applicablity on excise on brand

[Anil Jangid]

Suppose,I am a proprietor and trading in ladies footwear, we are purchasing ladies footwear from vendor and no excise duty charges on this footwear by vendor and we are selling footwear without any alteration only using my brand name/label/repacking.

Kindly let us know whether we are required to registered with excise act or not?

2. If required to obtained Excise then What will be the rate of excise on Ladies footwear and Rate of abatement on MRP Price.

[Ganeshan Kalyani]

What is your view in this regard. By knowing the same we can validate your findings. Thanks.

[KASTURI SETHI]

Sh.Ganeshani Kalyani Ji,

Pl. enrich my knowledge about VAT. Purchasing foot wear from vendor and affixing own brand ? Is it not illegal in the eyes law of VAT ? Does it not involve the element of falsification ? I have no knowledge. Pl. clarify, Sir.

Thanks a lot.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

Your offer of validating findings of Sh.Anil Jangid is well digested by me. I am cock sure that Sh.Anil Jangid is a knowledgeable person and well conversant with all the tax laws.

[Anil Jangid]

In my views, repacking is not amount of manufacture and thereafter selling it brand name not attract any excise duty. am I right? answer expert please.

[KASTURI SETHI]

The process of labelling, re-labelling, packing, repacking, affixing sticker of brand name on the goods amounts to manufacture in terms of Section 2 (f) (iii) of Central Excise Act,1944. All these processes render the product marketable to the consume. Hence covered under the definition of 'manufacture' Section 2(f) (iii) Note the language of Section 2 (f)(iii) ___________ or adoption of any other treatment on the goods to render the product marketable to the consumer. In support of this view, case law is appended below:-

2014 (301) E.L.T. 699 (Tri. - Mumbai) = 2014 (2) TMI 638 - CESTAT MUMBAI

IN THE CESTAT, WEST ZONAL BENCH, MUMBAI

S/Shri P.R. Chandrasekharan, Member (T) and Anil Choudhary, Member (J)

AMIN VIRJI

Versus

COMMISSIONER OF CENTRAL EXCISE, MUMBAI-I

Final Order Nos. A/1015-1016/2013-WZB/C-II(EB), dated 13-11-2013 in Appeal Nos. E/2842-2843/2004-Mum

_______

 

[Ganeshan Kalyani]

Dear Kasturi Sir,

I agree with your view in completer sense that affixing own brand on somebody's else product is totally illegal. However it is very much commonly find that people does to make money. I have purchased a cloth and reaching home found that a sticker was just pasted and below to it there was another brand label. It became common in unorganized sector from where the tax is leaked and loss to the exchequer. Further, as you observed rightly that Mr. Anil ji is having good knowledge as per profile update. However the type of questions he asks puzzles me sometime. That is why in a couple of question I have asked him to give his views first and thereafter we shall give our opinion. Further, regarding VAT, it is a tax on value addition which means even if it is purchased and without doing anything to the product it is sold in the market for more than the price for which it was purchased VAT would become payable on the price he added to the purchase price. Thanks.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

Thanks for enrichment of my knowledge on the subject of VAT. It is a very interesting subject. All experts are well aware of VAT. Even visitors of this site also have knowledge about VAT. Even then I would like mention an anecdote which I read in an a magazine.

" When we go to market to purchase any item attracting VAT, we ask shopkeeper, "What is the price of this item ? The shopkeeper would say ₹ 2000/- and we pay and then ask for receipt/cash memo/bill etc.The shopkeeper would say, 'If u want bill, you will have to pay 12% VAT extra." Thus phobia is created in the mind of buyer. Hence in a routine fashion, mostly buyers would avoid bill with intent to save ₹ 240/-. Actually the shopkeeper collects VAT from the buyer (because VAT is already included in ₹ 2000/- demanded). without issuing the bill.The shopkeeper would keep the amount of VAT in his pocket because at the end of day or month he would issue the bills as per his requirement.

In case, state Governments plug the leakage of VAT and electricity theft, India would be a rich country.

[Ganeshan Kalyani]

Sir absolutely your views are correct. I am very much worried because most of the dealers are trying to waive tax particularly Indirect tax. In Direct Tax there is quarterly audit, statutory audit, and disallowance of expenses for not paying tax and these provisions have streamlined the Direct Tax provisions. But in Indirect Tax there is no disallowance of expenses and therefore even big companies look to evade tax by modifying invoices etc. This is actually mindset of people which has to be changed. How is a question mark because for long time it has been seen like this only. Any way you feel sir which can be helpful to government to get revenue.

