1. Collector of Central Excise, New Delhi has filed the above captioned appeals being aggrieved from the order passed by the Collector of Central Excise (Appeals), New Delhi. Briefly the facts in both the above captioned appeals are that the appellants are manufacturers of wooden furniture and had filed classification lists and had claimed exemption from payment of duty under Notification No. 76/86 dated 10th February, 1986 for wooden decorative chairs and sofas, cupboards, cabinets, stands and counters having at times also inlay work on the ground that these were handicrafts since they were made from skilful use of hand by their craftsmen and had carving with Indian classical patterns and motives and at times having inlay work. Show cause notices were issued to the parties raising their liability of duty at the rate of 25%. The assessee had contended before the Assistant Collector that they bought the wood from the market. The same was cut to the required sizes from the saw mill. The cut wood was thereafter converted into articles of furnitures by using the aesthetic approach, imagination and skill by the craftsmen/carpenters with the help of hand tools like Aari, hathora sets, screw drivers, randha etc. The articles of furniture were then sold for furnishing houses, business houses and homes. The furniture produced by the craftsmen if required by the customers would have some carving or inlay work. The assessee also contended that in view of the process of manufacture the type of goods in its finished form essentially produced by hand of the craftsmen and the manner in which the craftsmen use their aesthetic approach, imagination and skill that such articles of furniture should fall under handicrafts. It was also argued that even the wooden furniture without being carved and inlay work was also handicraft. The assessee had cited excerpts from a number of books stated to have been published by All India Handicraft Board and other institutions. The Assistant Collector in his order had observed that the assessee had filed classification for items such as tables, cupboards, chairs, counters, beds, planters, chairs, sofas, stands and counters and had claimed items to be handicrafts. The Assistant Collector observed that these items were basically furniture which is of utilitarian value and had been used by the assessee for furnishing houses and offices and that efforts were made by the carpenters to increase the aesthetic value by whatever manner the customers may require could not be deprived. The Assistant Collector took the view that the goods were not handicrafts and exemption under Notification No. 76/86-C.E., dated 10th February, 1986 was not admissible to the assessee and were classified under Heading 9403.00 of the Central Excise Tariff and were subject to duty at 25% ad valorem/3%.
2. Being aggrieved from the aforesaid order, appeals were filed before the Collector (Appeals). The appellants agitated the same grounds before the Collector (Appeals). The Collector (Appeals) had relied on the Tribunal's decision in the case of Arya Cabinet House vide order No. 247-248/89 dated 10th August, 1989 and had held that they were eligible to benefit of Notification No. 76/86-C.E. and had observed that the items of wooden furniture in question with inlay work and designs were goods of handicrafts and eligible for exemption under Notification No. 76/86-C.E. and had set aside the order passed by the Assistant Collector and had allowed the appeals by separate orders.
3. Being aggrieved from both the orders the revenue has come in appeal before the Tribunal.
4. Shri R.K. Kapoor, the learned SDR appeared on behalf of the appellant and pleaded that both the respondents are manufacturers of wooden decorative furniture. He argued that articles which are handicrafts are exempt in terms of Notification No. 76/86-C.E., dated 10th February, 1986 and the goods manufactured by the appellants are furniture and are assessable under T.I. 9401 and 9403 and erstwhile Tariff Item 68 and the respondents are not entitled to the benefit of the notification. He further stated that there is no definition of handicrafts in the Tariff or in the notification. The question to be decided by the Tribunal is whether wooden furniture which is manufactured mainly with the aid of power with inlay decorative work can be considered as handicrafts. He referred to the definition of handicrafts as given in the ITC Policy and also dictionary meaning of handicrafts in Encyclopaedia of Britannica as under :- "Occupations of making by hand usable products graced with visual appeal. Handicrafts encompass activities that require a broad range of skill and equipment, including needle work, lace making, weaving, printed textile decoration, basketry, pottery, ornamental, metal making, jewellery, leather working, wood working, glass blowing and the making of stained glass." He pleaded that the respondents had used the following machinery for manufacture :- (v) Power sander and electric grinding wheel for cutting mother of pearls.
