Small scale exemption depends on brand use, not customer ownership markings; confiscation for unrecorded finished goods was upheld.

Goods found fully packed in the factory and not entered in RG 1 were treated as finished excisable goods kept unaccounted, so confiscation was upheld. Affixation of plates showing the names of customer oil companies was held to be only an ownership or destination marking and not use of a disqualifying brand name in trade, so small scale exemption was allowed for supplies made to those customers. In view of the partial relief, the penalty was substantially reduced, while confiscation remained sustained.

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Issues: (i) whether the goods found in the factory were liable to confiscation for not being entered in RG 1, (ii) whether the appellants were entitled to small scale exemption despite affixation of plates showing the name of the customer oil companies, and (iii) whether the penalty required modification.

Issue (i): whether the goods found in the factory were liable to confiscation for not being entered in RG 1

Analysis: The goods were found fully packed in wooden boxes and some were stripped, showing that they had reached the finished stage. The appellants did not dispute that the goods were not entered in the RG 1 register. On these facts, the goods were treated as finished excisable goods kept unaccounted in the factory.

Conclusion: The confiscation was upheld and the finding on this issue was against the assessee.

Issue (ii): whether the appellants were entitled to small scale exemption despite affixation of plates showing the name of the customer oil companies

Analysis: The plates only indicated that the goods were meant for the concerned oil companies and did not amount to use of a disqualifying brand name in the course of trade. The customer oil companies were not trading in the regulators and valves but using them for their own purposes. The reasoning was consistent with the treatment of ownership markings as distinct from brand use.

Conclusion: The benefit of small scale exemption was allowed to the assessee for the goods supplied to the oil companies.

Issue (iii): whether the penalty required modification

Analysis: Since the appeal succeeded on the exemption issue but failed on confiscation, the penalty was reconsidered in light of the partial relief granted.

Conclusion: The penalty was reduced from Rs. 10 lakh to Rs. 50,000.

Final Conclusion: The appeal succeeded only in part, with the exemption denial set aside, the confiscation sustained, and the penalty substantially reduced.

Ratio Decidendi: Marking goods with the customer's name or ownership indication does not amount to use of another person's brand name for denying small scale exemption where the customer does not trade in the goods but uses them itself.

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