Priya Bakers (P) Ltd. vs Union of India

Dhirendra Mishra, J.—The assessee''s appeal u/s 35G of the Central Excise Act, 1944 (in short "the Act") against the impugned order of Annexure A/1 passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (in short "CESTAT"), has been admitted on following substantial question of law:

Whether the learned Tribunal had committed any error by imposing/confirming the penalty imposed on the appellant notwithstanding the fact that the exemption claimed by the appellants was based on a bona fide interpretation and application of the exemption notification ?

The appellant is a private limited company having its small scale industry unit at Urla, Raipur. It is manufacturing biscuits in the brand name of "Priya Glucose V". Its turnover during 1996-97 was Rs. 2,14,405/-. Since they did not cross the limit of Rs. 30 lacs in 1997-98, as envisages under Notification No. 16/97-C.E., dated 1-4-1997 (Annexure A/3), they did not apply for registration under the Central Excise Law. They were served with the show cause notice dated 11-3-1998, proposing recovery of leviable excise duty for removing the excisable goods - biscuits - from its premises during the period from 11-3-1997 to 12-9-1997; confiscation of biscuits in terms of Rule 173Q of Central Excise Rules, 1944 (in short "the Rules"); imposition of penalty under the provisions of Rules 9(2), 52A, and 173Q of the Rules; imposition of interest u/s 11A of the Act, and recovery of mandatory penalty u/s 11AC of the Act equivalent to the amount of duty not paid etc.

The appellant replied to the aforesaid notice and stated that the Firm was entitled for exemption under the Notification of Annexure A/3 dated 1-4-1997, as being a small scale industry they did not cross the limit of Rs. 30 lacs, their brand name is "Priya Glucose V", and not "Priya" which is owned by M/s. Priya Food Products Ltd., S.M. Bose Road, Agarpara, Distt. North 24, Parganas, West Bengal, and thus, they are eligible for exemption and the proceedings, proposed in the show cause notice, be dropped.

The learned Additional Commissioner, Central Excise, Headquarters/ Raipur, dropped the proceedings with a conclusion as under:

5.5 In view of the foregoing, it can be easily concluded that commonness of one of the Directors and using of similar brand name are not sufficient grounds to club the value of clearance of two units when there is nothing on record to indicate presence of mutuality of interest. Again the notice has contended that their brand name is "Priya Glucose V" and not "Priya" of M/s Priya Food Products. For once, even if it is conceded that they are using the same brand name, then the only beneficiary will be M/s. Priya Bakers and no way it will benefit M/s. Priya Food Products. Further the show cause notice itself alleges that M/s. Priya Bakers are not formally authorized to use the brand name "Priya". Thus it will be a long drawn conclusion to say that they are using the brand name of M/s. Priya Food Products. Using another''s brand name means that the user must either be paying royalty to brand owner or they must be manufacturing the goods for the brand owner. The show cause notice fails to prove any of these. Therefore, the value of clearances of M/s. Priya Bakers is not clubbable with the value of clearances of M/s. Priya Food Products, 24 Pargana, West Bengal and therefore, benefit of Notfn. No. 16/97, dated 1-4-1997 is admissible to the notice. Held accordingly.

However, the appeal preferred by the Excise Department was allowed by the Commissioner (Appeals-I) and order passed by the adjudicating authority was set aside, Central Excise duty amounting to Rs. 2,30,102/- was confirmed, an equivalent amount of penalty u/s 11AC was also imposed and the seized goods was confiscated, and redemption fine amounting to Rs. 10,000/- was imposed in lieu of confiscation.

The appeal preferred by the assessee has been further dismissed by the CESTAT by the impugned order.

Shri Ashish Shrivastava, Learned Counsel for the appellant contended that as per Notification of Annexure A/3 dated 1-4-1997, the appellant-SSU was entitled for exemption benefit. The Commissioner (Appeals) as well as the CESTAT failed to appreciate that there was no evidence to show any connection between the appellant and M/s. Priya Food Products Ltd, West Bengal, or that the appellant was trying to take advantage of the trade name/brand name of some other company.

On the other hand, Shri Bhishma Kinger, Learned Counsel for the respondent-department, submits that the Commissioner (Appeals) as well as the CESTAT, after examining the labels of the goods manufactured by the appellant as well as the goods manufactured by other manufacturers, have recorded a finding of fact that "Priya" is written in the same way as written on the goods manufactured by M/s. Priya Food Products Ltd. The CESTAT, relying upon the decision of the Supreme Court in the case of Commissioner of Central Excise, Chandigarh-I Vs. Mahaan Dairies, ) held that in such circumstances, the manufacture is not entitled for benefit of exemption of notification. The above view has been further reiterated by the Supreme Court in the matters of Commissioner of C. Ex., Trichy Vs. Rukmani Pakkwell Traders, and Unison Electronics Pvt. Ltd. and Another Vs. Commissioner, Central Excise, Noida,

Heard Learned Counsel for the parties. Perused the impugned order as also the order-in-original and the order passed by the learned Commissioner (Appeals).

Learned CESTAT, on comparison of labels of the goods manufactured by the appellant and the goods manufactured by other manufacturers, has observed that "Priya" is written in the same way on the goods of the appellant as written on the goods manufactured by M/s. Priya Food Products Ltd., and confirmed the finding of the Commissioner (Appeals), by relying upon the decision of the Supreme Court in the matter of Mahaan Dairies (supra). The above conclusion of CESTAT confirming the finding of the Commissioner (Appeals) is essentially factual.

The identical issue came up for consideration before the Supreme Court in the matters of Mahaan Dairies and Rukmani Pakkzvell Traders (supra). Referring to the notification, it was held in Mahaan Dairies (supra) thus:

It is settled law that in order to claim benefit of a notification, a party must strictly comply with the terms of the notification. If on wording of the notification, the benefit is not available then by stretching the words of the notification or by adding words to the notification benefit cannot be conferred. The Tribunal has based its decision on a decision delivered by it in Rukmani Pakkwell Traders v. CCE. We have already overruled the decision in that case. In case also we hold that the decision of the Tribunal is unsustainable. It is accordingly set aside.

Similar issue again came up for consideration before the Supreme Court in the matters of Unison Electronics Pvt. Ltd. (supra), and the principles of law laid down in the aforesaid judgments have been reiterated in paras 8 to 10 of the judgment. The facts of the above cited cases are substantially similar to the facts of the present case. Thus, in view of the above well-settled principles of law, we are of the opinion that the learned CESTAT has not committing any illegality of infirmity in imposing/confirming penalty on the appellant and denying the benefit of exemption notification to the appellant. Accordingly, we dismiss the appeal, and decide the issue in favour of the respondent-department and against the appellant-assessee.