In the case of Continental Furnishers sand paper machine and lathe are being used. He referred to the statement of Shri Ashok Bajaj of Louis Shoppe and John Samuel of Continental Furnishers. He referred to the Import Export Policy, 1983-84 Appendix 9. He referred to the Profile of New Zealand Market of Handicrafts and page 119 where it has been mentioned that : "Goods imported under the DCHS must be hand made from natural materials. The expression 'handmade' includes goods which have been produced by hand, by tools held in the hand or by machines powered by foot or hand. Clothing and leather goods made by electrically powered/or similarly powered machines are not acceptable under DCH criteria. Handicrafts made of synthetic materials of any type either alone or combined with natural materials do not qualify under DCHS." He referred to page 145 of the paperbook which are General Notes which clearly says that "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; the may or may not possess functional utility value in addition to Artistic or decorative value of the article exported need not necessarily come out of any art work, engraving or decoration done on the articles but the very forms, shape or design of the article could also be artistic and suggestive of the fact that the articles primarily meant for decorative and not for utility purposes." Shri Kapoor, the learned SDR cited the following decisions :- (1) Mysore Agarbathi Works v. Union of India 1978 (2) E.L.T. (J 196) (A.P.)Padmini Products v. Collector of Central Excise 1989 (43) E.L.T. 195 (S.C.)Padmini Products v. Collector of Central Excise, Bangalore 1988 (35) E.L.T. 543 (Tribunal) (4) Arya Cabinet House v. Collector of Central Excise 1989 (44) E.L.T. 785 (Tribunal)Shyam Sunder Metal Industries and Ors. v. Collector of Central ExciseMukesh Kumar Aggarwal & Co. v. State of Madhya Pradesh and Ors., 1988 (14) E.C.R. 353 (S.C.) Shri Kapoor, the learned SDR argued that since there is no definition in the Tariff or Act dictionary meaning has to be resorted. He pleaded that the goods manufactured by the appellants are not a piece of decoration but are of utility. He pleaded for the acceptance of the appeals.
5. Shri Naveen Mullick, the learned advocate who has appeared on behalf of the respondents pleaded that handicrafts are items which should not have utility. Essential character of the said goods does not come out with hand-made process. He again explains the process of manufacture and also referred to wood carving i.e. inlay work and no machine can do its work and these are assembled manually. He referred to the classification list which appears on page 23 of the paper book in the case of Continental Furnishers. He referred to the order-in-original which appears on page 12 of the paper book. He pleaded that the mere fact that power was used at a particular stage will not take away the benefit. He argued that there are two notifications viz. Notifications No. 230/86, dated 3rd April, 1986 and No. 76/86-C.E., dated 10th February, 1986 and the later notification is in dispute and use of power at a particular stage cannot have the effect of denying the benefit of the notification. He referred to the submissions made at the times of personal hearing before the Assistant Collector. In reply to the show cause notice, he referred to page 20 of the paper-book where it was contended by the respondent before the Assistant Collector as under :- "From the above decisions it would be seen that wood working has been treated as handicraft. It may be submitted that the wooden furniture made from the cuttings of wood acquire their shape by the hand-made aspect of the craftsman. Thus the essential character of the wooden furniture comes out from the skilful use of hand by the workers and it is this artistic visual appeal of the wooden furniture that it is required and used by the consumer for furnishing their offices, houses etc. The term furniture in itself means an item having the artistic value and decorative value. That is the reason the customer has to pay quite substantially for the purchase of such furniture. The sale price of such article includes a small portion towards the cost of material used and for the major portion involves towards the labour and skill involved by a worker to convert the raw material into the artistic and decorative furniture. In short these articles are sold and accepted by the consumer by their craftsmanship essentially. My clients thus submit that their product is fully covered by the decision of the Central Board of Excise and Customs, Tribunal and the reports issued by the various bodies from time to time. They reiterate that even the All India Handicrafts Board including the Survey Report by DSIDC confirms wooden furniture to be handicraft.
