2013 (2) TMI 228 - CGOVT - Customs

DBK - other handicraft of iron & aluminium Vs. Furniture Assessee are engaged in the manufacture and export of handicrafts of Iron & Aluminium Filed rebate claims for export of goods described as other handicraft of Iron & Aluminium and classified under Drawback Schedule Heading No. 732602 which covers other handicraft of Iron and Steel there was four consignments contained goods such as chair, table bird cage, plant stand, tray and stand, etc. Department claims that table, chairs etc. are very well covered by the definition of furniture, and Furniture are specifically covered under Chapter 94 (under sub-heading 9403), hence the claimed classification under DBK Heading 732602 as other handicraft of Iron & Steel appeared incorrect. Held that - Chapter sub-heading 9403 simply cover other furniture and part thereof, made out of iron and steel whereas the Drawback Schedule Heading No. 732602 specifies other handicraft of Iron and Steel . Assessee claimed their drawback under Drawback Schedule No. 732602 and submitted a certificate bearing No. DC/(H)/Tex/PSICII/ NR/1(14)/2003-04/123, dated 10-9-2008 issued by Assistant Commissioner (H), Northern Regional Office, New Delhi. This certificate is not questioned/rejected by the department - Circular No. 3/2010-Customs., dated 12-2-2010 issued vide F.No. 609/27/2009-DBK resolves that whole dispute. Board vide Circular No. 128/39/95-CX., dated 25-5-1995 had clarified that since the office of Development Commissioner (Handicraft) has treated imitation or real zari as handicrafts the same may be treated as handicrafts by the Customs and Central Excise Authorities The board reiterated these guidelines vide Circular No. 32/99-Cus., dated 4-6-1999. The Board vide subsequent Circular No. 56/99-Cus., dated 26-8-1999 advised the field formations that they can accept the certificates issued by either the Development Commissioner (Handicrafts) or by the Export Promotion Council for Handicrafts (EPCH) - ). A decision to reject the certificate issued by the Development Commissioner (Handicraft)/EPCH Certifying the goods as artware/handicraft has to be taken only with the approval of the Commissioner of Customs/Central Excise and after discussion with the certificate issuing authority Against the revenue.

Summary

Issues Involved:
1. Classification of exported goods under the Drawback Schedule.
2. Interpretation and application of Notification No. 103/2008-Cus. (N.T.), dated 29-8-2008.
3. Acceptance of certificates issued by the Development Commissioner (Handicrafts).
4. Compliance with principles of natural justice.

Issue-wise Detailed Analysis:

1. Classification of Exported Goods under the Drawback Schedule:
The primary issue revolves around the classification of exported goods described as "other handicraft of Iron & Aluminium" under Drawback Schedule Heading No. 732602, which covers "other handicraft of Iron and Steel," versus classification under Heading 9403 as "furniture." The department argued that items like tables and chairs should be classified under Heading 9403 as furniture, aligning with the Customs Tariff Act. However, the respondent claimed the classification under Heading 732602, supported by a certificate from the Assistant Director (A & C).

2. Interpretation and Application of Notification No. 103/2008-Cus. (N.T.), dated 29-8-2008:
The adjudicating authority initially classified the goods under Heading 9403, but the Commissioner (Appeals) overturned this decision, citing Condition No. 3 of the Notification, which states that all artware or handicraft items should be classified under the heading of artware or handicraft (of constituent material) as mentioned in the relevant chapters. The Government agreed with the Commissioner (Appeals), noting that Condition No. 3 starts with a non-obstante clause, giving it an overriding effect over other provisions. The Government referenced Circular No. 3/2010-Customs, which clarified that handicraft items should be classified based on their constituent material, even if this differs from the HSN classification.

3. Acceptance of Certificates Issued by the Development Commissioner (Handicrafts):
The respondent provided a certificate from the Development Commissioner (Handicrafts), which the department did not contest or reject. Circular No. 3/2010-Customs emphasized that certificates from the Development Commissioner (Handicrafts) or EPCH should generally be accepted unless rejected by the Commissioner of Customs/Central Excise after discussion with the issuing authority. The Government noted that the department neither contested nor rejected the certificate, thus it could not be disregarded.

4. Compliance with Principles of Natural Justice:
The applicant department argued that the Commissioner (Appeals) did not provide a personal hearing to the adjudicating authority, thereby denying natural justice. However, the Government found that the Commissioner (Appeals) had adequately considered the submissions and evidence presented. The Government emphasized that a fair order must state why the lower authority's interpretation is wrong and provide its own reasoning. The Commissioner (Appeals) had done so by explaining the correct interpretation of Condition No. 3 and accepting the respondent's classification.

Conclusion:
The Government upheld the order of the Commissioner (Appeals), finding no infirmity in the classification of the goods under Heading 732602 as "other handicraft of Iron & Steel." The revision application was rejected as devoid of merit, affirming the respondent's classification and the validity of the certificate issued by the Development Commissioner (Handicrafts). The Government's decision emphasized the correct application of Notification No. 103/2008-Cus. (N.T.) and the principles of natural justice.