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TMI Blog2002 (11) TMI 717X X X X Extracts X X X X X X X X Extracts X X X X ..... siness group. These include M/s. Dolphin Hotels Ltd., M/s. Margadarshi Chit Funds Ltd., M/s. Ushodaya Enterprises Ltd. (Entertainment Division, Foods Division, Publications Division etc.) and M/s. Ushakiron Movies Ltd. etc. [Priya Foods Division of M/s. Ushodaya Enterprises Ltd., is a unit registered under Central Excise for manufacture of Priya brand pickles etc., and clearing the same on payment of duty]. 2. RFC was set up as a one-stop centre for film-making, spread over a vast area of about 1,000 acres in Village Anajpur, Rangareddy District, Andhra Pradesh. The Film City consists of numerous locations and landscapes which were developed to facilitate and cater to the requirements of out-door and in-door film shooting and production thereof. Necessary equipments, laboratory, Preview theatre and star hotels to provide accommodation to the film-personnel are all made available/located within the RFC. RFC is claimed as a place where a film-maker could walk in with a crew and walk out with a completed film. It is admittedly not a distinct legal entity, as in the case of a firm, company etc. Various group companies and units held by the HUF/RR-HUF have portions within the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iz., M/s Harmony and Maya, being the penalty equivalent to the duty amount payable prospectively with effect from 28-9-1996 under Section 11AC read with Rules 9(2), 52A and 226 of the Central Excise Rules. (iv) He ordered charging of interest under the provisions of Section 11AB on the total duty payable i.e. Rs. 3,76,43,230/- from the date and same was due till the date of its payment. (v) He ordered confiscation under Rule 173Q(2) of the land, building, plant and machinery etc. and gave an option to redeem the above said items on a fine of Rs. 20 lakhs only by the RR-HUF. (vi) He dropped proposals made in the Show Cause Notice for imposition of penalty under Rule 209A on Shri RR-HUF, Shri A. Ramamohana Rao, Attorney and K. Ravindra Rao, Accounts Manager. Hence, this appeal. 4. The ld. Commissioner vide his impugned order classified under the Headings as follows :- (i) Furniture and similar goods classifiable under Chapter 9403; and (ii) FRP Section classifiable under Chapter 3925; and (in) FRP/POP Statues classifiable under Chapter 9618 in their wholly owned workshops namely Harmony and Maya for use in within the film city in the HUF unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hip of the Art Director work to recreate authentic architectural details harmonising to the place, time and condition of the output and reproduce structures and artistic pieces. The source of the creation is at times pure fantasy, besides from research done from authentic books of art and historical monuments. Plaster of Paris or as the case may be Fibre Glass is used because they are user friendly and enable quick replication of the original. It is like the preference of soap stone to granite in the architectural works of the medieval periods. They are cost effective considering the huge money spent on craftsmen and artists. The materials provide and enable easy holding, moulding and completion with flexibility amenable to quality finishing to required texture and colour, and are light in weight and importantly weather proof in quality. These artists and artisans hail from Bombay, Calcutta, Bihar and Orissa where traditional skills in these avocations are well developed. Manner of preparation (a) The creations are ultimately work of art and these are used in the film settings and locations. These are first prepared out of intricate drawings and images from conceptions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e clay models and finally in the fibre glass moulds. (h) Clay designs are made in three ways, small size designs are made on ply wood. Medium, Designs are made on wooden armature. Large designs are made on wooden platform. Fingers are the main tools. All the delicate designs based on authentic books of art, album of art or from pure imagination are brought into relief through the deft use of fingers. So in all sense the design works starts in the same platform as any handicraft work does. The clay work is then smoothened and is brought into perfect shape with the help of ordinary household things like knife and stick. Any possible deformity caused by such ordinary instruments is repaired again using fingers especially the thumb. At last the brush is used to give the final touch up of finishing to the clay work structure. (i) When it comes to finishing the fibre glass moulds the fibre class moulds have a roughness or coarseness on their surface. Sand paper is used to get the surface smoothened duly. Also different type of files and knives are used in the chiseling process only to get the fine finish of the designed moulds. Then comes to the turn of painting wherein do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ument. Sometimes, these items are designed to given a opposite effect. For example, a bed if a commodian sits will break. These are used in the make believe world of film shooting. They only appear as a particular item but are not understood as such in the market. Even if they are brought to the market, these are not traded but or only auctioned as collector s items and not as furniture. What it fetches is only a fancy price in auction for its star value status, but not for its functional utility. Excisability/Dutiability