Higher Price Not Charged Than The Price Re-Fixed On The Rejected Footwear: CESTAT Quashes Excise Duty Demand Against Bata

The Kolkata Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has allowed the concessional rate of excise duty to Bata as there was no allegation against Bata that it has charged a higher price than the price re-fixed on the rejected footwear.

The bench of P.K. Choudhary (Judicial Member) and Rajeev Tandon (Technical Member) observed that the stickers were put on the rejected footwear after the completion of manufacture and there is no allegation against the appellant that they have charged any higher price than the price put on the sticker on the rejected footwear.

The Appellant, Bata manufactures footwear. Each pair of footwear is sold in packaged form. The assessee follows the system of assigning a 7-digit article number for its footwear. In respect of footwear, which passes the quality control inspection at the end of the assembly line, the 7-digit article number denotes the group, type, nature of basic upper material, color, mutation, and design number. The 7-digit article number and the MRP of the footwear are printed on the insole or on the upper lining of the footwear at the component stage itself.

In respect of footwear that has failed quality control inspection at the end of the assembly line and has to be treated as ‘Factory Seconds’. The factory seconds having a separate 7-digit article number were invariably sold to the customers at the reduced MRP marked on it.

The Appellant is availing the benefit of exemption Notification No.23/2004 dated 09.07.2004 and 5/2006 dated 01.03.2006. The Notifications provide a concessional rate of duty depending on the value of the footwear subject to the condition that the rejected sale price is indelibly marked or embossed on the footwear.

The Central Excise officers visited the assessee’s factory on 09.01.2008 for the first time and objected to the manner in which the assessee was marking the reduced MRP on factory seconds. The assessee also started rubber stamping the expression ‘Factory Seconds’, the article number meant therefore and the MRP on the footwear which failed the quality control inspection.

The Commissioner confirmed the demand for Central Excise duty along with interest and imposed an equal penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002.

The assessee contended that the condition that the retail sale price should be indelibly marked or embossed on the footwear was to ensure that the low-price footwear in respect of which the exemption was granted was actually sold at the marked price and not at any higher price.

The department contended that they have not marked the revised price in indelible ink and thus they have not fulfilled the conditions of the Notification. The price of a product depends on a myriad of factors.

The tribunal noted that the MRP of the factory seconds made them eligible for the exemption.

The CESTAT observed that the affixed stickers are printed with indelible ink, and the price originally printed on the footwear is blotted out. The chemical analyst’s report indicates the ink made use of as scratch-proof, the adhesive fixed the sticker permanently to the footwear. It cannot be removed without impacting the substrate enough to establish the fulfillment of the condition prescribed in the exemption Notification.

“There is no whisper of a suggestion to allege that the goods marked as ‘Factory Seconds’ were sold at premium prices or at a price higher than the mandatorily prescribed,” the ITAT said.

Case Title: M/s. Bata India Limited Versus Commissioner of Central Excise, Kolkata-V

Case No.: Excise Appeal No.674 of 2009

Date: 25 April 2023

Counsel For Appellant: J.P.Khaitan

Counsel For Respondent: S.S.Chattopadhyay

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