It is accordingly prayed that the same be treated as Handicrafts and may be given the benefit of Notification No. 16/86-C.E., dated 10th February, 1986 and the proceedings as initiated in the impugned show cause notice may be dropped." He referred to the judgment of the Tribunal in the case of Arya Cabinet House v. Collector of Central Excise, reported in 1989 (44) E.L.T. 785 (Tribunal) and laid special emphasis on para No. 18 of the said judgment where there is a reference to the decision in the case of Padmini Products v. Collector of Central Excise, reported in 1988 (35) E.L.T. 543 (Tribunal). He referred to page 93 of the paperbook. He referred to the decision in the case of Shyam Sunder Metal Industuries and Ors., reported in 1982 E.C.R. 289D and referred to paras 35 and 36 of the said judgment where it was observed that the term 'Handicrafts' is not averse to the use of machines in their manufacture so long as the essential character of the product is derived from the 'handmade' aspect. He argued that the dictionary meaning is not relevant. He referred to the Report on the Survey of handicrafts in Delhi and in particular referred to pages 51 and 56 of the paper-book. He referred to another decision in the case of Collector of Central Excise, Guntur v. Ambica Chemcial Products, reported in 1992 (60) E.L.T. 656 (Tri.) and also referred to pages 36 and 37 of the paper-book i.e.
International Trade Centre UNCTAD/GATT. Relevant extract from page 37 is reproduced below :- "Some goods may be produced partly by machine and partly by hand (e.g. a dress made up by hand from machine-made cloth, perhaps with additional hand embroidery or other decoration) ... in such cases a product should be regarded as 'hand-made' or 'handicraft' if the essential character of the product in its finished form is derived from the 'hand-made' aspect of its production." He also referred to craft designs of All India Handicrafts Board and referred to pages 38,39, 40 and 46. On page 40 there is a photograph of Divan-cum-Settee. At page 46 there is a photograph of Sankheda lacquerware from Gujarat and laid table top from Saharanpur. On page 96 appears advertisement of Phulkari i.e. "Wood inlaid Furniture" and on page 95 appears the photograph from Suraj Kund Crafts Mela of Furniture. He argued that the respondents are entitled to the benefit of Notification No. 76/86-C.E. and pleaded for the rejection of the appeals.
6. We have heard both the sides and have gone through the facts and circumstances of the case and have also duly considered the written submissions filed by both the sides. It is admitted position that the respondents are manufacturers of wooden furniture falling under Chapter 94.01 and 94.03 of the Central Excise Tariff and the following process is adopted :- "(i) Logs of wood are purchased from the open market and which are sent to the Saw Mills for cutting of the logs of wood into smaller pieces.
(ii) The pieces so received from the saw mills thereafter are used by the respondents for manufacture of their final product. Depending upon the nature of items to be manufactured that the pieces received from the saw mill are cut to the required sizes by making use of hand tools like Aary, Randha, Channi etc.
(iii) First of all from such pieces made to size that parts of the wooden furniture are made by the craftsmen which can be the legs of the chair or table, back portion of the chair, top of the table, legs of the cabinets and/or any other part of any item of the wooden furniture. The shapes and designs of such parts vary from item to item depending upon the requirement and choice of the customer placing the order.
(iv) The surface of such parts for smoothing and levelling is done with the sand paper applied manually. It is only in the year 1990 which of course is not the period in dispute that at times the use of sand paper machine of about 1/2 h.p. was undertaken for levelling some areas of such parts as in case of fine curves, inlay work and carving work the sand paper machine which of course is very small and handy cannot be used (refer also the statement of Shri Ashok Bajaj, recorded by the officers in the year 1990 for M/s. Loui Shoppe). Even after use of such sanding machine that sand paper is used and which is applied manually to get the required shape and levelling. (Refer statement of Shri John Samuel recorded in the year 1990 by the officers of Central Excise at Continental furnishers).
(v) The process of inlay work and/or carving is undertaken at the time on the pieces of wood which is required to be shaped into parts of the wooden furniture. The said job can only be undertaken manually by skilful use of hands by the craftsmen. During the course of hearing before this Hon'ble Tribunal on 16-8-1994 that the respondents showed the samples of wood on which the process of inlay/carving had to be undertaken and which showed that the required designs were first drawn on the paper and which was pasted on the wood.
