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PeThe Brake Motors Ltd. Vs. Commissioner of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Mumbai
Decided On
Reported in(1999)(114)ELT572Tri(Mum.)bai
AppellantPeThe Brake Motors Ltd.
RespondentCommissioner of Central Excise
.....medicine is established. if the same analogy is applied in the instant case on hand, words such logo pethe (the mark) relationship between the said logo (mark) and the specified goods cannot be established. if in their logo they were to use instead of pethe as pethe brakes then perhaps a relationship between the specified goods and user since indicated, it would have been proper to hold that such logo pethe brakes would satisfy the terms of the explanation of 9 of notification no. 1/93 for brand/trade the absence of it there is no authority to hold that the said logo pethe in the brand/trade name so as to deny exemption under the notification. their case is covered also by 1993 (65) e.l.t. 69 in the case of precise electronics, and 1996 (85) e.l.t. 78 - taj serpent eggs.....
1. The applicant has sought for the stay of the order of the Commissioner of Central Excise, Pune-II dated 9-10-1998 under which the Central Excise duty of Rs. 37,10,607/- was confirmed as demanded under the show cause notice dated 20-4-1998 on the applicant and imposed penalty of equal sum under Section 11AC of Central Excise Act, 1944 and Rs. 10 lakhs under Rule 173Q(1) of Central Excise Rules, 1944, and imposed interest 20% on the duty demanded under Section 11AB of Central Excise Act, and confiscated 157 items under seizure valued at Rs. 3,67,287/- under Rule 9(2) read with 173Q(1) of Central Excise Rules with redemption fine of Rs. 1.5 lakhs, and also the confiscated land, building, plant and machinery used for the manufacture of excisable goods under Rule 173Q(2) with redemption fine of Rs. 5 lakhs to be paid within 3 months of receipt of the order.

2. The applicant has attacked the above impugned order in the appeal memorandum as illegal and void, being also contrary to the rulings of the Hon'ble Supreme Court and ex facie contrary to law. After passing of the above order the officers of the range have been making enquiries desiring to know how soon the applicant would be making the payment of alleged duties under the impugned order. The duty, penally, interest and redemption fine sought to be recovered are under dispute. The applicant has an excellent, prima facie, case on merits as well as on limitation and the balance of convenience is on its side, and it will be put to great harm, prejudice, financial loss and irreparable damages, if the stay is not granted. The applicant is a small scale unit and the payment in terms of impugned order would result in great financial hardship so much so that it would be virtually impossible for the applicant to continue their manufacturing activities. The order discloses error apparent on the face of the record as the Commissioner has exceeded in his authority and jurisdiction while passing the order under the provisions of Sections 11AB and 11 AC, as they have no application to the case of the applicant, since the entire alleged demand is related to the period prior to 28-09-1996, when these provisions came into force. Even otherwise the said provisions apply only to the party who is intentionally evading payment of duty which is not in the case of the applicant. In the alternative, the department can recover the alleged short levied duty beyond the period of 6 months under the specified circumstances. The Commissioner while adjudicating the proceedings has not considered these valid submissions when their case is being fully covered by the rulings of the Hon'ble Supreme Court both on the aspect of limitation and merits and the show cause notice ought to have been withdrawn. There is an identity of issues in both the cases. A product namely the medicine manufactured by the appellant in the ruling was not registered under the Trade & Merchandise Act and therefore as held by the Hon'ble Supreme Court it would attract levy only if its container or packing carries any distinctive mark so as to establish relationship between the medicine and the manufacturer under the classification Patent & Proprietary Medicine under TI-14E, and as further held that letters AP or word ASTRA on the container was used to project the image of the manufacturer generally and it did not establish any relationship between the mark and the medicine, it is only a monogram to identify a manufacturer and if the appellant instead of using Dextrose Injections would have described it as Astra Injections or Astra Dextrose Injections, then it could be said that the relationship between the monogram and the medicine is established. If the same analogy is applied in the instant case on hand, words such logo PETHE (the mark) relationship between the said logo (mark) and the specified goods cannot be established. If in their logo they were to use instead of PETHE as PETHE BRAKES then perhaps a relationship between the specified goods and user since indicated, it would have been proper to hold that such logo PETHE BRAKES would satisfy the terms of the explanation of 9 of Notification No. 1/93 for brand/trade name.

