Whether duty payable on re-packing and fixing brand on shoes received in loose form?

PJ/Case law/2014-15/2217

Case:-AMIN VIRJI VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI-I

Citation:-2014(301) E.L.T. 699 (TRI.-MUMBAI)

Brief Facts:-There are two appeals directed against Orders-in-Original No. 07/M-I/2004, and 06/M-I/2004, dated 25-6-2004 passed by the Commissioner of Central Excise, Mumbai-I. As a common issue is involved in both these appeals, they are taken up together for consideration and disposal.
The appellants are M/s. Vira Shoes (Shri lmran Virji) and M/s. Foot-nook (Shri Amin Virji). The charge against the appellant is that the appellants received footwear from karigars in loose form in jute bags, plastic bags, baskets, etc. Thereafter, they affixed a sticker showing information as Item No., brand name 'REGAL' and MRP. Thereafter, a pair of footwear is put in plastic bags having 'REGAL' monogram and 'REGAL' brand name printed on it. Thereafter, the shoes are packed in cardboard boxes having 'REGAL' brand name printed on it and on the cardboard boxes also, stickers are affixed which indicate item No., colour, bar code, size and MRP. The appellants also claimed that they were receiving footwear from karigars in finished form in boxes bearing MRP. In such cases, only the size of footwear is either imposed or a sticker is affixed on the bottom sole of the footwear. After receiving the footwear, they put a sticker showing item No., date of packing and MRP on the bottom side of the sole and on the front side of the sole, they put a sticker with the brand name REGAL. Thereafter, they repack the pair of footwear in the same cardboard boxes received from the karigars. The department was of the view that the activity undertaken by the appellant amounted to manufacture under Section 2(f)(iii) of the Central Excise Act, 1944 and footwear is also specified in Third Schedule to the Central Excise Act, 1944 and therefore the appellants are liable to discharge excise duly liability thereon. Accordingly, show cause notices dated 5-4-2004 were issued to the appellants demanding Central Excise duty of Rs. 68,89,230/- and Rs. 66,15,053/- for the period 19-6-2003 to 30-9-2003 and 1-10-2003. The said notices were adjudicated and duty demand of 68,89,230/- was confirmed against Shri Imran Virji and 66,15,053/- was confirmed against Shri Amin Virji. Aggrieved of the same, the appellants are before Tribunal.

Appellant Contentions:-The learned counsel for the appellant submits that, as far as the duty demand in respect of shoes on which they have undertaken repacking of the shoes and affixed labels indicating item No., colour, MRP and brand name 'REGAL', etc. they are not disputing the duty liability at all. However, in respect of shoes received in cardboard boxes, which would be about 10% to 15% of the transactions, where they have affixed only a sticker on the shoes indicating the bar code number and the size of the shoes, and the brand name at the bottom of the sole, they are disputing the tax liability. It is their contention that this activity of labeling undertaken on the already packed shoes does not amount to manufacture. He relies on the decision of this Tribunal in a similar case in the case of Rafique Malik vide Order No. A/1331 /WZB/2005/C-III, dated 29-6-2005 [2006 (193) E.L.T. 200 (Tri.-Mum.)] wherein this Tribunal held that in cases where shoes were received in unit containers and where bar code and MRP are only affixed on the shoes, the same would not attract duty liability. The said decision was followed by this Tribunal in the case of Shreeleathers v. Commissioner of Central Excise - 2012 (275) E.L.T. 225. The learned counsel also relies on the order of the Authority for Advance Rulings dated 24-8-2012 in the case of Amazon Seller Services (2012 (285) E.L.T. 449 (A.A.R.)] wherein the issue of packing and stickering in relation to goods purchased by the customers of the various merchants through the applicant's website was considered and it was held that such activity would not amount to manufacture. Therefore, it is contended that wherever the goods have been received in packed condition with MRP affixed thereon, the activity of affixing bar codes, MRP and logo on the shoes would not amount to manufacture and, therefore, the duty demands in respect of the this activity needs to be set aside.