of these items : Section 3 of the Central Excise Tariff Act, 1944 imposes duty on goods produced or manufactured in India. Excise duty is on an activity of manufacture resulting in manufacture of goods meant for trade and consumption. A work of art can never be conceived as manufacturing process in the Central Excise Laws. Drawings or artistic creations are not conceived as manufacturing process, and there is no Chapters or Tariff Entries to assess them as goods. At this juncture attention is drawn to Customs Tariff Act, 1975 Chapter 97. Chapter 97 falls under Section XXI of Customs Tariff Act, 1975 and the said chapter comprises of goods which are works of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility value as the items referred to in Chapter 11 to Chapter 39 or for goods falling under Entry 39.25 of the Central Excise Tariff Act, 1985. In short, these are not goods known to the market for the purpose or utility ascribed under entry 39.25 and these are not traded or marketed as goods or articles of plastics or as builder ware. The goods are therefore not liable to duty under the Central Excise Act, 1944. Classification under Entry 39.25 and 96.18 : (a) Entry 39.25 talks about builders ware of plastic, not elsewhere specified or included and the sub entries include items such as reservoirs, tanks, vats and similar containers, doors, windows and their frames and thresholds for doors, shutters, blinds, etc. Chapter Note 11 to Chapter 39 again furnishes list of items which further include structural elements in the form of floors, walls or partitions, gutters and fittings, large scale shelving, ornamental architectural features for example flutings, cupolas, dovecotes etc. The articles conceived under Entry 39.25 or under Chapter Note 11 to Chapter 39 have commercial identity and commercial utility. These are goods produced meant for trade and consumption. (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e than 2000 tourist visit the place every day the inference is natural that the visitors and tourist come to see the aesthetic beauty of the creations and not articles of plastics or articles of PoP. (h) The preparations may involve an activity of polymerization. But here again the preparations ultimately are not plastic articles. An artist uses various paints and varnishes to create a work of art. Paint and varnishes are chemicals. These are employed in a canvas. It therefore cannot be said that the artist is involving himself in chemical treatment or a chemical process and therefore the finished piece of art are products of chemical industry. The fibre moulds are employed in layers to obtain a firm mould which is resultant of pure imagination translated into a work of art through deft use of fingers. (i) Chapter Note 11 to Chapter 39 again does not have any relevance as creations are not commercial installations in the form of doors, windows, statues, etc. The creations are not made for dwelling purposes and are not fit for occupation. There is only a frontage replicating a house or a palace, etc. But in reality there is no permanent place of dwelling. These are re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... getting prepared out of intricate drawings and images. Further these moulds do not have shelf life. In the case of PoP moulds these are employed to generate one creative output and in the case of FRP moulds these are not used beyond three or four creative output. These again are not moulds which can fall under Chapter 8480. Entry 8480 talks about moulding boxes for metal foundry, mould bases, moulding patterns, moulds for metal other than ingot moulds, metal carbides, glass, mineral materials, rubber or plastics. The moulds employed which are intermediate consumption cannot be classified under 8480. When an item is not excisable or classifiable, the question of extending any exemption does not arise. In this connection reference is drawn to the decision of the Tribunal in the case of Hindustan Sanitaryware Indus. v. Collector of Central Excise, New Delhi [1998 (104) E.L.T. 562 (T)] wherein the Tribunal was pleased to hold plaster of paris mould used in the manufacture of ceramic sanitary ware are not marketable goods and therefore not liable to duty. Notwithstanding a mention being made in the HSN Explanatory Notes. The said ruling will squarely apply both to FRP moulds and PoP mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st be predominantly made by hand. It does not matter if some machinery is also used in the process. (2) It must be graced with visual appeal in the nature of ornamentation or inlay work or some similar work lending it an element of artistic improvement. Such ornamentation must be of a substantial nature and not a pretence. The Central Board of Excise Customs vide Circular No. 32/99-Cus. dated 4-6-99 has also clarified that the test laid down by the Supreme Court, in the above referred case should be kept in view while deciding an item as a handicraft. The works at Maya had been completely made by hand. The articles are made for visual appeal and necessarily involve craftmenship of the highest order. Many of the items involved in lay work i.e., super adding one material over the other to a prepared pattern namely making ornamentations like post, supports, palace arcades. There is an element of artistic improvement. For these reasons the place attracts Tourist and it is an approved Tourist Center recognized as such by the Government of Andhra Pradesh by G.O. Ms. No. 31 dated 13-4-1994. It would be irreconcilable and inconsistent to call a Tourist Centre as a factory of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idea till implementation. 