In the absence of it there is no authority to hold that the said logo PETHE in the brand/trade name so as to deny exemption under the notification. Their case is covered also by 1993 (65) E.L.T. 69 in the case of Precise Electronics, and 1996 (85) E.L.T. 78 - Taj Serpent Eggs Factory. It is not at all considered in the order. So also regarding the limitation aspect. The show cause notice does not disclose any specific allegation warranting recourse to the extended period of limitation. The alleged demand cannot be legally confirmed for a period beyond 6 months from the relevant date. The contention ought to have been accepted by the Commissioner. There is no case to support any allegation of wilful misstatement or suppression of facts with intention to evade payment of duty. As they are applicable in a situation where there is deliberate or positive acts of mischief on the part of the assessee to evade payment of duty. The case of the applicant at the highest is a case on the part of holding a bona fide belief that while they may use the said logo on the goods, they did not manufacture a specified goods bearing the brand/trade name, assuming while denying the same that the said logo was regarded as brand/trade name, the department is at liberty to cross-check their declarations by carrying of the inspection of their goods at any point of time and clearances were made with the full knowledge of the department day in and day out. The impugned order is passed without particularly examining the submissions of the applicant which are supported by the decisions of the Hon'ble Supreme Court. He has failed to take note of the specified exclusion provided under Section 11AB Clause (ii) while dealing with the alleged demand for the period prior to 1996. He has failed to consider the points that the provision to Section HA(i) have application in the case of wilful mischief or suppression of facts or on the existence of other specified grounds coupled with intention to evade payment of duty by the assessee, which is not so in this case.

Page 8 of the order shows that the Commissioner has failed to realise distinction between the element of suppression and the case of wilful suppression in holding that the extended period under rule 11A(i) is applicable and he ought to have rejected the invocation of the extended period. So under these circumstances the applicant is confident in succeeding in the appeal. So they have sought for the unconditional stay, and also preventing the department from making any recovery of the alleged duties under the impugned order and enforcing the stay order in any manner pending the appeal.

3. Prof. P.K. Subedar, learned Counsel for the applicant has submitted in the course of the arguments that the applicant was a SSI unit and manufactures electromagnetic clutches, breaks, parts under Chapter Heading 85.05, 85.01, 85.03,85.43,85.10. Claim of exemption of the applicants are wrongly denied by the Commissioner in the impugned order on the ground that the case is not covered by provisions of Notification 1/93 as the goods cleared by them are affixed with the brand name of another person. The central issue calling for determination is whether the logo affixed on the goods of the applicants which is their family name without any description of the goods by itself is a brand name on a true and proper meaning under explanation 9. Applicants deny that itself a brand name. The Board Circular No. 52/94-CX on a true interpretation of the explanation 9 of the said notification and the judgment of the Supreme Court and Tribunal supports the applicant, on the merits, the applicants were under the bona fide belief that the said logo PETHE does not amount to making use of the brand/trade name. There is no specific allegation of the wilful suppression of the fact in the show cause notice. The Commissioner also gives finding that there is an element of suppression. The extended period of limitation is not applicable to the instant case in view of decisions of Supreme Court, Tribunal and (sic)...There is an error apparent on the record in confirming not only the duty demand but the penalty, interest and the imposition of the redemption fine in the impugned order, since there was no intention to evade duty, as they were under the bona fide belief and the clearances is made under approved classification list. To invoke provisions of Section 11AI3 and AC for the period prior to 28-03-1996 there is no authority. The impugned order is contrary to law. They have got a good case on merits and limitation, and unconditional stay required to be granted. In support of their contention the applicant has cited about 17 case laws as listed in the syn opsis, on merits and limitation, and on the non-attraction of Section 11A proviso, and 11AC. Further it is contended that regarding the manufacture of common or similar description of goods by the applicants and PEPL, their case is otherwise covered by the decisions of the Tribunal in the case of Precise Electronics v. Collector of Central Excise -1993 (65) E.L.T. 69 and Taj Serpent Eggs Factory - 1996 (85) E.L.T. 78, it deal with the situation where the items manufactured by another SSI unit making use of the same brand name or logo, the benefit of Notification 1/93 cannot be denied. The items manufactured by the PEPL are totally different and distinguishable and there is no similarity except the fact that going by the Tariff Heading under 85.05 wherein brakes inter alia is classified. Even though the brakes manufactured by the applicants and PEPL, though by description fall under the same classification there is no interchangeability between them and both are meant to serve entirely different track and are meant to carry out different functions and applications in the industry. PEPL is engaged in the manufacture of 5 items falling under 85.05 only and they are electromagnetic clutches, electromagnetic brakes and chucks, whereas applicant is engaged in the manufacture of electronic motor under 85.01, brakes 85.05, and brake motor and thruster motor under 85.43. The brakes manufactured by the applicant are having different design and are used in equipments which are accident prone, like hoist cranes elevators, etc. and on failure of electricity the brakes function is carried out with spring tension.