(vi) The inlay work on wood is an embroidery on the wood and the materials used for inlaying are mother of pearls, copper and brass wire etc. The pieces of copper, mother of pearls are taken. Before inserting the same into the wood with the aid of small hand tools that scratching on the already drawn outlines is undertaken on the wood by chiesel and hammer. It is on such created surface on the wood that the pieces of copper, brass wire, mother of pearls etc.
are inserted manually. This requires the skill of the craftsmen and use of skilful hands.
In case of carving it is once again that outline is drawn on the wood and it is by use of chiesel and hammer, operated manually, that different designs are made on the wood." The learned Senior Departmental Representative, Shri R.K. Kapoor in his written arguments has mentioned the process of manufacture of furniture items as per statement of Shri Ashok Bajaj of Loui Shoppe as under :- "The machines used are saw mill for cutting logs of wood in proper shape and size for manufacture of furniture, hand tools, spray painting with electric operated compressor, electric grinder, power sander, and electric grinding wheel for cutting mother of pearls." Similarly, Shri John Samuel of Continental Furnishers has also admitted that they are using sand paper machine and lathe. The learned SDR in his written submissions has mentioned that the use of machines for the manufacture of furniture item by the two parties was predominant and, therefore, it will not be correct to categorise the goods manufactured by them as "handicrafts". Shri M.V. Narayana Rao of All India Handicrafts Board in his article on handicrafts from Karnataka has written about wood carvings had written as under :- Wood carving is an ancient craft in Karnataka, which found expression mostly on doors and ceilings of temples and on temple chariots. The most popular and interesting, however, are the sandalwood carvings which have obtained a pride of place among the crafts of the State. The artisans, popularly known as Gudigars, are known for their delicate workmanship.
The carvers produce a wide range of choice articles which include imagines, panels, caskets, photo frames, trays, vyasapeeta, paper-weights, paper-knives, fans and many other decorative and utility articles. Various designs are worked out in high and middle relief as well. Incised designs like flower traceries, creepers, festoons and animal and bird motifs are used for special embellishment. Sorab, Sagar, Sirsi, Kumta, Honaver and Siddapur are the main centres of production.
Rosewood carving which calls for meticulous skill and care is practised mainly at Mysore by the craftsmen belonging to Viswakarma community.
An attractive item in wood carving is the ivory inlay work. Inlay is the medium of art by which a surface is decorated by setting pieces of other materials in it. The ornamentation which usually consists of geometrical scroll of floral patterns is produced by setting small pieces in different shapes into the design incised on a flat surface. Mysore city is the only place in the State where inlay articles of wood are produced. This exquisitely delicate art consisted hitherto of ornamenting rosewood with ivory, but in recent years the emphasis has shifted to securing a happy and attractive combination of woods of different natural colours against a dark background. Of late, plastic inlay has also crept in the area to substitute ivory.
A wide range of articles are made by the inlay workers at Mysore among which may be mentioned panels, trays, teapoys, plates, boxes, powder bowls and cigarette cases besides the Dussehra pageantry, landscapes and pastoral scenes." Delhi State Industrial Development Corporation in the Report on the Survey of Handicrafts in Delhi which appears on pages 51 to 71 has written about the process of manufacture as under :- "Woodwork in Delhi comprises of the manufacture of furnitures, decorative articles and small articles like ball pens, agarbati stands etc. Carving is necessary only in the manufacture of decorative articles.
Further, the logs of wood are cut into pieces of required length with the help of hand saw or a mechanised saw. The use of the hand saw for the cutting requires a much physical labour and time.
