ASSESSMENT OF FOOTWEARS IN CENTRAL EXCISE:
1. Footwear falls in Chapter 64 of the Central Excise Tariff and attracts a tariff rate of duty of 14% ad velorem. Vide Notification No. 5/2006 dated 01.03.2006, as amended, serial no. 5, the effective rate of duty has been as follows:
A. Footwear of retail sale price not exceeding Rs. 250:- Nil
B. Of retail sale price exceeding 250 but not exceeding 750:- 8%
Such concessional rate is available on the condition that retail sale price must be indelibly marked or embossed in the footwear itself. Thus in order to avail this concessional rate of duty, the retail sale price must be indelibly marked on the footwear itself, marking merely on the package may invite dispute.
A footwear on which retail sale price is not marked, or not required to be marked- for example bulk supply to some other manufacturer or supply to some industrial consumer, police forces etc.(not for retail sale) shall attract a duty of 14% on the transaction value.
2. As per notification issued under Section 4A of the Central Excise Act, footwear is required to be valued as per the maximum retail price printed. For footwear of retail sale price 250-750, rate of abatement is 37% and for footwear of retail sale price more than 750, the rate of abatement is 40%.
3. Parts of footwear are to be classified in Chapter heading 6406, and they are not required to be valued as per the retail sale price. Effective rate of duty on these items are 8%, except for gaiters, leggings etc. and parts thereof which attract the tariff rate of 14%.
4. Based on these, duty structure is as follows:
A. Duty rate is 14% of the invoice value on footwears not intended for retail sale.
B. Intended for retail sale:
- if retail sale price is upto Rs. 250- NIL
- if retail sale price is more than 250 but upto 750- 8% with 37% abatement.
- if retail sale price is more than 750- 14% with 40% abatement.
5. Small Scale Industry Exemption:
Goods falling under Chapter 64 are eligible for Small Scale Exemption granted vide Notification No. 8/2003 dated 01.03.2003. Under this notification first clearance upto the value of Rs. 150 lakhs in the financial year are exempted from duty, if the total value of home clearance of the unit is less than 4 crore in the previous financial year.
Calculation of value:
In calculating the value of 150 lakhs, value of clearance which are totally exempt from duty is not to be considered. Thus if the manufacture is manufacturing footwears, of retail sale price less than 250, such products being totally exempt from duty, value of such clearance will not be included in the value of 150 lakhs.
Value is required to be calculated as per the provision of Section 4A. The manufacturer can make a simple account of all clearances date wise, and enter the Central Excise value against every clearance. Cumulative total can be made after every clearance.
When such cumulative total exceed 90 lakhs, the manufacturer is required to file a declaration before the Divisional Assistant Commissioner/Deputy Commissioner.
6. Small Scale Exemption is not available if the manufacture is manufacturing product in the brand name of other person. In that case, duty is required to be paid on the product bearing brand name of other person from the first clearance. However, the manufacturer can take cenvat credit on the inputs used in the manufacturing of dutiable product.
All other exemption, except SSI exemption is available even if the product is in the brand name of other person. This if the retail sale price is upto 250 rupees, the product is exempted, even if it bears the brand name of other person.
In calculating the limit of 150 lakhs, value of these clearances in the brand name of others are not required to be included.
Rajesh Kumar & Associates
Advocates & Consultants