Commissioner Of Central Excise & ... vs M/S. Shalini Plywood Pvt. Ltd

[Arising out of Order-in- Appeal No. BPS(406) 210/2004 dtd. 20/12/2004 passed by the Commissioner of Central Excise & Customs(Appeals), Aurangabad]

For approval and signature:

Honble Mr. P.K. Jain, Member(Technical) Honble Mr Ramesh Nair, Member(Judicial)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : seen of the Order?

4. Whether Order is to be circulated to the Departmental: Yes authorities? =======================================================

Commissioner of Central Excise & Customs, Aurangabad : Appellants

VS

M/s. Shalini Plywood Pvt. Ltd. : Respondent

Appearance

Shri. Ashutosh Nath, Asstt. Commissioner(A.R.)for the Appellants Shri. D.H. Mehta, Advocate for the Respondent

CORAM:

Honble Mr. P.K. Jain, Member (Technical) Honble Mr. Ramesh Nair, Member (Judicial)

Date of hearing: 18/2/2015 Date of decision: 18/2/2015

ORDER NO.

Per : Ramesh Nair

The appeal by the revenue is directed against Order-in-Appeal No. BPS(406)210/2004 dated 20.12.2004 passed by the Commissioner(Appeals), Central Excise & Customs, Aurangabad wherein the Ld. Commissioner set aside the Order-in-Original No. 69/2003 dated 30.06.2003 and allowed the Appeal filed by the Respondent.

1.1 The facts of the case is that the Respondent is engaged in the manufacture of Commercial Plywood falling under Chapter Heading No. 4408 of Central Excise Tariff Act, 1985. They are availing value based SSI exemption under Notification No.8/99-C.E. upto the threshold limit of Rs. 1crore in each financial year during the period 1997-98 to 2001-02 (upto July, 2001). The Respondent is using brand name, namely Rajat Ply, Assam Ply, Natraj Ply, Hit Ply. It is Revenues contention that these brand names earlier used by the old management and there is no evidence that brand name was transferred from earlier share holder to the present share holder of the company. Therefore it was contended that the appellant using the brand name of other person, hence not eligible for SSI Exemption under notification No. 8/99-CE dated 1/3/1999. A show cause notice dated 4/1/2002 was issued and same was adjudicated wherein the demand of excise duty amounting to Rs. 5,35,480/- was confirmed and equal amount of penalty under Section 11AC and interest under Section 11AB of Central Excise Act, 1944 was also demanded. In addition, penalty of Rs. 2 lakhs was imposed on Shri. Nitin Kankraj Sottany, Director/Manager of the appellant/company under Rule 209(A) of Central Excise Rules, 1944. Aggrieved by the said order-in-original dated 30/6/2003, the respondent filed appeal before the Commissioner (Appeals) who vide the impugned order allowed the appeal of the respondent. Being aggrieved with the impugned order the Revenue is before us.

2. Shri. Ashutosh Nath, Ld. Asstt. Commissioner(A.R.) appearing on behalf of the appellant/ Revenue submits that it is admitted fact that the respondent were affixing various brand names i.e. Rajat Ply, Assam Ply, Natraj Ply, Mysore Play and Hit Ply which were earlier being used by the previous company that shows that the respondent does not own this brand names. He further submits that respondent did not produce any evidence to establish that above brand names were transferred to their company after taking over previous company. Therefore in absence of such evidence it is clear that the brand names do not belong to the respondent. He referred to the grounds of appeal wherein it was stated that Assam plywood and Mysore plywood are manufactured of M/s. Assam Plywood Industries and M/s. Mysore Plywood Ltd. and therefore these companies are the owner of these two brands. He submits that since the brand name used by the Respondent on their plywood does not belong to the respondent, they are not eligible for exemption under Notification No 8/99-CE dated 1/3/1999.

3. On the other hand, Shri. D.H. Mehta, Ld Counsel for the respondent at the out set submits that ground of appeal that brand names Assam plywood and Mysore plywood belong to M/s. Assam Plywood Industries and M/s. Mysore Plywood Ltd respectively, was taken first time before this Tribunal therefore the same can not be entertained at this stage. He submits that entire case made out by the Revenue on the admitted fact that the brand names were earlier used by the company belong to other management and since after change of management the brand name was not transferred therefore it was inferred that the brand name does not belong to the respondent. Ld. Counsel categorically pointed out findings of the order-in-original that the respondent did not produce any evidence regarding transfer of brand name from the earlier share holders to the present share holders of the company and therefore ownership of the said brand still lies with the earlier shareholders of the company. The whole case is based of this view, in the show cause notice as well as in the order-in-original. It is his submission that findings of the original order and the ground made in the Revenues appeal based on the said findings is absurd for the very simple reason that in the undisputed facts of this case that it is not a case of change of entity, however in the present case only shareholders were changed but the company remained intact.

