TMI Blog2015 (11) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, where the goods manufactured by a manufacturer bear brand name or trade name (whether registered or not) of any manufacturer of trade, they shall not be deemed to have been manufactured by such other manufacturer or trade. Reading of the aforesaid provisions in the Notifications unambiguously points out that for the purposes of availing the benefit of Notification by an SSI Unit, the clearances for home consumption only are to be taken into consideration, except in those cases where it is clearly provided otherwise. It becomes apparent that so far as manufacture of branded goods of third party on job work basis by the SSI Unit is concerned, they are to be dealt with differently in the sense that they do not come within the ambit of exemption on which normally excise duty, as per the provisions of the Act, is payable. As a sequitur, it also follows that once excise duty is paid by the manufacturer on such branded goods manufactured, the brand name whereof belongs to another person, on job work basis, the SSI Unit would be entitled to CENVAT/MODVAT credit on the inputs which were used for manufacture of such goods as on those inputs also excise duty was paid. To put it otherw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the CETA, 1985 ). In addition, it is manufacturing medicines under the brand name belonging to third parties, viz., M/s. Roots Pharma House (P) Ltd., Chennai, M/s. Satven Mer, Chennai, M/s. Tickle Pharma, Chennai, M/s. Shyulu India, Krishnagiri and M/s. ARK Medicare, Chennai. The goods manufactured by the assessee on its own account bear its own brand name and goods manufactured by the third parties bear the brand names belonging to those parties. During the period in question, i.e., 1999 to 2003 - 2004, the assessee had availed the benefit of SSI exemption notifications that were in force, i.e., Notification nos. 8/1999 etc., as mentioned above. Availing the benefit of these Notifications in respect of goods manufactured by the assessee on its own account, i.e., the goods bearing its own brand name, the assessee had cleared the said goods without payment of any excise duty. On the other hand, during this very period, in respect of goods bearing the brand name of third parties manufactured by the assessee, it paid excise duty thereupon. At the same time, it also availed CENVAT credit in respect of inputs used for the manufacture of these branded goods. It resulted in issuance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MODVAT credit. Three show cause notices were issued to the assessee stating that since it had filed MODVAT facility for branded goods under Notification No. 1/93-C.E., the assessee was not entitled to the benefit of exemption notification even in respect of its own products. Order-in-Original dated July 10, 1998 was passed confirming the demand. In the appeal filed by the assessee to the Commissioner (Appeals), the assessee succeeded as the said appeal was allowed by orders dated March 25, 2003 setting aside the Order-in-Original and holding that the assessee could avail both the facilities, i.e., MODVAT credit of inputs used for manufacturing of goods with brand name of others of exemption for own branded goods, simultaneously. This order was challenged by the Department before the CESTAT. However, vide impugned order dated June 12, 2008, the Tribunal has dismissed the appeal, thereby maintaining the order of the Commissioner (Appeals). This is how the Department has filed the two instant appeals challenging the orders of the Tribunal. 6) From 1986, the SSI Units have been given the benefit of excise duty by allowing them to clear the goods either without payment of any exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... National Small Industries Corporation or the State Small Industries Development Corporation. * * * * Notwithstanding the exemption contained in paragraph 1 of this notification, a manufacturer shall have an option for not availing of the benefit of the exemption contained in the said paragraph and to pay duty of excise at the rate applicable to the specified goods but for the exemption contained in the said paragraph 1, subject to the condition that such manufacturer shall pay duty at the rate applicable but for the aforesaid exemption on all subsequent clearances of specified goods made after availing such option, in a financial year in which such date of option falls. 8) This Notification contained as many as 11 explanations. For our purposes, Explanation Nos. III, IX and X are relevant and, therefore, we reproduce here below these explanations as well: Explanation III. - For the purpose of computing the aggregate value of clearances under paragraph 1,2 and 3, the clearances of any specified goods, bearing a brand name or trade name (registered or not) of another person, which are not eligible for grant of exemption in terms of provisions of paragraph 4 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder this notification shall exercise his option in writing for availing the exemption under this notification before effecting the first clearances under this notification and such option shall be effective from the date of exercise of the option. Such option shall not be