Thereafter the block of wood is further split into requisite girth with the help of a hammer and chisel. However, skilfully the artisans may split the wood, the girth does not remain uniform for all pieces. It is likely to vary from piece to piece; cutting is followed by the cleaning edges with the help of edgers. Thereafter, shaping of wooden pieces into required model is done with the help of a chisel. Carving is done on artistic goods with different types of chisels and hammer. In the process of manufacture of decorative pieces the artisn rarely draws an outline of the model. These artistic pieces reflect the imagination and creative art of the craftsman. The armoury of a craftsman producing various objects of requisite beauty and craftsmanship consists of simple tools like saw, hammer edge, country chisels cutting pillars and edgers etc.
Polishing is the last process to complete wood article such as furniture decorative piece etc. In this process the craftsmen are using different types of brushes, varnish, spirit and paints.
Polishing with chemicals give the products glaze and it saves the articles from wood-ant." A perusal of the survey report shows that the logs are cut to the required length with the help of hand saw or a mechanised saw and the use of hand saw for the cutting requires a much physical labour and time and thereafter the block of wood is further split into requisite girth with the help of a hammer and chisel and in the process of manufacture of decorative pieces the artisan rarely draws an outline of the model. These artistic pieces reflect the imagination and creative art of the craftsman. After the wooden furniture manufactured manually polishing is done. In this process the craftsmen use different types of brushes, varnish, spirit and paints. It is only in the case of lacquer polishing that the use of spray gun has been undertaken in the year 1990 which helps in spreading the lacquer, with less time on the wooden surface. In fact, in case of polishing like varnish etc. that such job is undertaken manually. Even after use of spray gun that the process of rubbing and vexing on the surface has to be undertaken manually. This aspect has been explained both by Shri John Samuel and Shri Ashok Bajaj in their statements. The wooden furniture, therefore, is manufactured by hand made aspect of the craftsmen and it is due to the craftsmanship undertaken on such items that the customer pays for the same. Shri Naveen Mullick, the learned advocate pleaded that looking to the process of manufacture involved in the making of wooden furniture and the facts that such articles of wooden furniture come out by skilful use of hands by the craftsmen who use their aesthetic approach, imagination and skill that the respondents while filing their classification list claimed them as handicrafts and further claimed exemption under Notification No. 76/86. Such classifications have been filed from pages 22 to 30 in the combined paper book of M/s.
Continental Furnishers and also in a small paper book filed in the case of Loui Shoppe where in the remarks column it has been explained that the items of wooden furniture are made by skilful use of hands by the craftsmen. Notification No. 76/86-C.E., dated 10th February, 1986 supersedes Notification No. 234/82. The scheme of the Central Excise Tariff Act has been that the Central Govt. had issued two types of notifications. For the goods manufactured without the aid of power and exempted from Central Excise Duty that Notification No. 230/86, dated 3rd April, 1986 had been issued and Notification No. 76/86 includes handicrafts, cover the goods irrespective of the process of manufacture involved i.e. even with the aid of power. Such scheme also appeared even prior to coming into operation of the Central Excise Tariff Act, 1985. The Departmental Representatives, on the other hand, has relied on the dictionary meaning of "handicrafts" from Encyclopaedia of Britannica which is reproduced below :- "Occupations of making by hand usable products graced with visual appeal. Handicrafts encompass activities that require a broad range of skill and equipment, including needle work, lace making, weaving, printed textile decoration, basketry, pottery ornamental, metal making, jewellery, leather working, wood working, glass blowing and the making of stained glass." He also referred to the Import-Export Policy, 1983-84 wherein the description of handicrafts has been given as under :- "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 purpose."Case of Akbar Badrudding Jiwani v.Collector of Customs, reported in 1990 (47) E.L.T. 161 (S.C.) had observed that : "It is well settled that in Taxing Statute the words used are to be understood in common parlance or commercial parlance but such a trade understanding or commercial nomenclature can be given only in cases where the word in the Tariff Entry has not been used in a scientific or technical sense and where there is no conflict between the words used in the Tariff Entry and any other Entry in the Tariff Schedule". Hon'ble Supreme Court had further observed that: "In interpreting a term appearing in the Tariff Item which has not been defined either in the Tariff Schedule or in the Import Control Order, the same is to be interpreted in such a way which is in consonance with the Items specified in the ITC schedule without leaving out any part of the Items mentioned therein. Relevant extracts from paras 53 and 55 from the said judgment are reproduced below :-Swadeshi Polytex Ltd. v. Collector of Central Excise, reported in 1989 (44) E.L.T. 794 (S.C.) had observed that "It is true that in a fiscal statute, the exemption therefrom is to be construed strictly but the strictness of the construction of exemption notification should not be given by any circuitous process of interpretation. After all exemption notifications are meant to be implemented." Relevant extract from para 20 is reproduced below :-Collector of Central Excise v.Parle Exports (P) Ltd., reported in 1988 (38) E.L.T. 741 (S.C.) on page 748 in para 11 had held as under:Collector of Customs v. Delhi Tubes Pvt.
