Brand name on buyer-supplied cartons did not defeat small-scale exemption; demand and penalty failed.

Exemption under Notification No. 175/86 is not denied merely because the buyer's brand name appears on cartons supplied by the buyer, where the brand is not affixed on the goods themselves and the manufacturer's own name is more prominent. Paragraph 7, inserted by Notification No. 223/87, applies only when the manufacturer affixes another person's brand name or trade name on the manufactured goods, so the disqualification did not arise on these facts. The basis for invoking Rule 9(2) also failed because there was no clandestine removal or unauthorized clearance to sustain the demand. The exemption remained available and the demand and penalty were not sustainable.

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Issues: Whether the assessee was entitled to the exemption under Notification No. 175/86 where the cartons supplied by the buyer carried the buyer's brand name, and whether the demand and penalty based on ineligibility under paragraph 7 and Rule 9(2) were sustainable.

Analysis: Paragraph 7 of Notification No. 175/86, as introduced by Notification No. 223/87, denies exemption where the manufacturer affixes on the manufactured goods the brand name or trade name of another person who is not eligible for the exemption. The decisive question was whether the brand name appearing only on the secondary packing, and not on the goods themselves, could be treated as affixation by the manufacturer for the purpose of disqualification. The cartons were supplied by the buyer, the manufacturer's own name appeared more prominently, and the other brand name related to switchgear rather than to the wires manufactured by the assessee. In these circumstances, the condition in paragraph 7 was not attracted. The basis for invoking Rule 9(2) also failed in the absence of the kind of clandestine removal or unauthorized clearance that would justify the demand.

Conclusion: The assessee was entitled to the exemption, and the demand and penalty were unsustainable.

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