3. It is evident that a temple or a church etc., moves as a set out of Maya. 4. There is no FRP section for any independent assessment. The nomenclature suggested is without basis or evidence and there is no support for the same in any manner. 5. The aspect how goods will not fall under Chapter 39.25 has been dealt in the previous paras and the same may kindly be read as part and parcel of these comments. 6. The aspect as to how exemption Notification No. 76/86 dated 10-2-86 as handicrafts would be applicable is also been dealt with in the previous paras and the same may kindly be read as part and parcel of these comments. Findings by the Commissioner on FRP/PoP Statues : 1. What are manufactured are the one s normally described under Tariff Sub-heading 96.18 and just because they were put up for different use in RFC does not make them difference. 2. The Appellants had not let in any evidence like the process involved in making the said FRP/PoP statues were different from that of the items described in tariff sub-heading 96.18 to prove that the said statues were not comparable with the goods under 96 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aspect of excisability and classification of furniture the principle question which needs to be addressed is whether the articles produced are manufactured by the appellants or by various independent contractors. Appellants wish to make the following submissions in this regard before deciding the aspect of excisability and availability of exemption Notification No. 76/86 dated 10-2-86. 2. RFC is a film city location which comprises of various other divisions of the group, which includes star hotels such as Dolphin Hotels. The film divisions and hotels and other divisions requires furniture and fittings for their respective uses. With a view to address the requirement of each of the divisions the services of various furniture contractors with their set of carpenters and skilled men were obtained. Harmony one of the appellant was merely as a facilitating centre for the contractors and the contracting parties. The necessary raw materials for production were issued directly by the various divisions to the contractors. Preparation of furniture is a skilled job and the activity has to be carried out entirely through skilled carpenters through the use of hands. Machines are used on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and competitive rates contractors on some occasions may get lesser rate for the work done which is being accepted. However, once rates are finalised, they would not receive anything less than what was finalised and due to them. (11) They also confirmed that furniture cannot be made only with cutting and plaining and manual skills are involved. (12) Contractors are not prevented from doing any other independent job outside harmony. Pratap Singh consultant of Harmony deposed the following : (i) He is a consultant and not an employee of Harmony. His role is that of a facilitator. The machines referred in the show cause notice are used for plaining and cutting and cannot be used in the manufacture of furniture which is done only by hand all over the world. (ii) Contractors are not his employees. Items are manufactured to a specific requirement at site and the carpenters report to their contractors. The increase or decrease in rates depends on commercial consideration and the payments are made directly by the respective divisions to the contractors. There is also hold on amount against the contractors by the divisions. From the above analysis it is clear t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ex parte decisions. Vide Para 9.4 the learned authority has observed that appellants have failed to furnish the list of contractors. The allegation is incorrect. The minutest of details in the form of nature of work, period, contractors name, bill number, year of work has been furnished against every contractor for every piece of activity carried out in the film city. Having held that the deposition of 4 contractors should be taken as representative in character the learned authority ought to have taken into account the cross examination proceedings of all these contractors. Assuming but not admitting proceedings are maintainable Harmony cannot be held as a manufacturer for which we have made enough submissions along with evidence. We now seek to support this view also with the following case laws : (a) It is clear on record that the carpenters report only to the contractors that the contractors who supervise the works. Mr. Pratap Singh is a consultant of Harmony and is only responsible for the over all activity and not a direct supervision or co-ordination with each of the carpenters for each of the work. At the most Mr. Pratap Singh s role can be stated as one of Technic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt decision in the case of Collector of Central Excise v. M.M. Khambhatwala [1996 (84) E.L.T. 161 (S.C.)] and the decision of the Supreme Court in the case of Pawan Biscuits Co. (Pvt.) Limited v. Collector of Central Excise, Patna [2000 (120) E.L.T. 24 (S.C.)]