CARBORANDUM UNIVERSAL LTD Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THIS appeal filed by M/s. Carborundum Universal Ltd. (CUL, for short) is against an order of the Commissioner demanding duty of over Rs. 15.9 lakhs from M/s. Eastern Abrasives Ltd. (EAL, for short) under the proviso to Section 11A(1) of the Central Excise Act in respect of the goods cleared from their factory during the period April, 1989 to July, 1990 and imposing penalty of Rs. 16 lakhs on them under Rule 173Q of the Central Excise Rules, 1944. During the said period, M/s. Eastern Abrasives Ltd. were a subsidiary of M/s. CUL. It appears that, after the impugned order was passed, the subsidiary company was merged with the holding company. Hence the appeal of M/s. CUL.

(2.) THE impugned order is in adjudication of a show -cause notice dated 11.03.1994, which denied SSI benefit under Notification No. 175/86 -CE dated 01.03.1986 to M/s. EAL for the aforesaid period on two grounds viz. (a) the total turnover of the two companies, taken together, exceeded the specified limit (Rs. 200 lakhs), under Notification No. 175/86 -CE, of aggregate value of clearances in the preceding financial year (1988 -89) and, therefore, M/s. EAL would not be eligible for the benefit of the Notification for the period of dispute and (b) M/s. EAL used the name of its holding company (M/s. CUL) on their products cleared from factory during the period of dispute, which amounted to using the brand name of the holding company; para 7 of the above Notification barred SSI units from availing exemption from payment of duty on goods bearing the brandname of another person; therefore, the branded goods cleared by M/s. EAL during the period of dispute were chargeable to duty of excise. For the purpose of invoking the larger period of limitation, the show -cause notice alleged that M/s. EAL had suppressed, in their classification lists filed with the department, the fact that they were a subsidiary of M/s. CUL. It was also alleged that M/s. EAL did not disclose to the department that they were clearing their products marked "Eastern Abrasives Ltd. - a subsidiary of Carborandum Universal Ltd" to indicate connection between the goods and the holding company. The allegations in the show -cause notice were denied by the noticee. The demand of duty was contested both on merits and on the ground of limitation. In adjudication of the dispute, learned Commissioner passed the impugned order, wherein he found that the department was fully aware of the fact that M/s. EAL were a subsidiary of M/s. CUL and, therefore, it could not be held that they had suppressed their status vis -a -vis M/s. CUL before the department. Learned Commissioner accordingly rejected the proposal to deny exemption under Notification No. 175/86 -CE to M/s. EAL on the ground of their being a subsidiary of M/s. CUL. However, on the brandname -related issue, the adjudicating authority held against the assessee. It was held that use of the words "a subsidiary of Carborandum Universal Ltd" on the goods in question amounted to use of the brandname of M/s. CUL and accordingly the benefit of the Notification was denied to the party in terms of para 7 thereof, which made the notification inapplicable to goods cleared under the brandname of another person. With regard to the use of the so -called brandname, learned Commissioner found wilful suppression on the part of M/s. EAL and accordingly invoked the extended period of limitation for demanding duty from them. He also imposed penalty on the assessee.

(3.) AFTER giving careful consideration to the submissions, we note that, in view of the apex court's judgment in Grasim Industries case (supra), the appellants do not have a case on merits against the demand of duty. However, they have succeeded in resisting the demand on the ground of limitation. The period of demand is April, 1989 to July, 1990. The show -cause notice was issued on 11.03.1994 by invoking the extended period of limitation on the ground of suppression of facts. The department alleged that M/s. EAL did not disclose the fact that they were using the name of their holding company on their products. In the case of Pioneer Electronics (supra), this Bench considered a similar factual situation and held that, as it was not obligatory for a SSI unit to disclose the factum of use of brandname in Rule 173B declaration, the assessee (SSI unit) could not be held to have suppressed the fact that they had been using the brandname of another person. It was also held, in the said case, that, where there were conflicting decisions of the Tribunal on the substantive issue, the extended period of limitation was not invocable for demanding duty. In the present case, it is not in dispute that, during the relevant period, the view taken by the apex court in Grasim Industries (supra) was unknown to the trade. Hence there is substance in the claim of the appellants that they did not know that they were using the brandname of another person (holding company) on their products, when they affixed on the goods the words "a subsidiary of Carboraudum Universal Ltd.". It is not in dispute that use of such words has come to be tantamount to using another person's brandname with the decision of the apex court in Grasim Industries (supra) only.