2010 (9) TMI 440 - AT - Central Excise

Exemption as handicraft - Supreme Court (in 1995 -TMI - 44223 - SUPREME COURT) held that to consider a goods as handicraft the test is that it must be predominantly made by hand and it must be graced with visual appeal in the nature of ornamentation or in-lay work or some similar work lending it an element of artistic improvement and such ornamentation must be of a substantial nature and not a mere pretence - respondents were manufacturing only metallic yarn which cannot held to be graced with visual appeal in the nature of ornamentation or in-lay work or some similar work lending it an element of artistic improvement - order is not sustainable - hence set aside and the adjudication order passed by the adjudicating authority is restored Decided in favor of revenue.

Summary

Issues:
- Interpretation of Notification No. 76/86-C.E. dated 16-2-1986 regarding exemption from Central Excise duty for handicrafts.
- Whether metallic yarn (zari) qualifies as handicraft under the said notification.

Analysis:

1. The appeal before the Appellate Tribunal CESTAT, MUMBAI involved a dispute where the Revenue challenged an order granting the benefit of Notification No. 76/86-C.E. dated 16-2-1986 to metallic yarn (zari) as handicraft by the Commissioner (Appeals).

2. The Revenue contended that the criteria set by the Hon'ble Supreme Court in CCE v. Louis Shoppe - 1996 (83) E.L.T. 13 (S.C.) for considering an item as handicraft did not apply to metallic yarn like zari. Therefore, they argued that zari should not be considered as handicraft eligible for the notification's benefit.

3. On the other hand, the respondents relied on a certificate from the Department of Handicraft stating that zari qualifies as handicraft, thus advocating for the notification's application to zari.

4. The Tribunal noted that the issue revolved around whether zari, being manufactured by the respondents, could be classified as handicraft under Notification No. 76/86-C.E. The Tribunal referenced the Supreme Court's decision in Louis Shoppe, emphasizing that for an item to be considered handicraft, it must be predominantly made by hand and exhibit visual appeal through ornamentation or artistic work.

5. The Tribunal concluded that metallic yarn like zari did not meet the criteria set by the Supreme Court for being classified as handicraft. Since zari lacked the necessary visual appeal or artistic improvement, the Tribunal held that the impugned order allowing the benefit of the notification was unsustainable. Consequently, the Tribunal set aside the order and reinstated the adjudication order passed by the adjudicating authority.

6. Ultimately, the Tribunal allowed the Revenue's appeal, thereby ruling in favor of the Revenue's argument that zari did not qualify as handicraft under Notification No. 76/86-C.E. dated 16-2-1986.