. When supplier of raw material cannot be held to be a manufacturer permitting usage of machines for the limited purpose of cutting and planing will not make Harmony the manufacturer especially when the cost have been borne by the respective divisions. In other words, raw material supplied and cost towards usage of machinery for cutting and planing which are simple operations and were borne by the respective divisions. Harmony is only a facilitating centre and proceedings therefore are not maintainable. The transactions relating to the division Parade cannot be assessed at the hands of Harmony , when the entire activity has been between Parade and the independent contractors Harmony had no role to play. Department vide letter dated 16-6-1999 sought for clarification on the assumptions that certain amounts were also figuring in the books of Harmony and there are no corresponding entries in Parade and therefore works had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. Comments : (i) Supreme Court in Louis Shoppe case has laid down two important guidelines and it has not excluded items which are otherwise Handicraft as ineligible merely because they are put to commercial use or utilitarian purposes. No such exclusion is contemplated in the decision. In fact the items under dispute in the case of Louis Shoppe is only furniture and fittings. (ii) Finding that items are not solely for the purpose of display or promoting our traditional heritage is again not a guideline prescribed in the Supreme Court in the above referred decision. (iii) Having held at one breath that the items under question have lot of ornamentation/decoration it would be inconsistent to say in the very same sentence that any ornamentation or decoration if not done substantially cannot be regarded as artistic improvement. (iv) Reference to Entry 9403 read with the Explanatory Notes to HSN including the exclusion clauses goes to show that items which do not have the character of furniture would not fall under the said entry. Limitation The creation of film set and settings has been in vogue in this country since the inception of film industry whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at proceedings have been initiated under the extended period of limitation alleging suppression of facts. Right from the inception of Central Excise Tariff Act and Rules the items under question have never been assessed to duty. Supreme Court in the case of Collector of Central Excise v. Chemphar Drugs Liniments [1989 (40) E.L.T. 276 (S.C.)] has held that something positive other than mere inaction or failure on the part of the manufacturer or producer of conscious or deliberate withholding of information when the manufacturer knew otherwise, which is required before it is saddled with any liability beyond the period of six months. When no central excise proceedings had been initiated in the past against any person in the country the assumption that Maya had suppressed or withheld information which they knew to be excisable is unsustainable. The Supreme Court in the case of Pushpam Pharmaceuticals Company v. Collector of Central Excise, Bombay [1995 (78) E.L.T. 401 (S.C.)] had held that no rule could be pointed out requiring a manufacturer to disclose the turnover of exempted goods. Even assuming it was the appellant could not be held guilty for suppression when the law itself wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (T) = 2002 (50) RLT 667 (T)]. It is also submitted that penalty under Section 11AC is not sustainable as appellants are not manufacturers under the Central Excise Act, 1944. (b) The Additional submissions are :- The furniture made at Ramoji Film City for the various user agencies is actually hand crafted by the various independent contractors. These furnitures are not regular furnitures meant for the day-to-day usage. All these furniture are special furniture made exclusively with various cinema sets in mind. From the Central Excise point of view all the furniture can be divided into 2 categories (a) Decorative furniture for the specialized hotels within the Ramoji Film City, (b) Furniture meant for the Prop-Shop available within the Ramoji Film City by name Parade . Before going into the details regarding the various furniture it would be appropriate to mention that both the types of furniture mentioned above are exclusively designed and hand crafted. These furniture are not mass-produced and are not meant for commercial sales or usage. The user agencies will indent for their furniture requirement through a facilitating agency called Harmony, which is also unit of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... op Parade the following is submitted. (i) As the name itself suggests Parade is a prop-shop which houses various cinema set requirement for the various film sets. These items are in nature of various types of furniture the equipments required for various scenes like Mock weapons, Mock tables and chairs, partitions etc. The list in this regard can be endless and limited only by the imagination and requirement of the Art Director. (ii) The furniture of the prop-shop are not utility furniture but make believe furniture. The design and upholstery of these furniture are changeable as per the set requirements. (iii) These furniture are also designed to cater for the specific stunt requirement of the various scenes in films. Very often we see furniture is being broken on the heads of various artists while fighting etc. These furniture are all specialized furniture which have been made with light wood and which cannot be utilized for the normal usage purposes. Similarly there are various other wood works and furniture, which have very specialized usage in the film sets only and in the normal environment of usage they have not operational utility. Parade is a sort of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, as