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TMI Blog2003 (7) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... upplied by M/s. ITC and as per the specifications, drawings and designs supplied by them. On 12-12-95, officers of Central Excise visited Hotel RPS and called for details of the above contract, which were furnished by M/s. ITC. Copies of the two agreements also were supplied by M/s. ITC. Statements of Shri Vinoo K. Naik of M/s. Interscape and Shri Abhijit Chakrawarti of M/s. ITC were recorded under Section 14 of the Central Excise Act. The Central Excise officers subsequently inspected various items of furniture manufactured at site by M/s. Interscape. They seized the furniture items which were believed to be liable to confiscation under the Central Excise Act. On the basis of scrutiny of the agreements, details of the works done thereunder, the statements recorded under Section 14, etc., the department found that M/s. Interscape had manufactured various furniture items chargeable to duty of excise under Headings 94.01 and 94.03 of the Central Excise Tariff Schedule and had cleared the same without payment of duty. The department also found that M/s. Interscape had suppressed material facts relating to such manufacture and clearance. Accordingly, the proviso to Section 11A(1) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... items had been manufactured and supplied by M/s. Interscape and that Central Excise duty had not been paid on any of the items. The said furniture items were seized as they were believed to be liable to confiscation under Rule 173Q. Statements of Shri Vinoo. K. Naik (proprietor of M/s. Interscape) and Shri Hari Singh (Corporate Accountant of M/s. U.B. Palace) were recorded. Shri Vinoo K. Naik stated, inter alia, that the contracted work had been completed in October, 1994. Shri Hari Singh stated that the work had been started in 1989 and was completed in March, 1995. The Central Excise officers collected from them details of the work, payments made under the contract etc. They also recorded a statement of one Shri Chandrasekhar Kanetkar (Managing Director of M/s. Chandrasekhar Architects Pvt. Ltd., interior designers who had designed the furniture items manufactured by M/s. Interscape and supplied to M/s. U.B. Palace), who furnished the particulars of payments received from M/s. U.B. Palace towards interior designing charges. He also stated that the furniture works had been completed in October, 1994. On the basis of the results of investigation, the department issued show cause n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amentation. As handicrafts were exempt from duty under Notification No. 76/86-C.E., dated 10-2-86, the said items were not chargeable to duty of excise. In this connection, reliance was placed on the Hon'ble Supreme Court's decision in CCE v. Louis Shoppe - [1996 (83) E.L.T. 13 (S.C.)]. It was further submitted that M/s. Interscape were under a bona fide belief at the relevant time that the furniture items could not attract levy of Central Excise duty owing to the Exemption Notification No. 76/86-C.E. as also the Tribunal's decision in the case of Louis Shoppe. Therefore, the department's allegation that they had suppressed material facts with intent to evade payment of duty was baseless and invocation of the extended period of limitation against them was not justifiable. It was also argued by the Counsel that the provisions of Section 11AB were not applicable to the case. It was further argued that where a penalty was imposed on M/s. Interscape under Rule 173Q no penalty could be imposed on the proprietor under Rule 209A. It was requested that all these arguments be considered mutatis mutandis in the connected appeal (E/2337/98) also. Ld. Counsel for M/s. Hotel RPS adopted the arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... article. There are two Chapter Notes in Chapter 94, which are relevant to the Headings 94.01 to 94.03. These are Note (2) and Note (3). While Note (2) relates to complete articles, Note (3) refers to parts. Therefore, it is Note (2) which is relevant to the instant case and the same reads as under :- "The articles (other than parts) referred to in Heading Nos. 94.01 to 94.03 are to be classified in those headings only if they are designed for placing on the floor or ground. The following are, however, to be classified in the above-mentioned headings even if they are designed to be hung, to be fixed to the wall or to stand one on the other : (a) Cupboards, bookcases, other shelved furniture and unit furniture; (b) Seats and beds". (emphasis supplied) Admittedly, most of the items held dutiable by the Commissioner are designed for placing on the floor or ground and, therefore, their classification under Heading 94.03 is in order. The second paragraph of the above Note (2) is in the nature of a proviso to the first paragraph of the Note. Even if any of the articles is designed to be hung or to be fixed to the wall or to stand one on the other, it is to be classified under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... element of artistic improvement. In the instant case, ld. Commissioner has found thus : "There is not any substantial ornamentation or special visual appeal in the goods such as is normally found in the works of traditional handicrafts, or delicate , workmanship and special aesthetic appeal." We are not inclined to interfere with this subjective finding of fact, in the absence of any reliable evidence on record to prove to the contrary. The subject goods, already classified under Heading 94.03, will, therefore, be held to be chargeable to duty at normal tariff rate. 6. The question now before us is who manufactured the above goods. The agreements entered into between M/s. Interscape and M/s. ITC had clearly held out the work as "manufacture of furniture items." The work was to be done by M/s. Interscape on labour contract basis as per the drawings and specifications supplied by M/s. ITC, and any wastage thereof was to the contractor's account. The responsibility of organising material movement was with the contractor. In respect of all labour directly or indirectly employed for the contracted works, M/s. Interscape had to comply with the provisions of the Contract Labour (Regulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en paying duty under protest. They could have done so in 1992-93 also. Had they done so, their present contention that they had manufactured and cleared the goods in question without payment of duty under a bona fide belief that the goods were exempt from payment of duty would perhaps have stood to reason. In their reply to the SCN, they said that they had never claimed even the benefit of small scale exemption. Their payments of duty under protest were not based on Notification No. 76/86 either. But, their Counsel has argued that, in view of the said Notification, they believed bona fide that the furniture items were exempt from duty. He has further argued that the Tribunal's decision in the case of Louis Shoppe [1995 (75) E.L.T. 571] (which gave a liberal meaning to "handicraft" to include hand-made furniture within its ambit, and which later on came to be set aside by the Apex Court vide (83) E.L.T. 13) had also worked to strengthen such belief. These arguments which are fact-centric are not supported by anything contained in the party's reply dated 3-10-1996 to the SCN. We, therefore, reject the plea of bona fide belief. We have not found any evidence on record to disprove the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e vacated when the one on the proprietorship concern remains. Interest has been demanded by the adjudicating authority on the duty to be paid by M/s. Interscape. This demand is under Section 11AB of the Central Excise Act. This provision of law (which was enacted only w.e.f. 28-9-96) was not in force during the period of dispute (1992-93) and, therefore, the demand of interest cannot be sustained in law. 9. The essential facts in appeal No. 2337 of M/s. Interscape are not significantly distinguishable from those involved in their appeal No. 2335. The only apparent difference is that, unlike in their contract with M/s. ITC for the works at the site of Hotel RPS, M/s. Interscape carried out similar works at the site of U.B. Palace (Jodhpur) under oral orders from the latter and not under any written agreement. But, this difference is of no consequence for the case on hand. All the points raised by the two sides in appeal No. 2335, in relation to demand of duty confirmed against M/s. Interscape on furniture items as also to penalty imposed on them, were agitated with equal fervour in appeal No. 2337 also. Our decision on the issues in the former appeal must apply with equal force to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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