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TMI Blog2015 (4) TMI 966X X X X Extracts X X X X X X X X Extracts X X X X ..... chedule to DVAT Act must be construed in its plain lexical sense, without any colour being added by extraneous factors. - The fact that “Baldi” items are imported from Italy seems to have been considered by both authorities, the Commissioner and the Tribunal, as a factor which clinches the issue. There is nothing in the DVAT Act, or the Rules framed therein or, for that matter, any other instruction, notification etc. to require that a commodity in order to be accepted as “Handicrafts” must be one indigenously made or, to put it conversely, must not be one imported into India. We have concluded earlier that the expression “Handicrafts” has to be construed in the sense it is commonly understood. Since the legislative entry does not qualify it by any other pre-requisites, the restrictive interpretation put on it by the authorities below (based on the fact that it is imported from Italy) cannot be approved. The revenue did not refute, either before the Tribunal or before this Court, the claim that the “Baldi” items, in which the appellant deals, are predominantly made by hand. There is no dispute that they are items graced with visual appeal, on account of ornamentation or inlay wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e items sold under the brand name of Baldi . It is averred that the Baldi glass items are manufactured primarily using the designs given by craftsmen and formulating the same on a glass base. The manufacturing process of Baldi statedly involves crystal playing, engraving, polishing, assembling, chiseling and after final product is made the same is subjected to hand polishing, dismantling, pre-gilding and then finally assembled as per the design given by the craftsman. The entire process of manufacture is claimed to engage highly qualified artisans who make the individual pieces by hand with no two pieces resembling each other. Claiming that these goods having decorative visual appeal are made as a result of process which involves substantial use of hands, as against being manufactured by machines, reliance is placed, inter alia, on literature explaining the manufacturing process, that was shared with the Commissioner through letter dated 6.3.2009, which would describe Baldi as product of Italy, popular as a retail gift item of exclusivity and opulence , signature of luxury style of living involving neoclassicism and timeless shapes , using materials such as amethyst, la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of glass including the goods sold under the brand name of Baldi are classifiable as Handicrafts under Entry 128 of Schedule III of the said Act. b. Whether the said goods are chargeable to VAT @ 4% ad valorem instead of 12.5% under the residual category as specified under Section 4(e) of the Act. 5. The above questions persist, as questions of law, for the purpose of the appeal at hand, though restricted to the goods sold under the brand name of Baldi . 6. As mentioned earlier, the assessee submitted on 6.3.2009 documents describing the manufacturing processes of the products in question for consideration of the Commissioner. The claim of the assessee about the products being Handicrafts was resisted by the Revenue. It, inter alia, urged that Baldi items were admittedly articles of handicraft art popular in Italy , directly imported and sold by the dealer but did not fulfill the essential criteria for being treated as Handicrafts . 7. While accepting the claim with regard to the stained glass items, the contention of the assessee vis- -vis Baldi items was rejected by the Commissioner, through reasoning, the relevant portion whereof may be extracted as under :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecourse to the residuary clause be rejected. 9. The Tribunal, however, upheld the view taken by the Commissioner and dismissed the appeal of the assessee holding that it had failed to show that Baldi items imported from Italy, could be classified as Handicrafts under entry 128 of the third schedule . Rejecting the case of the appellant , inter alia, based on the tests laid down in the case of Collector of Central Excise V. Louis Shoppe (1996) 83 ELT 13 (SC) and the ruling of Oswal Agro Mills Ltd. V. Collector of Central Excise (1993) 66 ELT 37 (SC), the Tribunal observed as under : 19. ..... It is to be noted that from the preface of the copy of the printed material pertaining to Baldi filed with this appeal, the signature message for the product marketed as Baldi is The Luxury Style of Living . If we consider this expression described as the item The Luxury Style of Living when considered on the touch stone of the Common parlance and commercial parlance test, the commodity marketed as Baldi cannot be treated as Handicrafts by any yardsticks. Further the psyche of a Handicraft has more of a traditional and basic appeal rather than a luxury style of living. . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inoor Glass House (2009) 26 VST 135 (All), the Tribunal proceeded to apply common parlance theory as well as the functional test for observing that an item is to be considered sometimes by the express words of the taxing statute and sometimes by the implied meaning of the words of a taxing statute. 11. In the case of Louis Shoppe (supra), the issue for determination was as to whether wooden furniture by itself could be treated as Handicrafts within the meaning of the Government notification dated 10.2.1986 issued under the Central Excise Act. The Supreme Court observed that furniture as such would not qualify as Handicrafts but could be so characterised if the following tests are satisfied :- (1) It must 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 in-lay work or some similar work lending it an element of artistic improvement. Such ornamentation must be of a substantial nature and not a mere pretence. 12. It was ruled that whenever the above question arises, the authorities shall examine the matter from the above stand-point. The test ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of these items was done by hand, when it is machines which predominantly produced the end product. While examining the issue, the Court subjected to scrutiny the process of manufacture of the items in question, inter alia, in light of the dictionary meaning of the expression Handicrafts as provided in the Concise Oxford English Dictionary and Encyclopaedia Britannica as indeed the distinction between Handicrafts and goods which are machine made as explained in the definition adopted by UNCTAD as follows :- Some goods may be produced partly by machine and partly by hand : (i.e. a dress made up by hand from machine made cloth, perhaps with additional hand embroidery or other decorations) ... in such cases a product should be regarded as hand-made or handicrafts if the essential character of the product in its finished form is derived from the hand-made aspect of its production. 17. Noticeably, the expression Handicrafts also occurs in the Import Policy adopted by the Government of India. Referring to the policy book for 1984-85, the Court extracted the general note in the said document against entry relating to Handicrafts stating as follows : Articles which ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truments . Obviously, the benefit of such exemption cannot be extended to imported handmade musical instruments. The logic is simple. By adding the word indigenous , the legislature has qualified the expression giving it a restrictive meaning. 22. We may add three more examples here. The entry nos. 12, 20 and 39, again in the first schedule to DVAT Act, relate to earthen pot , all bangles except those made of precious metals and handmade safety matches respectively. All these items are exempt from VAT. The way these commodities have been described in the said schedule, pots which are metallic, bangles which are made of precious metals like gold or silver, or safety matches produced with the help of machinery would not qualify for exemption under Section 6 of DVAT Act. 23. It, thus, clearly emerges that the expression Handicrafts used in entry no.128 of the third schedule to DVAT Act must be construed in its plain lexical sense, without any colour being added by extraneous factors. 24. In our opinion, the approach of both the Commissioner and the Tribunal has been erroneous and, to say the least, on reasoning which defies logic or substance. 25. In para 9 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f living . It seems to have taken a cue from the observations of the Commissioner who pointedly described Baldi items as object d art , and not merely a handicraft as if to say that a handicraft cannot be object d art. Reference to the high price (at which these items seem to be selling in Indian market), also has been made in the same context. We are unable to subscribe to this kind of syllogism. It is not proper to reject a commodity from the category of Handicrafts only because it is also an object d art. The dictionary explains the expression object d art as a small decorative object , [Reference : Shorter Oxford English Dictionary]. Having regard to the tests laid in the case of Louis Shoppe (supra), the fact that the commodity is a decorative object only reinforces its claim to be accepted as a handicraft , rather than playing out as a disqualification. 29. The acceptability, constituency or market for Handicrafts has expanded and grown over the years. The raison d etre for government sponsorship or supportive policy for Handicrafts industry may have evolved from the idea of promoting traditional arts and crafts with added objective of generating employm ..... 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