These brakes are mechanically applied and actuated by electricity. The brakes manufactured by PEPL are mechanical brakes and cannot be used as clutches, and mostly used in textile machinery wherein brakes are electrically applied but mechanically released under failure of electricity the machines stops after sometimes on its own. The customers of both, the applicant and PEPL are not common and each one has an entirely different trade of its own. Shri A. Ashokan, the learned JDR has submitted in the course of the arguments that the impugned order shows that both the companies namely the applicant and the PEPL are limited companies availing SSI exemption and closely held private companies in which close family members are holding 100% equity share and B.W. Pethe, the Director of PEPL is also Managing Director of PBMPL (applicant). Both the companies are using the log PETHE written in rectangular form and PEPL was started using it from 1972, whereas applicant company is started in 1980, and there are admissions in the statements about the ownership of the said logo, which are printed either in the cover or in the nameplate affixed to the product. The goods contained in the vehicle under seizure belong to both of them.

The logo is printed inside the cover in the case of the goods of the applicant, whereas it was visible from outside on the goods manufactured by PEPL. Statement of Shri Athwale and Manager (Admn. & Excise) of the applicant and that of Shri D.H. Palande, Excise Clerk of PEPL and of Shri D.S. Pethe, clearly supports the case of the department. Shri B.W. Pethte, Chairman of Pethe Brake Motors Pvt. Ltd. has accepted the fact that the goods manufactured by both the companies having the brand name/logo PETHE written on them. The admissions of the common Director of both the company D.S. Pethe, and the Chairman of the applicant Shri B.S. Pethe supports the stand taken by the department.

4. It is further contended by the ld. JDR that the Commissioner has clearly held after applying the definition of brand name or trade name in explanation No. 9 of the Notification 1/93 in the impugned order and has come to the just and proper conclusion that the applicants have used the brand name PETHE of the PEPL, and has further held that even the family name can be used as brand name or trade name as there is no such restriction. The learned Commissioner has also held that the customers are impressed by the said brand name about the goods which they have purchased, regarding quality. The reasoning of the Commissioner in the circumstances of the case is correct. Regarding the question of limitation also the order of the Commissioner squarely covers the requirement of proviso to clause (1) of Section 11A of the Central Excise Act. The decision relied upon by the applicant in 1995 (75) E.L.T. 214 is properly distinguished by the Commissioner. The suppression of not disclosing regarding the use of brand name in respect of the product manufactured by the applicant in the classification list, gate passes or invoices is clearly established, with the purpose of wrongly availing the exemption, hence attract extended period.

