2017 (2) TMI 363 - AT - Central Excise

Eligibility for N/N. 76/1986-CE dtd. 10th Feb 1986 - handicrafts - Revenue contends that the goods that were subject to duty in the order of original authority were non-handicraft items because the statements recorded during investigation indicated use of motors by job-workers who undertook embroidery and painting on the garments - circular no. 773/6/CX dated 28th January 2004 by Central Board of Excise & Customs - Held that - the said circular does permit some tolerance to the use of machinery in the production of handicrafts . We also notice a total absence of finding in the order of the original authority that the goods are not handicrafts - it has not been established that the goods produced by assessee are covered within the ambit of circular of Central Board of Excise & Customs - appeal allowed - decided in favor of appellant.

Summary

Issues:
Eligibility for exemption under notification no. 76/1986-CE dated 10th February 1986 for 'handicrafts'.

Analysis:
The appeal before the Appellate Tribunal CESTAT MUMBAI involved the eligibility of M/s Vira Enterprises for exemption under notification no. 76/1986-CE dated 10th February 1986, which exempts 'handicrafts' from central excise duties. The appellant claimed to be manufacturing handicrafts and had surrendered their license following a circular issued by the Central Board of Excise & Customs. The issue revolved around the classification of goods as handicrafts or non-handicrafts, with the original authority upholding a demand on certain pieces of 'readymade garments'. The first appellate authority limited the demand to the normal period of limitation, but the Revenue contended that the goods were non-handicraft items based on statements recorded during investigation.

The Appellate Tribunal noted that the circular allowed some tolerance for the use of machinery in producing handicrafts. However, there was a lack of findings by the original authority that the goods were not handicrafts. The Tribunal observed that the decision-making process lacked expert opinion or adherence to Ministry guidelines in segregating handicraft and non-handicraft items. The Tribunal emphasized the labor-intensive nature of handicraft production and the subjective nature of distinguishing between the two categories. The Tribunal concluded that the goods produced by the assessee were not conclusively proven to fall outside the scope of the circular issued by the Central Board of Excise & Customs.

In light of the above analysis and considering the precedent set by the Supreme Court, the Appellate Tribunal set aside the impugned order. The appeal of the assessee was allowed, while the appeal of the Revenue was dismissed. The cross-objection was also disposed of. The Tribunal's decision highlighted the importance of expert opinion and adherence to guidelines in determining the eligibility for exemption under the relevant notification, emphasizing the need for a thorough and objective assessment in such matters.