No penalty under Central Excise Rule 26 if no Malafide Intention to Evade Duty: CESTAT [Read Order]

The Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) held that penalty under Central Excise Rule 26 in absence of malafide intention  to evade duty.

The issue involved in the present case is that whether the appellants Sonic Chain Pvt Ltd and Arvindbhai M Limbasiya is eligible for SSI exemption Notification No. 08/2003- CE dated 01.03.2003. When they affixed the brand name on their goods i.e. bracelet for wrist watch of another person namely Timex, Titan and Sonata which belongs to M/S Timex Groups India Ltd. and M/S Titan Industries Ltd.

Shri R. Subramanya, counsel appearing on behalf of the appellant submitted that even though the appellant are manufacturing the bracelet for wrist watches under the brand name of Timex, Titan and Sonata which belongs to other person but the bracelet manufactured and supplied by them is as a part of wrist watches to be used by the brand name owner. Therefore, in view of Para 4(a) of the said notification, the appellant is eligible for exemption.

Shri Ajay Kumar Samota, Superintendent (AR) appearing on behalf of the revenue reiterates the finding of the impugned order. He submitted that, firstly, the bracelet is not a component or part of any machinery or equipment or appliances and secondly, the appellant have not followed the procedure which is required for the purpose of clearance of branded component or parts of any machinery or equipment or appliances, therefore, the appellant is not entitled for the exemption in respect of branded goods as provided under Para 4(a) of Notification No.08/2023-CE.

The exemption contained in Notification No 08/2003 –CE. shall not apply to specified goods  bearing the brand name or trade name that were registered or not of another person. It was observed that  there is no dispute that the goods namely bracelet manufactured by  the appellant bears the brand name namely Timex, Titan and Sonata which are owned by another person namely M/s. Timex Groups India Ltd and M/s. Titan Industry Limited, therefore, the appellant in terms of para 4 is not eligible for exemption Notification No. 08/2003 –CE.

There is an exception provided in the notification under clause (a) of para 4 according to which if the goods is  in the nature of component or part of any machinery  or equipment or appliances and the same is cleared as  original equipment  in manufacture of the said machinery or equipment or appliances by following the procedure laid down in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 than even though the goods bears the brand name or trade name of another person,  the  same  shall  be   eligible   for   exemption.  

A two-member bench comprising Mr Ramesh Nair, Member (Judicial) and Mr C L Mahar Member (Technical) observed THAT “Firstly the bracelet cannot be said  to be a component or part of wrist watches to be used  as  original equipment in the manufacture of wrist watches. Secondly, it is an admitted fact that for supply of branded bracelets the procedure laid down in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 has not been complied with. Hence, the condition for exception provided for branded goods for extending SSI exemption 08/2003- CE has not been complied with. “

The Tribunal held that ‘the appellant is not eligible for SSI exemption Notification No. 08/2003- CE.

Since there is no mala fide intention of any individual, the penalty imposed on Shri Arvindbhai M Limbasiya , the co appellant under Rule 26 is not sustainable.’

To Read the full text of the Order CLICK HERE

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