per the labour bills ; they are handled by Shri Pratap Singh, an employee of Harmony , to whom they report; that the overheads pertaining to the manufacture (e.g., electricity, depreciation of machinery, interest on investment) are incurred by Harmony and billed on the Divisions along with the markup towards profit, which thus flows to Harmony. The carpenters, painters etc. are thus neither charged for the use of resources of Harmony, nor do they receive any share of the manufacturing profit. They receive only labour charges. (d) Para 9 to 11 of the Show Cause Notice relied upon by the ld. DR read as under :- 9. MANUFACTURE OF FURNITURE ARTICLES : (1) Harmony was established as the Furniture-making unit for the Divisions in RFC. As explained by Shri A. Ramamohana Rao, M.D and Attorney, the starting of Harmony (and Maya) was intended to enable proper supervision and control, while making items to their satisfaction, which were required for the various purpose in Film City. Shri Sudhakarbabu, Additional Manager, DHL also stated that for most of the requirement of the Furniture and fixtures for the hotels in RFC (viz., Sitara, Tara, Sahara and Samrat), DHL purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upholstery workmen) and gave them the designs, drawings etc. The required materials i.e., Wood, hardware etc. were also given to them. The carpenters along with their helpers and assistants, carried out the woodworking processes, using the power-driven machinery in HARMONY. As stated by Shri Pratap Singh, he supervised and monitored the activities at HARMONY; that once the carpentry work is completed, the goods are painted/polished in Painting/Polishing workshop (by other personnel i.e. painters, polishers and their assistants) and the items are dispatched only after completion of the carpentry and painting work. (6) The carpenters and painters were paid labour charges by Harmony, on a piece-rate basis (which included the wages of their helpers/assistants). For payment of the Labour Charges, Harmony s Consultant (Shri Pratap Singh) prepared Estimates, which were submitted to the M.D. for approval. As seen from the documents titled as Cost Breakup/ Estimate for furniture cost , the carpentry and painting charges were approved by Shri Ramamohana Rao, sometimes after reducing the amounts originally mentioned. The labour charges (rates) were accordingly paid to the carpenters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly of Furniture (though there is no written contract, since HARMONY is a sister-concern, as explained by Shri Sudhakarbabu of DHL). To illustrate, vide Journal Voucher dated 31-3-98 of DHL, out of the total amount of Rs. 87,06,489/- billed by HARMONY - termed as Room, Restaurant, Lobby and other Furniture labour charges debited by Harmony (vide Bill Nos. 301 and 303 dated 31-3-98); Rs. 1,74,310/- was deducted as TDS deducted from Harmony on Furniture labour bills and credited to TDS on Contractor A/C . All the other companies similarly deducted TDS on contract from the amounts charged by Harmony. [Copies of the relevant documents pertaining to these were submitted by Shri Ravindra Rao, vide his letter dated 3-6-99 (Annexure-A-5(32)]. (11) In their annual Trial Balances (from 1994-95 onwards), Harmony accounted the details of various Furniture items being manufactured under the head of account Job works , indicated for each Division separately. Similarly, under the account-head of Furniture under preparation , details of various furniture items being manufactured were also shown separately. In the trial balances of the companies like DHL (including the individual accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cher of DHL etc., are enclosed as ANNEXURE-C-1-2 to ANNEXURE-C-1-8 to this notice. (Many of the indents/ letters for furniture, indents for raw-materials, nothings of Shri Pratap Singh allotting the work to carpenters etc., acknowledgements given by the Divisions for receipt of Furniture items/ work done etc., were found available in the files recovered vide Sl. Nos. A-8, B-2, B-17 to B-20 ANNEXURE-C-2-6). (15) Though Shri Ravindra Rao was requisitioned to produce all the documents pertaining to the activities of Harmony, such as indents/ work-orders placed by Divisions on Harmony, raw-material and finished Furniture accounts, dispatch documents etc., he produced only the 2 Delivery Challan books, mentioned above (apart from other tabulated statements showing the details of Furniture items). Thus, it was evident that apart from the documents and records mentioned above (and those found among the recovered records), no other account of record was maintained by Harmony. 10. MANUFACTURE, CLASSIFICATION AND DUTIABILITY : 10.1 The processes of cutting, planning, sizing and rounding etc., carried out on wood as per designs and specific dimensions and further assembling of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basing on their individual imagination and creativity, to constitute handicrafts. By virtue of this position and considering the Apex Court s ruling, the wooden Furniture items produced by Harmony, are not handicrafts, eligible for exemption from Excise Duty). 