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TMI Blog1989 (8) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... nsequential orders in the appeal on the question of penalty and confiscation. Appeal allowed. - Civil Appeal No. 4080 of 1988 - - - Dated:- 18-8-1989 - Sabyasachi Mukharji and B.C. Ray, JJ. A.K. Ganguli, Senior Advocate (K. Swamy, T.V.S.N. Chari and P. Parmeswaran, Advocates, with him), for the respondent. V. Lakshmi Kumaran, N.M. Popli and V.J. Francis, Advocates, for the appellant. [Judgment per : Sabyasachi Mukharji, J.]. - This is an appeal by the [revenue]] under Section 35L of the Central Excises and Salt Act, 1944 (hereinafter referred to as 'the Act') against the order No. 195 of 1988-C dated 8th March, 1988 passed by the Customs, Excise and Gold (Control) Appellate Tribunal (hereinafter referred to as 'the Tribunal'). 2.The appellants at all relevant times were manufacturing agarbatis, dhoop sticks, dhoop coil, dhoop powder falling under Tariff Item No. 68 of the erstwhile Central Excise Tariff. The relevant period involved in the present Civil Appeal is from the year 1979 to 1983-84. The appellants claimed exemption under Notification No. 55/75, dated 1st March, 1975. By the said notification, the Central Government had exempted goods of the description ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereon unconditionally. The effect of this notification, was that manufacture of such goods were exempt from the operation of rule 174 of the said Rules. As a result, it was not necessary to take out a licence as enjoined by Rule 174. The appellants had indicated the process of manufacture of dhoop sticks, coil and powder before the Tribunal and the process was as follows : "1. The various ingredients/raw materials like perfumes, essential oils, natural oils and other raw materials are first mixed in specific proportions, by manual labour. 2. These raw materials along with jigget and saw dust after seiving by hand are mixed in a barrel with a stirrer with hand and made into a paste. 3. This paste is kneaded in the kneading machine operated by power. 4. This paste is put by hand in the extruder. 5. The extruder extrudes the paste in the form of needles with the aid of power. 6. As the paste is extruded from the extruder it is collected on a wooden tray which is of a particular size. As it is collected on the tray it is cut on both sides to the accurate size by hand. 7. The thin long incense is then transferred by hand from the individual trays of long big tray by hand. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thing else but agarbaties. As indicated hereinbefore, Basic Chemicals, Pharmaceuticals and Cosmetics Export Promotion Council had also indicated that dhoop sticks, incense cubes and cone, coils, joss sticks are agarbaties in different physical forms and that the end-use of these and the ingredients used therein were one and the same and for that reason these had been made eligible for the benefit of export incentives as agarbaties. Learned Counsel for the appellants submitted that in the report on the Marketing of Handicrafts under the title "Survey of Indian Handicrafts" sponsored by the All-India Handicrafts Board, which was brought out by Indian Cooperative Union, agarbaties were mentioned, which according to counsel, indicated that these were recognized as handicrafts. A letter was placed before the Tribunal which was issued by the Deputy Director, All India Handicrafts Board functioning under the Ministry of Commerce, Department of Export Production which had certified that the agarbaties were the products of the Indian Handicrafts Board, Ministry of Commerce. Certain notifications were also drawn attention to of the Tribunal which indicated that agarbaties were handicrafts el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y hand. General Note I against the entry 'Handicrafts' in the Policy Book stated as follows : "Articles which are classifiable elsewhere in this policy will be deemed to be 'Handicrafts' falling in this group only if such articles, besides being made by hand, have some artistic or decorative value; they may or may not possess functional utility value in addition. Artistic or decorative value of the article exported need not necessarily come out of any art work, engraving or decoration done on the article but the very form, shape or design of the article could also be artistic and suggestive of the fact that the article is primarily meant for decorative and not for utility purposes." 7.After analysing the findings and the trade notices and relying on the decision of this Court in M.S. Company Private Limited v. Union of India - 1985 (19) E.L.T. 15 (S.C.) =1985 ECR 110 SC, the Tribunal in the light of the definition of "handicrafts", in the Encyclopaedia Britannica, came to the conclusion that in the manufacture of a product skill of the worker and the use of hand are two pre-requisites for a product to qualify as a handicraft. In the Encyclopaedia Britannica, handicraft has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal that the revenue was entitled to levy tax for a period of five years prior to the issue of show cause notice and not six months pursuant to rule 9(2) of the Central Excise Rules. The relevant portion of rule 9(2) provides as follows: "(2) If any excisable goods are, in contravention of sub-rule (1) deposited in, or removed from, any place specified therein, the producer or manufacturer, thereof shall pay the duty leviable on such goods upon written demand made within the period specified in Section 11A of the Act by the proper officer, whether such demand is delivered personally to him, or is left at his dwelling house, and shall also be liable to a penalty which may extend to two thousand rupees, and such goods shall be liable to confiscation." It may be mentioned that rule 9 (1) of the said Rules stipulated that no excisable goods shall be removed from any place where they are produced, except in the manner provided in the rules. Therefore, the question that arises in this appeal is whether Section 11A of the Act applies or not. The relevant provisions of Sec. 11A are as follows: "11-A. Recovery of duties not levied or not paid or short-levied or short-paid or erron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be established. Whether in a particular set of facts and circumstances there was any fraud or collusion or wilful mis-statement or suppression or contravention of any provision of any Act, is a question of fact depending upon the facts and circumstances of a particular case. The Tribunal, however, had held contrary to the contention of the appellants. The Tribunal noted that dhoop sticks are different products from agarbaties even though they belonged to the same category and the Tribunal was of the view that these were to be treated differently. Therefore, the clarification given in the context of the agarbaties could not be applicable to dhoop sticks etc., and the Tribunal came to the conclusion that inasmuch as the appellant had manufactured the goods without informing the Central Excise authorities and had been removing these without payment of duty, these would have to be taken to attract the mischief of the provisions of rule 9(2) and the longer period of limitation was available. But the Tribunal reduced the penalty. Counsel for the appellants contended before us that in view of the trade notices which were referred to by the Tribunal, there is scope for believing that agarb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elieving that the goods came within the purview of the concept of handicrafts and as such were exempt. If there was scope for such a belief or opinion, then failure either to take out a licence or to pay duty on that belief, when there was no contrary evidence that the producer or the manufacturer knew that these were excisable or required to be licensed, would not attract the penal provisions of Section 11-A of the Act. If the facts are otherwise, then the position would be different. It is true that the Tribunal has come to a conclusion that there was failure in terms of Section 11-A of the Act. Section 35-L of the Act, inter alia, provides that an appeal shall lie to this Court from any order passed by the Appellate Tribunal relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment. Therefore, in this appeal, we have to examine the correctness of the decision of the Tribunal. For the reasons indicated above, the tribunal was in error in applying the provisions of Section 11-A of the Act. There were no materials from which it could be inferred or established that the duty ..... X X X X Extracts X X X X X X X X Extracts X X X X
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