withdrawn during the remaining part of the financial year except when an option is exercised with respect to Notification No. 9/99-C.E., dated 28th February, 1999. (ii) a manufacturer also has the option not to avail the exemption contained in this notification and instead pay the normal rate of duty on the goods cleared by him. Such option shall be exercised before effecting his first clearances at the normal rate of duty. Such option shall not be withdrawn during the remaining part of the financial year. (iii) while exercising the option under condition (i), the manufacturer shall inform in writing to the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise with a copy to the Superintendent of Central Excise giving the following particulars, namely:- (a) name and address of the manufacturer; (b) location/locations of factory/factories; (c) descripti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for use as original equipment in the manufacture of the said machinery or equipment or appliances by following the procedure laid down in Chapter X of the Central Excise Rules, 1994. Provided that manufacturers, whose aggregate value of clearances for home consumption of such specified goods for use as original equipment does not exceed rupees fifty lakhs in a financial year as calculated in the manner specified in the said Table, may submit a declaration regarding such use instead of following the procedure laid down in Chapter X of the said rules; (b) where the specified goods bear a brand name or trade name of- (i) the Khadi and Village Industries Commission; or (ii) a State Khadi and Village Industry Board; or (iii) the National Small Industries Corporation; or (iv) a State Small Industries Development Corporation; or (v) a State Small Industries Corporation. 11) This Notification also provided the definition of 'brand name' or 'trade name', as under: Explanation. - For the purposes of this notification, - (A) brand name or trade name shall mean a brand name or trade name, whether registered or no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit of duty on inputs under rule 3 or rule 11 of the CENVAT Credit Rules, 2002 (herein after referred to as the said rules), paid on inputs used in the manufacture of the specified goods cleared for home consumption, the aggregate value of first clearances of which, as calculated in the manner specified in the said Table does not exceed rupees one hundred lakhs; (iv) the manufacturer also does not utilise the credit of duty on capital goods under rule 3 or rule 11 of the said rules, paid on capital goods, for payment of duty, if any, on the aforesaid clearances, the aggregate value of first clearances of which does not exceed rupees one hundred lakhs, as calculated in the manner specified in the said Table; (v) where a manufacturer clears the specified goods from one or more factories, the exemption in his case shall apply to the aggregate value of clearances mentioned against each of the serial numbers in the said Table and not separately for each factory; (vi) where the specified goods are cleared by one or more manufacturers from a factory, the exemption shall apply to the aggregate value of clearances mentioned against each of the serial numbers in the said Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the specified goods are manufactured in a factory located in a rural area. 13) Having taken note of the relevant provisions of the aforesaid exemption Notifications and without commenting upon the same at this juncture, we would like to discuss few judgments of this Court which have considered and interpreted these Notifications in the context of the issue that arises for determination in these appeals. In Commissioner of Central Excise, Ahmedabad v. Ramesh Food Products 2004 (174) E.L.T. 310 (S.C.) , the assessee therein was engaged in the manufacture of biscuits under the brand name 'Ramesh' on his own account. It was also manufacturing, on job work basis, biscuits under the brand name of 'Cadbury' on behalf of M/s. Hindustan Coco Products, Bombay. It availed MODVAT benefit on the inputs used for manufacture of Cadbury branded biscuits. The Department issued the show cause notice taking the position that as the assessee had availed MODVAT benefit it had no right to avail the benefit of Notification No. 175/86 in respect of its own goods bearing 'Ramesh' brand either. Though, the Assistant Collector dropped the demand holding that assessee coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t smaller Bench of the Tribunal, while giving the decision which was impugned before it, was bound to follow the judgment of the larger Bench as per the demands of judicial propriety. (c) In Kamani Foods case, the larger Bench of the Tribunal had noted its earlier Special Bench ruling in the case of Kharia Cement Works v. Collector of Central Excise 1989 (42) ELT 696 (Tribunal) wherein it was held that Notification No. 175 of 1986 had to be read as a whole and sub-clauses (i) and (ii) had to be construed harmoniously. The case was, thus, confined to interplay between sub-clauses (i) and (ii) of clause (a) of para 1 of the Notification, which reads as under: In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 85/85-Central Excises, dated the 17th March, 1985, the Central