SSI Exemption – Brand Name – SC Judgement and Board Instructions
Notification No. 8/2003- Central Excise provides full exemption from Central Excise duty to goods manufactured by small-scale units i.e. units whose aggregate value of clearances did not exceed Rs. 4 Crores in the preceding financial year. The exemption is available for clearance up to Rs.1.5 Crore in a financial year if the prescribed conditions are fulfilled. One of the conditions of this notification is that goods bearing the brand name or trade name of another person are not eligible for exemption barring a few exceptions such as goods cleared as ‘original equipment', goods bearing the brand name or trade name of KVIC, or if such goods are manufactured in a factory which is located in a rural area.
Disputes have arisen in the past about the applicability of this condition to goods that bear the brand name of another person but which are sold under that brand name by the buyer of the goods and not by the SSI unit affixing the brand name. Such goods are normally manufactured by the SSI unit as per the orders of the customer for further use by the latter in the manufacture of the final product. Examples of such goods are elastic tapes used in the manufacture of undergarments, castings, packing materials such as printed cartons of paper, HDPE bags, polypropylene caps, metal containers etc. On the basis of circulars/ clarifications issued by the Government, from time to time, the brand name restriction was not being applied to such goods and the benefit of the exemption was being extended on the ground that there is no nexus between the person manufacturing the goods and the brand name. In the case of Kohinoor Elastics Pvt. Ltd. , the Supreme Court held that the wording of the notification does not allow the benefit of the exemption in this situation as the notification does not envisage a nexus between the manufacturer and the brand for it to attract the mischief of the brand name restriction. Accordingly, the mere affixation of brand name of another person is adequate to disqualify the goods for SSI exemption.
In the light of the Supreme Court decision, instructions were issued by the Board to raise protective demands in case where the benefit of SSI exemption was being extended by the filed formations in such cases by Board's letter F.No. 115/1/2008-CX.3 dated 16 th June, 2008.
Subsequently, by Notification No. 47/2008-Central Excise dated 01. 09.2008, the benefit of the exemption was made available to specified goods bearing the brand name or trade name of another person if they are in the nature of packing materials, namely, printed cartons of paper or paper board, metal containers HDPE woven sacks, adhesive tapes, stickers, pp caps, crown corks and metal labels.
Board wants the trade and industry to be suitably informed and Commissioners to take necessary action accordingly.