SSI Exemption Denied without Proof of Third-Party Brand Ownership: CESTAT Sets Aside Excise Duty Demand [Read Order]

The Chennai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has set aside an excise duty demand, holding that SSI exemption cannot be denied in the absence of evidence that the brand name used indicates a connection with another person or mark is demonstrably the brand of a third party.

The Tribunal ruled that the burden rest with the Revenue to establish third-party brand ownership, which it failed to do in the present case.

The assessee, Aashish Enterprises, dealt in the manufacturing of gas lighters and claimed SSI exemption under Notification No. 8/2003-CE. The Department served a show-cause notice to the assessee regarding clearing goods under the names “Ganga” and “Shinghvi”, bearing the brand names owned by other persons.The Department thus denied SSI exemption to the assessee and confirmed excise duty, interest, and penalty.

The adjudicating authority allowed this demand, construing that since another person’s brand name had been used, Aashish Enterprises was not eligible for SSI benefits. Aashish Enterprises appealed to CESTAT.

The Appellant, on the other hand, supported its defence by presenting that the brand names involved were unregistered, common, and had no exclusive connection with any other person or company. The argument put forward emphasized that there had been no production of any documentation by the Department to establish that the brand name or mark owned or exclusively associated with another person .

The Appellant also relied upon the decisions of the Tribunal, In the case of Ample Industries Versus Commissioner of Central Excise, Rajkot ,2007 (218) E.L.T. 456 wherein it was held that “It is well-settled that the onus to show that an assessee is using the brand name of another person to whom it belongs to, lies on the Revenue and is required to be proved before the benefit of small scale exemption notification could be denied”.

The Revenue relied upon the mere use of the brand names to impugn exemption for SSI on the grounds that the brand names belonged to other parties, as evident from statements taken during the investigation.

The Appellate Tribunal overruled the Revenue that, "Merely an allegation or a statement without any corroborative evidence cannot form the basis to hold SSI exemption ." The Tribunal made it clear that in order to deny any person exemption in Notification No. 8/2003-CE, it is mandatory on the part of Revenue to prove conclusively that the brand name is of a third person, indicating an association in the course of trade.

The Tribunal Bench comprising Justice S.S. Garg (Judicial Member) and C.S. Garbyal (Technical Member),held that the trade names were unregistered and were common trade names, and that there was no proof of exclusive ownership of these trade names by any other party. It also relied upon CBIC Circular No. 52/52/1994, which held that where the trade names are “floating” or common brand names does not automatically disentitle an assessee from SSI exemption.

Holding that the necessary condition for denying SSI exemption was not satisfied, CESTAT cancelled the demand of excise duty, interest, as well as penalties, thus allowed the appeal in favour of the assessee.

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