11. MANUFACTURER 11.1 From the details mentioned above, it is evident that HARMONY has manufactured excisable and dutiable Furniture items. Vide letter dated 26-3-99, submitted by Shri Ravindra Rao, Accounts Manager (ANNEXURE-A-5-9), it was claimed that no manufacturing activity is taken by Harmony. HARMONY is a facility centre only possessing necessary expertise and the above said manufacturing activity is offloaded to independent sub-contractors; that HARMONY and identified more than 60 sub-contractors - who undertake job works relating to furniture/partitions on job-charge basis and further they are independent manufacturers of furniture/partitions. S/Shri Ravindra Rao and NLN Das, Sr. Law Officer put forth similar versions, in the course of their statements given under Section 14 of the Act. 11.2 Under Section 2(f) of the Central Excise Act, 1944, manufacturer includes not only a person who employs hired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng more, (vi) That the labour-charges paid to them are as per the approval of the M.D. only, (vii) That they work only as per the instructions given by Shri Pratap Singh and none else and that all the other carpenters, painters work under similar terms/conditions, and (viii) That even repair works etc., are also allotted by Shri Pratap Singh only, and that whoever (in RFC), requires work, the same is informed to Shri Pratap Singh only. 11.5 In their statements given under Section 13, S/Shri Ramamohana Rao and Shri Ravindra Rao also confirmed the position that the rates of labour charges, are as approved by Shri Ramamohana Rao only. Shri Ramamohana Rao deposed that the wages are paid as per his approval only and that at times, he has received objections (on reducing the rates). Though Shri Pratap Singh initially (on the date of search), stated that the rates are as orally agreed upon; the fact that the labour charges are paid only as per the M.Ds approval was found evident from the documents i.e. Estimates and also from the statements of the above persons. Further, this position was also clearly states by the carpenters, painters and liner etc. 1 1.6 Though HARMONY ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enters etc., is enclosed as ANNEXURE-C-1-9. The labour charges for these works were decided by HARMONY S in-charge (Shri Pratap Singh), as deposed by Shri Ramalingeshwara Rao of HARMONY. The above was also admitted by the carpenters and painter etc, who deposed that whatever work is there in Film City, the same is given to them only by Shri Pratap Singh. The letters/correspondence contained in Files B-18, B-19 (Annexure-C-26) also depicted the fact that these carpenters, painters have attended to various miscellaneous works, through Harmony only. (v) All the overheads pertaining to the manufacturing activity i.e., expenditure towards power, rent, use of machines and also elements like depreciation, interest on investment were incurred by HARMONY and billed, on the Divisions, along with the margin i.e. markup towards profit, which thus/flowed directly to them. The carpenters, painters etc., were not involved in any manner, either for being charges for the overheads etc., nor for being given a share of manufacturing profit, the only remuneration received by them being the Labour-charges as decided/approved by HARMONY. (vi) The companies viz., DHL and others deducted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the carpenters, painters etc, were termed as contractors, categorically stated that carpenters and painters work under the contractor, sometimes the contractor himself does the painting work etc.) Thus, it emerges that the carpenters and painters, employed by Harmony are termed as contractors, in terms of the labour provided by them (along with their assistants and helpers) and they are not independent sub-contractors for the Furniture making activity as a whole. (viii) Even in their own correspondence and letters, the personnel in RFC have clearly mentioned that the manufacturing activity is done by Harmony. The Divisions referred to Harmony as Furniture Unit , Carpentry Shed etc. and accordingly indented Harmony for supply of the material. Thus, it appears that even within their own internal annals, the Divisions in RFC have dealt with Harmony as the manufacturer/manufacturing unit. This is also evident from the letters mentioned vide paras 9.1 to 9.5 supra. For example, vide Inter-Office memo dated 16-6-98 (ANNEXURE-C-1-11), Shri Pratap Singh, the Consultant of Harmony, addressed Shri Nitish Roy (and also the M.D. and Additional Manager of DHL), to inform that as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s regards the processes undertaken at MAYA and HARMONY divisions. The dispute is regarding the classification of the entities emerging at MAYA and HARMONY and if exigible who is the manufacturer and whether based on the case law relied upon, the demands other liabilities could be arrived at. (f) From the Book What an Art Director Does - An Introduction to Motion Picture Production Design by Ward Preston published by Silman-James Press, Los Angeles, (ISBN : 1-879505-18-5); the Chapter on Set Construction, as extracted herein below would be very relevant to arrive at and indicate of what a FILM CITY and its division are engaged in : Set construction on a soundstage is the meat and potatoes of art direction. The film industry s years of experience with this system has resulted in the closest thing that Hollywood has to an assembly line operation. When compared with the confusion and frustration of building sets on location in a warehouse with semi-trained personnel, working in a full studio facility is almost like a holiday. Consider the various shops and departments at the disposal of the art director : The Mill not only has every power woodworking tool imaginable, but also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The earliest of the backlot