1996 (9) TMI 554 - AT - Central Excise

Dutiability - Manufacture - Footwear - Hand-made footwear - Valuation - Redemption fine and penalty - Quantum of

Issues Involved:
1. Use of power in the manufacture of hand-made footwear.
2. Admissibility of exemption under Notification No. 49/86 and Notification No. 175/86.
3. Inclusion of freight and transport charges in the sale value.
4. Quantum of redemption fine.
5. Imposition of penalties.

Issue-Wise Detailed Analysis:

1. Use of Power in the Manufacture of Hand-Made Footwear:
The primary issue was whether the appellants used power in the manufacture of hand-made footwear. The Preventive Officers of Central Excise found power-operated machines in use during their visit to the factory on 23-12-1993. Both directors of the appellants' company confirmed that power-operated machines were used for cutting leather and embossing the trade mark on all types of shoes, including hand-made footwear. The appellants argued that the use of power was temporary, only to meet the festival season's demand. However, they failed to provide concrete evidence to support this claim. The Tribunal, relying on the Supreme Court's judgment in C.C.E. v. Rajasthan State Chemical Works, held that any operation integrally connected with the manufacturing process and carried out with the aid of power would be considered as manufacturing with the aid of power.

2. Admissibility of Exemption under Notification No. 49/86 and Notification No. 175/86:
The appellants claimed the benefit of exemption under Notification No. 49/86, which was contingent on non-use of power in the manufacturing process. The Tribunal found that power was used for cutting leather and embossing the trade mark, both integral parts of the manufacturing process. Citing the Supreme Court's judgments in C.C.E. v. Rajasthan State Chemical Works and Standard Fireworks Industries Sivakasi v. C.C.E., Madurai, the Tribunal held that the use of power in any part of the manufacturing process disqualified the appellants from claiming the exemption. Consequently, the benefit of Notification No. 49/86 was not admissible to the appellants.

3. Inclusion of Freight and Transport Charges in the Sale Value:
The appellants contended that the sale value should be considered inclusive of freight and transport charges. However, they did not produce any evidence to show that deliveries were not given at the factory gate or that freight and transport costs were included in the sale value. The Tribunal agreed with the Collector's finding that, in the absence of documentary evidence, the deduction for freight and transport charges could not be allowed.

4. Quantum of Redemption Fine:
The Collector imposed a redemption fine of Rs. 3 lakhs on goods valued at Rs. 6,18,750/-. The Tribunal found this fine excessive and reduced it to Rs. 1 lakh, considering the value of the goods and the circumstances of the case.

5. Imposition of Penalties:
The Collector imposed a penalty of Rs. 1 lakh on M/s. Walker (India) Ltd. and a personal penalty of Rs. 10,000/- on Shri Karim B. Jiwani, the Director of the company. The Tribunal found no reason to interfere with the imposition or the quantum of these penalties, given the facts and circumstances of the case.

Conclusion:
The Tribunal modified the impugned order by reducing the redemption fine to Rs. 1 lakh but upheld the rest of the Collector's order, including the duty demand, confiscation of goods, and imposition of penalties. The appeals were disposed of accordingly.

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