Respondent Contentions:-The learned Additional Commissioner (AR) appearing for the Revenue, on the other hand, contends that in the statements recorded under Section 14 of the Customs Act, Shri Saiyad Asifali, authorised signatory of M/s. Vira Shoes, had admitted that they were receiving the footwear from the karigars in loose form and thereafter, they were packed in pair form in printed cardboard boxes where the brand name is affixed and the sticker, showing item No., colour of the goods, size, MRP, packing date are affixed and the goods are re-packed. There is no mention in the said statement of receiving the shoes in cardboard boxes from karigars which contained all the details and where mere affixing of labels containing bar code, MRP and logo is undertaken. He further points out that this plea was taken by the appellant before the Hon'ble High Court of Bombay wherein they challenged levy on this activity and both Shri Imran Virji and Shri Amin Virji had admitted in the statements recorded under Section 14 that they had given incorrect particulars in the writ petition and they have no proof showing that they had received the goods already pre-packed. He further submits that they have taken the same plea before the adjudicating authority during the personal hearing held on 5-5-2004 who gave an opportunity to the appellants to produce evidence in respect of their claim that they had received some consignments of shoes pre-packed in plain boxes. The appellants sought time till 31-5-2004 to submit the evidence. However, vide letter dated 2-6-2004, the appellants submitted before the adjudicating authority that they would not be in a position to give the bifurcation of the shoes purportedly received by them in the manner as claimed by them. In the absence of any evidence, the adjudicating authority has correctly confirmed the duty demand by treating the activity undertaken by the appellant as 'manufacture' and, therefore, the impugned orders are sustainable in law.

Reasoning of Judgment:-We have carefully considered the submissions made by both the sides. The appellants have clearly admitted that in respect of shoes which are received in loose form and which are re-packed in cardboard boxes wherein details such as brand name, MRP, size of the shoes, colour of the shoes, etc. are affixed, they are liable to pay excise duty. This Tribunal in the case of Rafique Malik's case(cited supra) had also held that such activity would amount to manufacture'. Therefore, bulk of the demands confirmed in the impugned orders have been admitted to by the appellants and are not disputed. They are disputing the liability only in respect of shoes received in pre-packed form i.e., in card board boxes where the MRP is affixed and the appellant undertakes affixing of stickers on the shoes indicating bar code, MRP and logo of the appellant on the bottom of the sole. However, in the statements recorded under the provisions of the Central Excise Act, the appellants have clearly admitted that they have no evidence in respect of this claim. Further, it is also an admitted fact that opportunity was given to them by the adjudicating authority to lead evidence about the receipt of shoes in pre-packed form; however, the appellants were not able to lead any evidence in spite of sufficient time being granted and the appellants admitted that they have no evidence in this regard. Therefore, the claim of the appellant that they had received about 10% to 15% of the shoes in pre-packed form from the karigars is only a mere claim without any supporting evidence. In the absence of any supporting evidence, such a claim cannot be entertained and, therefore, the adjudicating authority was right in concluding that the activities undertaken by the appellants amounted to 'manufacture' as defined in Section 2(f)(iii) of the Central Excise Act, 1944 read with Third Schedule thereof.
In view of the above, we do not find any merit in these appeals and they are dismissed accordingly.

Decision:-Appeal dismissed.

Comment:-The crux of this case is that the activity of re-packing and affixing brand on shoes is liable to duty as it amounts to manufacture. However, mere labeling on the already packed shoes does not amount to manufacture. But as the appellant failed to submit evidence that he had received the shoes in pre-packed condition in cardboard boxes from karigars, so in the absence of any supporting evidence, the activities carried on were deemed to be considered as amounting to manufacture defined in Section 2(f)(iii) of Central Excise Act, 1944.

Prepared by:- Hushen Ganodwala

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