[Srikanthan S]

What is illegal about affixing of a brand name by the owner of the brand name? He may get it manufactured as per his specifications/requirements and on being satisfied with the quality, the buyer affixes his own brand which may have acquired goodwill/reputation. Thus, excise and VAT apart, I do not see anything illegal about branding an unbranded product.

[KASTURI SETHI]

Sh.Srikanthan S Ji, Sir,

When any manufacturer purchases goods from a Vendor ( Vendor means a person or company offering something for sale, especially a trader in the street, retailer,seller,dealer,trader,shopkeeper,hawker,supplier,salesperson) and affix his own brand. How can he ensure the guarantee of quality from any goods purchased from open market ? Under what processes it has gone through ? What are the ingredients ? Whether the purchased goods have been manufactured under proper ratio of inputs or required heat or temperature etc.? Nothing can be said. Had the questioner used the word, 'job worker' instead of 'vendor', reply would have been different. Purchasing the goods from open market and affixing your own brand means no guarantee of quality. It means unbranded goods i.e. ordinary goods are being sold in the guise of branded goods. How far it is justified ? It cannot be digested.There is a quote---"Product is manufactured in the factory but brand is created in the mind." Buyer is swayed by the brand. If goods purchased from an open market and brand is affixed ? What does it mean ? When we purchase any branded goods from the market, we over-pay 50% as compared to the price of unbranded goods. This over-payment is because of good-will of brand name may be your own or another person.

If you want to affix your own brand, either you should manufacture the goods in your factory or get the goods manufactured from job-worker.

[Ganeshan Kalyani]

I agree with Kasturi Sir's view which is very logical and correct. People should be given the product which they have been shown as original. Such type of manipulation brings dissatisfaction in the minds of buyer. buyers expectations are killed and left misleaded.

[Srikanthan S]

Dear Sirs,

Please look at the issue from a legal perspective. Let us assume that the product is bought from a Vendor who may or may not be a manufacturer. In either case, if he manufactures / sells the product with certain standards (which the Buyer should get satisfied about) consistently, what is illegal about affixing a brand name by the Buyer (of course, the brand name should be that of the Buyer himself; he may even get it registered under the Trade Marks Act). With the consistent quality of the product over a period of time and with his own Brand Name, the Buyer can create a niche for his own name.

For eg. if I buy shoes from a Vendor and affix BATA brand, then it is illegal. Buying a standard product from a Vendor / Manufacturer and affixing one's own brand name is not illegal. I am unable to understand the proposition that it is illegal to do so.

[KASTURI SETHI]

Sh.Srikanthan S Ji,

Sir, Let us discuss impartially. What is the necessity to affix brand on any goods purchased from the open market ? Think deeply with a cool head. Why any person does so ? Forget whether it is legal or illegal. It is another aspect.Brand stands for high standard and top quality. It is also a fact that one may not get expected quality even from BATA. If any vendor has high quality of goods in its possession, why he is waiting for someone and allowing him to affix brand. In such example, people affix brand on sub-standard goods. Goods are so inferior that these are not saleable in the market. So any person can take the shelter of any 'BRAND' with an intent to sell the goods on higher rates. It is a clear-cut case of cheating. You may or may not agree. It is your discretion.

If you are honest and sincere, it does not mean all people are honest and sincere. Fraud, crime, violence, cheating, corruption etc. has been on the rise in India since independence. To save our interests everybody has to be cautious.Our Govt. has unearthed so many cases of spurious drugs, spurious milk and other adulterated eatables.And we are talking about footwear only.

[Ganeshan Kalyani]

Absolutely right Sir.

AI Summary

Labelling and repacking as manufacture can trigger excise registration and duty under central excise law. Whether affixing or relabelling, packing or repacking purchased footwear constitutes manufacture attracting excise registration and duty is disputed. The legal position advanced is that processes which render goods marketable-including labelling and repacking-fall within the definition of manufacture and can trigger excise liability, supported by an appellate authority cited by forum participants. The discussion also notes VAT consequences for value addition on resale and consumer-protection concerns where branding misrepresents quality.