streets used staff skins to imitate the exterior surfaces of brick or stone buildings. Because of the weight of plaster, these skins today are molded in fiberglass, foam rubber, or vacuum-formed plastic. The development of resins for castings has also put the staff shop in the foundry business. Hardware door escutcheons, raised letters, and ornamental hinges are common requests. Now is probably the time to mention the Hardware Department. Pilferage on motion-picture sets has not usually been a problem. However, if any single category of items can be regarded as in jeopardy, it s the hardware. For some reason, these items are considered fair game to those of a felonious nature. Of course, there ll be some surprised vandals when the brass paint comes off those plastic resin key plates. It s a blessing that the imitations are available. Gathering enough matching hardware to complete a large set would be next to impossible without them. The hardware department normally has its own technician who will install and remove all the locksets, bolts and latches. This is also the place where you ll find metal numerals for doors, mail slots, door bells, and ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iting material, it will pay to have a short meeting with the costume designer. It would be a shame to see our actress disappear in the inadvertent camouflage of similar colors. Prior to getting that new upholstery, the decorator can check the piece into the Furniture Refinishing Shop. Sometimes this is just another function of the paint shop or it can be a separate shop. In any case, it s unlike any commercial shop in that they also have perfected the art of aging and weathering pieces as the story may dictate. The arts of aging, texturing, and creating faux surfaces make the studio Paint Shop the creative centre of the back lot. When showing my concern over the way a wood replica of an iron fence was being assembled, I was reminded of the art director s first commandment: All the camera sees is the last coat of paint. With that in mind, the importance of this critical craft comes into focus. Painters actually put in very little shop time. The spray booth is here and the color mixer, but most of their work is on the stage or location. The painters are also the source of some of the best backlot stories in the industry. My favorite is the one about the master set painter Ronni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o start work on stage. A Soundstage designed for set construction will have many advantages over a converted warehouse, i.e., ample electricity to operate power tools, compressed-air outlets for sprayers and tools, running water and sinks for paint crews, level wood floors suitable for nailing, removable sections of flooring over pits into which staircases can descend, an accessible, reinforced overhead grid from which to hang light scaffolding, heating and air conditioning units, and, of course, proper sound insulation. (g) From the extracts at (f) herein above, it would appear at RFC while the activity at unit HARMONY is what is named as Mill in the extract above that activity at MAYA , is combined activity of Staff Shop , Metal Shop , and the special effects department, while at Parade it is the Prop Shop . A reading of this book indicates that Staff Shop i.e, MAYA in this case, is the place where Plastor of Paris material with fibre binders bring into existence various building, statues, models, sculptures, panels, blocks and the like, which can also be any Fibre Reinforced Glass or FRG material as per requirements of the Art Director of the Films. Revenue has made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out. Relief sculpture presents quite different design problems, since a complicated series of actual spatial relationships may have to be indicated within a relatively shallow depth of material. The particular challenges to a sculptor s capabilities may be overcome by learning or by instinct, but, inevitably, it is only in practice, not in theory, that the solutions are found. The three basic methods of creating sculpture with raw materials are carving, modeling and construction. Carving and modeling are the oldest methods, and the basis of sculptural traditions, whereas construction has only been fully exploited and accepted in the twentieth century. Casting is a fourth basic technique, but this is a process of reproduction, not of original shaping. (Emphasis Supplied) And, thereafter this book lists out various nuances and forms of material like Clay, Pottery and Ceramics, Wax, Mould-making, Casting Metal, Resins and Glass Fibre Reinforced plastics, Wood, Stone, Plaster, Concrete, Plastics as material with which sculptures can be obtained. Therefore, all Entities emerging at MAYA would be sculptures. An art form of Statues and Sculptures in any form would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... get classified under Chapter 3925.99 as arrived at by the ld. Commissioner. The builders ware under Chapter 39, cover a particular type and quality and function goods marketable and dealt with in the market as Builders Ware . As found herein above, the goods, under dispute, in this case did not qualify the marketing test of builder wares. A part or full model copy of a building, cannot be building or builders wares. In any case, no evidence has been brought forth in the material on record by the ld. Commissioner as to how the marketing test as Builders Ware is satisfied to charge duty under heading 3929.99. The classification arrived at by