5. Perused the show cause notice and the reply and the written submissions, copy of the Notification 1/93, and the stay application and the appeal memorandum and the copies of the panchanama. From the material on record, it is seen that the applicants have attacked the impugned order in all respects namely the definition of the brand name, and the misuse of the same by the applicant, and interpretation of Para 4 and Explanation 9 of Notification No. 1/93 and the availment of extended period of limitation, and the rate of duty, and the demand of interest, and imposition of penalty, and have strongly urged that as per the decisions cited, their case is well founded. As pointed out by the learned Counsel for the applicant, the thrust of the whole case is determination whether the logo by itself is a brand name or trade name on a true and proper meaning under Explanation 9 and the applicability of the provisions of Para 4 of the Notification No. 1/93. At this stage of considering the stay application, only prima facie case has to be gathered, and the entire merits of the case cannot be considered. As contended by the ld. JDR, the statements recorded in this case referred by him clearly shows that there is an admission by the concerned persons, who are connected with these firms, about the usage of the logo by both the companies, though in different manner, attracting the attention of the public about the quality of the goods supplied by these two companies. The use of the word PETHE as a logo indicating it as a family name by both the companies are admitted. There is an admission that the word PETHE belongs to PEPL. Both the companies have got common Directors and the Chairman. There is no dispute that these two companies are the family concern with common management. Bat looking to the nature of the products manufactured by each company they are treated as separate entities. Whether the word PETHE is a brand name or not, has to be considered in detail only at the stage of the final hearing of the appeal. Prima facie, view of the matter can be taken on the available material in the form of statements and panchanama and the reply of the applicant to the show cause notice.

There is no dispute that PETHE is a family name. As held by the Commissioner there is no restriction in the notification or elsewhere that it should not be used as a trade name. The ownership of the word PETHE is admitted by Shri D.S. Pethe that the logo/monogram of PETHE belongs to PEPL. So, under these circumstances on material available now on facts as above the applicant has no prima facie case.

6. Now coming to the question of limitation, it is seen that the statement of Shri D.S. Pethe shows that the Central Excise invoices issued did not mention logo in the description. The applicant has not declared in the classification list that they were manufacturing branded goods. The applicants have not mentioned in the classification list, gate pass and the invoices about the usage of the logo as a brand name, which attracts the proviso to clause (1) of Section 11A of Central Excise Act. The impugned order has considered the contention of the applicants and discussed, and come to the conclusion that there was suppression by the applicant by the above acts about the using of the logo/monogram PETHE on the products. Prima facie, the requirement of the said provision is existing against the applicant in view of the above material. Wilful means intent to evade duty as per 1995 (75) E.L.T. 721 in the Cosmic Dye Chemical v. Collector of Central Excise at page 6 of the judgment. The question of liability to penalty under Section 11AC of Central Excise Act is a matter to be considered in the merits of the case. The department had got a prima facie case that there is intent to evade payment of duty in claiming wrong exemption under Notification 1/93 by the applicant in using the logo or monogram of PEPL. So under these circumstances, the contentions of the applicant that they have got a prima facie case both on merits and limitation cannot be accepted.

7. The applicants are not entitled for full waiver of the deposit. So for hearing the appeal on merits the applicant leave to make pre-deposit. The duty liability is Rs. 37,10,607/- in this case. An equal penalty and penalty of Rs. 10 lakhs is also imposed. Redemption fine of Rs. 1.5 lakhs and 5 lakhs are imposed for the release of the confiscated goods. No financial hardship is claimed. The case laws relied upon by the applicant have to be examined and applied in detail while dealing with the merits of the case in the course of final hearing. So under these circumstances we pass the following order.

8. For the reasons indicated above the applicant company is directed to make pre-deposit of about Rs. 18 (eighteen lakhs only) towards duty within two months from the date of communication of the order and report compliance on 30th June, 1999, subject to which the pre-deposit of the balance amount of duty and the whole of penalty imposed are waived and the recovery stayed, and also the recovery of the interest stayed. The department to maintain the status quo regarding confiscation.

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