognising floating brands and the need for Revenue to establish ownership/connection has been followed by Tribunals. Interpretation and reasoning - The core question is factual and legal: does the brand used by the manufacturer belong to 'another person' and does its use indicate a connection in the course of trade with that other person? The Notification must be read to require actual ownership/possession or demonstrable connection by a third party. An assignment of rights (registered or unregistered) that pre-dates or coincides with manufacture, supported by an assignment deed, affidavit or no-objection, makes the SSI unit the owner and removes the prohibition. Conversely, mere statements by third parties, without corroborative documentary proof of ownership or exclusive rights, are insufficient to establish that the brand is 'of another person' or that the manufacturer intended to exploit another's goodwill. The Department bears the evidentiary burden to show both ownership by another and use intending to communicate a connection. Ratio vs. Obiter - Ratio: The bar in Para 4 applies only where the brand is actually of 'another person' and the use indicates a connection in trade; burden of proof rests on Revenue; proof may be by evidence of registration or credible documentary proof of ownership/exclusive rights, and assignment to the SSI unit negates the 'another person' character. Obiter: Observations about particular modes of proving assignment (e.g., notarized deeds, affidavits) are persuasive guidance rather than exhaustive legal rules. Conclusions - On the facts, (a) the deed of settlement dated prior to the investigation effecting assignment of the 'NATIONAL' mark to the manufacturer establishes ownership and precludes characterisation as a third-party brand; (b) for 'GANGA' and 'SHINGHVI' the Department adduced only statements from third parties without documentary proof of registration or exclusive ownership and did not pursue inquiry of the alleged earlier owner (no TM-23/TM-24 or statements from alleged transferor); (c) the brand names were common/generic or unclaimed such that there was no evidence of exclusive third-party ownership or intent by the manufacturer to indicate a trade connection with any other person. Accordingly, the use of the three brands did not disentitle the manufacturer to SSI exemption under Para 4 and the confirmed duty demand is unsustainable. Issue 2 - Invocability of extended period of limitation and imposition of penalty Legal framework - Extended limitation principles and penal provisions arise only if substantive duty demand is sustainable; penalties under relevant sections and confiscation rules follow established criteria including wilful evasion and period limitations. Precedent treatment - Courts and Tribunals examine limitation and penalty only after establishing prima facie liability; if substantive demand fails, question of limitation/penalty becomes academic. Interpretation and reasoning - Since the substantive demand (denial of SSI exemption) is set aside on merits because Department failed to discharge burden of proof on ownership and connection, there is no need to examine invocation of extended limitation or to sustain penalties. The Tribunal declines to reach limitation and penalty issues when the underlying demand does not survive. Ratio vs. Obiter - Ratio: Where substantive duty demand fails on merits, extended limitation and penalty issues need not be adjudicated; they are dependent on substantive liability. Obiter: None beyond the statement of non-necessity of consideration. Conclusions - Because the demand for excise duty was unsustainable on merits, extended period of limitation is unnecessary to consider and imposition of penalty is not upheld; the appeal is allowed and the demand is set aside. Cross-references See Issue 1 conclusions for the factual application that negates the necessity to decide Issue 2; the Department's failure to produce documentary proof of third-party ownership and to investigate alleged transferors is central to both issues.
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