The change of shareholders does not affect the identity of the company therefore brand names earlier used by the company namely M/s. Shalini Plywood Pvt. Ltd. and after change of the shareholder the very same company used the brand names. Therefore there is no change of ownership of brands as earlier as well as subsequently also it is M/s. Shalini Plywood Pvt. Ltd. who have been owner of the brand name through out and therefore transfer of brand names does not exist in this case. He submits that due to this undisputed facts, the entire case is made out absolutely on wrong footing that merely due to change of shareholder the brand name should also be transferred. He submits that Ld. Commissioner (Appeals) has properly examined this fact and categorically held in the order that since constitution and identity of the company remained same, there is no need of transfer of brand name and it was held that the brand name was belonging to the respondent company only and therefore it is not the case that the respondent company used brand name of any other person.

4. We have carefully considered the submissions made by both the sides.

5. From the close reading of the show cause notice as well as adjudication order we find that whole basis of the case that the brand name in question were earlier used by same company under different management and thereafter due to change of management the brand name should have been transferred and in absence of that it cannot be said that brand name belong to the respondent. As far as this basis of demand, we completely disagree with the Revenue that admittedly there is no change in the identity of the company, it is only a change of management. Change of management does not make in change of identity of the company. As regard private limited company it is the company who holds the identity and not share holders, therefore company remained intact irrespective of change of share holders. In this position if the brand name were owned and used by the same company under the old management there is no need of transfer of brand name from old management to new management because brand name is not owned by the management but it is owned by the company only. As regard the ground of appeal that some of the brand is related to different company, neither the show cause notice nor adjudication order dealt with this new submission, therefore same cannot be considered at this stage. In view of this undisputed position the Ld. Commissioner(Appeals) has rightly extended the benefit of Notification No. 8/99-CE dated 1/3/1999 to the respondent. The relevant findings of the Ld. Commissioner (Appeals) is extracted below:

8. I find adequate substance and merit in the Appellants above contentions and submissions. It is an undisputed fact that the Appellant Company was the sole owner of the brand names found affixed on the seized goods. It has also not been disputed that the shares of the Appellant Company had been transferred from old management to new management and the company continued to function uder the same name and style as it was functioning under the previous management. The appellant Company as well as it share holder had separate legal existence under Companies Act, 1956. Further, on going through the Annexure A of the show cause notice, impugned before the adjudicating authority, it is seen that the value of the goods cleared from the Appellants unit during the period 1997-98 (From November1997 to July 2001) had never exceeded the prescribed exemption limit provided under the exemption Notification. It has also not been placed on record by the department that the brand name used by the Appelalnts on their goods had actually been used by any other person on the same class of goods and also that the said brand name indicated a connection in the course of trade between such specified goods and some person using such name or mark with or without any indication of the identity of the that person. In any case when the appellants are contesting that the brand name used by them did not belong to any one, burden is on the department to establish ownership of the brand name. Reliance is placed upon CESTAT decision in the case of SUSANGAT ENGINEERING WORKS Vs. COMMISSIONER OF C.EX.RAJKOT-2004(170) ELT. 59(Tri-Mumbai). This burden does not seem to have been discharged by the department in the present case. Under such circumstances, it cannot be held that the appellants had used the brand name of any other person. As matter of fact, the subject brand name was owned by the same company which continued to be the same even after its management was taken over by the Appellants. Therefore, the allegations made against the Appellants are found not proved by the department.

From the above unambiguous findings of the Ld. Commissioner (Appeals), it is clear that the adjudicating authority has wrongly confirmed the demand holding that brand name does not belong to the present respondent company only on the ground that earlier the company was under different management. We feel, it is necessary to quote the finings of the adjudication order to ascertain that what was the basis of the demand. Relevant para 13 of the adjudication order is extracted below:

I find that, noticees contention in this regard is not sustainable for the reason that, company to company there may be variations in ownership of brand name. It is true that , the present member of the company purchased shares from the previous member of the company but that about brand names Viz. Rajat Ply, Assam Play, Natraj Ply, Mysore ply and Hit Play. Noticee did not produced any evidence regarding the transfer of brand name from earlier shareholder to the present shareholder of the company. Therefore I an inclined to held that the ownership of the said branch still lies with the earlier shareholder of the company i.e. management.

From the above finding of the adjudicating authority we surprise to note that when brand names belong to company how it could be transferred from earlier shareholder to present shareholder. This finding of the Ld. Adjudicating authority is absurd and beyond common sense. In view of our discussion we are of the considered view that the order of the Ld. Commissioner(Appeals) is proper and legal which does not require any interference, therefore the same is upheld and the appeal of the Revenue is dismissed. Cross Objection is also disposed of, accordingly.

(Operative part pronounced in court)

P.K. Jain Member (Technical) Ramesh Nair Member (Judicial)

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