the Commissioner cannot be upheld. (j) As regards the classification of other entities of the Staff Shop i.e., MAYA, in this case, being held as Tailors Dummies falling under Tariff item No. 9618.00, the same cannot be accepted. To arrive at a classification of an entity it is imperative first to understand what the entity under classification is. In the present case, certain items emerging at MAYA may have human forms and one may be led to believe them to be classifiable as Tailors Dummies . However, it is not only that tailors dumm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the various studio sets as props in original or after repairs, painting and refurnishing. (l) Before proceeding to examine the classification of these items, said to be furniture under Chapter 94.03 of Central Excise Tariff as arrived at by the ld. Commissioner, it is necessary to consider the nature, purposes and use of the items which emerge and go to embellish the studio sets, as props therein. Examining the same, it is found from the Book, Designing Dreams Modern architectures the movies by Donald Albrect, published by Thames and Hudson, 1987 and printed at Harper and Row Press, New York, stipulates at page xii in Chapter Introduction : - .......Building film sets indoors on sound stages encouraged exploration of out of the ordinary designs by liberating film designers from the structural economic and climatic constraints within which architects are forced to work. Thus the designs for the props on the Studio sets have a definite purpose, other than that of commonly understood use of furniture, that is, to achieve vivid rendering of three dimensional space in reality, on the flat two dimensional movie screen. The very same book at Page XVI reads : - ........Rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curtained niche. This tactic acknowledged the necessary presence of this piece of furniture in the boudoir, but prevented it from being approached onscreen in the company of men. Another stratagem was to exaggerate both the scale and the position of dressing and makeup tables, stressing the grooming function of the room. Portraying the eroticism of the new woman was less a problem. A heroine s sexual allure could be subtly suggested by placing her on a daybed - A popular item of decor of the period-chaise longue, or sofa, furniture that allowed her to assume a reclining position for reading, telephoning, smoking, or just lounging in elegant pajamas . [Emphasis supplied] This passage as extracted herein above and others not extracted to avoid prolix findings on this aspect, leads to a conclusion that items utilized in studio sets as props , which may appear to be a furniture to a common eye, are not actual marketable furniture pieces. Functioning of all props on a film set are with a specific design to achieve and create an aura for the camera to record the narration of the story being unfolded. They are for effect, for Decor over and undersized and designed with the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rations . Such furniture pieces are found to be excluded from being classified under Chapter 94 by Chapter Note 1(k) of Chapter Note 94 of Central Excise Tariff which reads as under : - 1(k) Toy Furniture or toy lamps or lighting fittings (heading No. 95.03), billiard tables and other furniture specially constructed for games (heading No. 95.04), FURNITURE FOR CONJURING TRICKS OR DECORA-0TIONS (other than electric garlands) such as Chinese lanterns (heading No. 95.05). Therefore, supplies made from HARMONY to studio sets in original or after refurnishing at PARADE cannot be classified under heading 9403 as arrived at by the ld. Commissioner. (m) In view of the nature of the item, supplies made from HARMONY or and PARADE to studio sets and otherwise of pieces altered by changing cushion materials, upholstery and paints to look resemble the items of antique or futuristic or new pieces would amount to repair/refurnishing of existing props. Such activity would not amount to manufacture under the Central Excise Act, 1944. The value of such items has to be excluded from reckoning duty on furniture. (n) Certain items like boxes, notice boards, name plates etc, cannot in any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 361] has to be granted for Valuation for Exemption as well as for the purposes of levy of duty, if any, if the exemption limits are being crossed. Since this would require extensive and intensive re-determination of facts, we would set aside the order and remand the matter back for re-determination of the quantum of Furniture which could be classified under Chapter 9403.00 and duty if any, therefore, be worked out as above. (r) Since the matter is being remanded back to re-determine the classification of such furniture as supplied to Hotel, Cafeteria/ Offices, we leave the question of who is the manufacturer of the same and is liable for duty open along with other questions regarding limitation raised by the appellants. (s) Since the matter is being remanded back for re-determination of duty, we would set aside the penalty, confiscation and redemption fines imposed, and order that the same may be re-determined, if found liable consequent to the proceedings in remand. 6. In view of our findings herein above, we hold : - (a) Entities emerging at MAYA viz., FRP Sections are not classifiable under 3925 and FRP/POP statues /or entities are not classifiable under Chapt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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