SSI exemption to branded packaging goods, diaries etc
The Supreme Court in the case of M/ s.Kohinoor Elastic Pvt Ltd has held that the benefit of SSI exemption is not available to the goods bearing a brand name/trade name of the customer, manufactured by a SSI unit, as per the orders of the customer, for further use by the customer in the manufacture of final product.
In this case, the manufacturer was engaged in the manufacture of elastic bands as per the orders of the customers, who were manufacturers of undergarments. As per the orders of the customers the manufacturer affixed brand/trade names belonging to the respective customers, on the elastic band manufactured for that customer. The SSI Units claimed exemption which was denied to them and subsequently the matter reached the Supreme Court. The Supreme Court has observed that the ‘course of trade' is between the SSI manufacturer and his customer. Whether or not such goods reached the market in the same form is not relevant for the purpose of ‘course of trade'. It could never be the intention to enable the manufacturers who are otherwise not eligible to get their goods or some inputs manufactured from small scale industries, affix their brand/trade name, and still avail of the exemption.
The CBEC has now brought this judgment of the Supreme Court to the notice of the Chief Commissioners and Commissioners with a request to initiate action to raise protective demands wherever warranted. Existing instructions which are at variance with the Supreme Court decision are being withdrawn, but the action for issuing show cause notices may be taken based on the Supreme Court order immediately, without waiting for withdrawal of circulars.
This judgement of the Supreme Court was delivered on 4/8/2005 and we carried it on Oct 3, 2005. Now after THREE years, the Board wants SCNs to be issued. Will they allege suppression? And can a notice be issued three years after the Supreme Court judgement?
The Board believes that as soon as a Notification is signed in North Block, it is known to the assessees and is enforceable law! But a Supreme Court Judgement, which was prominently carried by the media, is made known to field only after three years.
Board should perhaps instruct the field to browse TIOL more often.
CBEC Letter in F.No.115 /01/2008- CX -3 Dated the 16th June, 2008