Government hereby exempts the excisable goods of the description specified in the Annexure below and falling under the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), (hereinafter referred to as the specified goods ), and cleared for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In fact, as noted above, the Court was primarily influenced by the fact that Tribunal had relied upon its earlier decision in Faridabad Tools case without realising that same had already been overruled by a larger Bench of the Tribunal in Kamani Foods case. It would be pertinent to point out that the appeal was decided ex parte, i.e., in the absence of assessee who chose not to appear. As would be noted hereafter on this issue, it is the other clauses of the Notifications which provide a correct answer. 16) The question posed in these appeals, however, is different where the assessees have not claimed any CENVAT/MODVAT credit in respect of inputs used in the manufacture of their own products. This CENVAT credit is availed by them in respect of goods manufactured for third parties on job work basis for which the assessees had admittedly paid the excise duty. In such circumstances, whether such an assessee loses the benefit of exemption notification even in respect of goods for home consumption? Answer to this question is not available in sub-clauses (i) and (ii) of clause (a) of para 1. For this, other paragraphs of the Notifications in question have to be looked into. We have al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a brand name or trade name (registered or not) of the Khadi and Village Industries Commission, the State Khadi and Village Industries Board, the National Small Industries Corporation or the State Small Industries Development Corporation. Para 4 The exemption contained in this notification shall not apply to the specified goods bearing a brand name or trade name, whether registered or not, of another person, except in the following cases:- (a) where such specified goods, being in the nature of components or parts of any machinery or equipment or appliances, are cleared for use as original equipment in the manufacture of the said machinery or equipment or appliances by following the procedure laid down in Chapter X of the Central Excise Rules, 1944. Provided that manufacturers, whose aggregate value of clearances for home consumption of such specified goods for use as original equipment does not exceed rupees fifty lakhs in a financial year as calculated in the manner specified in the said Table, may submit a declaration regarding such use instead of following the procedure laid down in Chapter X of the said rules; (b) where the specified goods bear a brand nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e scheme inasmuch as: (a) they are not to be included for the purposes of determining the aggregate value of the clearances for home consumption; and (b) such products bearing brand names or trade names of third parties, even if manufactured by the SSI Unit, are not eligible for any exemption and excise duty thereupon has to be paid. Once we understand the scheme of the Notifications in the aforesaid perspective, which according to us is the only manner in which it has to be understood, it becomes apparent that so far as manufacture of branded goods of third party on job work basis by the SSI Unit is concerned, they are to be dealt with differently in the sense that they do not come within the ambit of exemption on which normally excise duty, as per the provisions of the Act, is payable. As a sequitur, it also follows that once excise duty is paid by the manufacturer on such branded goods manufactured, the brand name whereof belongs to another person, on job work basis, the SSI Unit would be entitled to CENVAT/MODVAT credit on the inputs which were used for manufacture of such goods as on those inputs also excise duty was paid. To put it otherwise, these branded goods manufactured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption under Notfn. 175/86 to the manufacturer and the manufacturer had to decide on one option. Once an option was made, there was no liberty to the assessee to avail benefits of both the options simultaneously. Therefore an SSI unit availing full exemption as per the Notfn. No. 175/86 in respect of certain specified goods could not also avail the modvat benefit in respect of certain other specified goods. 8.1 Notfn No. 175/86 dated 01.03.1986 extended concessional rate of duty on first clearances of specified goods of value of rupees seven and half lakhs while availing modvat credit on inputs or full exemptions benefit for such goods without the benefit of modvat credit. The Notfn also provided lesser benefit for further clearances in excess of the above aggregate value under both the options for higher slabs/aggregate value of clearances. In computing the aggregate value of clearances for the purposes of exemption under both the options, the notification did not require that the goods bearing brand name of third parties should be excluded. The following explanations, inter-alia, governed computation of the above aggregate value for the Notfn. Explanation IV - For the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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