Prepared by: - CA. Pradeep Jain
Sukhvinder Kaur, LLB(FYIC)
visit us : www.capradeepjain.com
Introduction: -
SSI exemption has been granted to boost the small scale industries. Exemption is granted from payment of basic excise duty and from special duty of excise on clearances of specified value of goods. The specified value as well as the limit of exemption is fixed vide Notifications which are issued from time to time. SSI exemption was granted initially vide Notification No. 175/1986-CE, dated 01.03.1986. At present the Notification in force granting SSI exemption is Notification No. 8/2003-CE, dated 01.03.03 and as amended.
The dispute involved: -
SSI Exemption is granted subject to fulfillment of certain conditions which are prescribed in Notification no. 8/2003. One of the conditions prescribed is that the SSI exemption will not be applicable to specified goods bearing a brand name or trade name of another person, irrespective of the fact whether such brand name was registered or not contained in Para 4 of the Notification. However, exceptions are also provided to this condition such as goods cleared as `original equipment', goods bearing brand name or trade name of KVIC or if such goods were manufactured in factory located in rural area. The exceptions in the Notification read as follows:-
"4. The exemption contained in this notification shall not apply to specified goods bearing a brand name or trade name, whether registered or not, of another person, except in the following cases: -
(a) ………
(b) ………
(c)…………
The definition of `brand name or trade name' is given in Explanation to Para 5 which reads as follows:
Explanation.- For the purposes of this notification,-
(A) "brand name" or "trade name" means a brand name or a trade name, whether registered or not, that is to say, a name or a mark, such as symbol, monogram, label, signature or invented word or writing which is used in relation to such specified goods for the purpose of indicating, or so as to indicate 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 that person;
Thus, the Notification is denying SSI exemption to units which are manufacturing goods which have a brand name/trade name of another person. This has lead to a lot of litigation.
The Apex Court in the case of M/s Kohinoor Elastic Pvt. Ltd. [2005 (188) ELT 3 (SC)] 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 his final product. The said unit was manufacturing elastic tape and affixing the brand name of his customer who was manufacturer of undergarments. This was done as per specific instructions of the customer.
Issue of the SSI manufacturers: -
The SSI manufacturers who are engaged in manufacture of flexible packing material like plastic bags, corrugated boxes etc, were printing/affixing the brand name of the customers whose goods are to be packed therein, were being denied the benefit of SSI exemption. The said manufacturers contended that this was not a use of brand name of another person by them.
It was contended that the packaging material will definitely contain the brand name of some other party as it is to be used by that other party for packing their final product. However, the SSI exemption cannot be denied merely on these grounds as this sale is not in course of normal trade and the goods are to be specifically used by the buyer booking the order. The Board has, also, interpreted the like cases in favour of the assessees.
Amendment of Notification No. 08/2003-CE: -
Several representations were made by the Trade and Industry against the stand of the Department that printing on packing material will amount to use of brand name of other person. Although it does not sound logical but the language of notification was such that it lead to such a confusing situation.
The Board, ultimately, amended the Main Notification No. 8/2003-CE by Notification No. 47/2008-CE dated 1.09.08. With this amendment, exemption was granted to specified goods which were in the nature of packing materials. The relevant clause (e) of Para 4 is reproduced here under:
"(e) Where the specified goods 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, metal labels."
Further, the exemption granted to specified goods in the nature of packing materials was limited to clearances upto Rs 90 lakhs for the remaining part of financial year 2008-09. The relevant clause is reproduced as under:-
"4B Notwithstanding anything contained in the preceding paragraphs, the exemption in respect of goods specified in clause (e) of paragraph 4, contained in this notification, shall be restricted to rupees ninety lakhs for the remaining part of the financial year 2008-09."
The said amendment is effective from 1st of September, 2008. But this has also lead to certain problems. One of the problem was that the exemption granted only to printed cartons of paper or paper board, metal containers, HDPE woven sacks, adhesive tapes, stickers, PP caps, crown corks, metal labels. But this notification has not included the packaging material (i.e. material for primary packing) like the products of polymers units - pouches and plastic bags. The use of the word `namely' had also restricted the scope of packing materials which were eligible for SSI exemption under Notification No. 8/2003- CE.
Again the representation was made to the Ministry of Finance. The Board has once again considered the representation of the industry and amended the basic SSI Notification 8/2003-CE (cited supra) by the Notification No. 2/2009- C.E. dated 11.02.2009 and plastic bags were added in the above list. But still some packing materials were not added to the list and the printed laminated rolls were added in the budget by Notification No. 9/2009-C.E. dated 07.07.2009. Thus, the Board has considered the submission of Trade and Industry and amended the notification on their representation.
The after situation: -
As already stated, the amendment only brought relief to certain extent but also raised certain other problems. One such problem was handled by Board by amendment in the notification. But the other problem was raised by the department. They said that the exemption granted to specified goods in the nature of packing materials had been granted from 1st of September, 2008. This meant that the SSI exemption has been granted from 1st of September, 2008 and not from 1.03.2003 when Notification No. 8/2003- CE was made effective. Consequently, the SSI units manufacturing packing materials of the nature mentioned above have been made liable to pay duty from 1.03.2003 till 1.09.08.
Thus, the Demand for duty could be raised from such SSI units which had not paid duty by claiming the SSI exemption under Notification No. 08/2003-CE. This could have led to a lot of issuance of show cause notices all over the country. This is due to the fact that the entire SSI industry manufacturing packing materials was not paying the duty and was claiming exemption.
Section 11C Notification: -
This has led to a number of representations from the packing material industries all over India once again. The Board has power to issue retrospective exemption under Section 11C of Central Excise Act if there is duty on certain product and general practice of industry is such that they are not paying duty during that period.
Now, the Board has once again considered the representation of the industry and issued Notification No. 24/2009-CE (NT) on 21.10.09 granting Section 11C exemption to SSI units manufacturing packing materials, namely printed cartons of paper or paper board, metal containers, high density polyethylene woven sacks, adhesive tapes, stickers, pilfer proof caps, crown corks, metal labels; Plastic Bags and Printed laminated rolls. The exemption from payment of duty has been granted on the said goods manufactured by a unit where the manufacturer had affixed the specified goods with a brand name or a trade name of another person who is not eligible for grant of exemption under the relevant Notification. The exemption is granted with retrospective effect. Thus, the issue has been settled and SSI manufacturers of packing material have got the relief from the Board.
Before parting: -
Thus, the SSI units who were affixing brand name or trade name of another on the packing material, Plastic Bags and Printed laminated rolls have been finally granted relief which was not only long awaited but was well fought by the SSI manufacturers. Also, the Board has also played a very positive role in granting the exemption to end this issue. The complete period of this issue has been very cumbersome but it is famous proverb- "All is well that ends well."