Ltd. reported in 1990 (49) E.L.T. 243 [Paras 15 & 25] had held as under :- For the proper appreciation as to the extension of benefit of Notification No. 76/86, dated 10th February, 1986 the same is reproduced below :- In exercise of the powers conferred by Sub-rule (1) of rule 8 of the Central Excise Rules, 1944 and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 234/82-Central Excises, dated the 1st November, 1982, the Central Government hereby exempts goods of the description specified in the Schedule hereto annexed and falling under the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), from the whole of the duty of excise leviable thereon under section 3 of the Central Excises and Salt Act, 1944 (1 of 1944).
17. Sludge obtained in the sewage or effluent treatment plant belonging to municipal corporation, local authority or an industrial unit.
21. (a) Animal drawn vehicles manufactured out of iron sheets, roads, bars, angles or wooden planks; and (b) the following parts of animal drawn vehicles (i) wheels; and (ii) Axles.
The main argument of the Departmental Representative is that if the item so-called 'handicraft' has got utility though it may be decorative, it loses its identity as a handicraft. The dictionary meaning in Encyclopaedia Britannica as well as the definition in the Import-Export Policy, 1983-84 does not help the appellant. Notification for exemption of duty is issued under Rule 8(1) of the Central Excise Rules, 1944 and while looking at the notification true intention has to be looked into.
7. In view of the above discussion, we are of the view that if the dictionary meaning is to be resorted to or definition of the Import Trade Control Order, it will defeat the purpose of the notification issued by the government. The word "handicraft" has to be read and understood in the ordinary language of the layman.Padmini Products v. Collector of Central Excise, reported in 1989 (43) E.L.T. 195 (S.C.) had held as under : The Tribunal in the case of Arya Cabinet House v. Collector of Central Excise reported in 1989 (44) E.L.T. 785 has held as under :- "The term 'handicraft' is not averse to the use of machine in their manufacture so long as the essential character of the product is derived from the handmade aspect. The goods may be produced partly by use of hand and partly by use of machines but this can be considered as handicrafts only if the product acquires its essential character in the finished form by use of hand. The use of the machine in the manufacture of a product does not preclude an article from the category of handicraft when essential character of that product is shaped by use of hand." In the article 'The Vital Role of All India Handicrafts Board' appearing on page 151 of the paper book, the Board has written as under :- "The All India Handicrafts Board was set up in 1952 to advise the Central Government on problems of handicraft industries and suggest measures for their improvement and development. The Board is also required to study technical marketing, financial and organisational aspects of handicrafts and formulate plans for their development and assist State Governments in preparing and executing developmental schemes. The Board has been reconstituted by the Government from time to time. The latest reconstitution was done in July, 1974 for a period of three years.
The All India Handicrafts Board has a vital role in formulating necessary plans directed towards achieving the objectives of production of quality handicrafts in the country and increased exports. The step up in the number of designs and provision of facilities in terms of training, marketing, research, improved tools and equipment, appropriate techniques of production, credit, exhibitions and publicity are all oriented towards increased production and larger surpluses for foreign markets.
It may, however, be mentioned that the various developmental activities of the Board have also a bearing on export promotion of handicrafts; so the Board is performing the functions of an Export Promotion Council." The main plea of the department that by use of power and the goods being of utility ceased to be handicraft is not the correct view.
9. In view of the above discussion, we do not find any infirmity in the orders passed by the Collector of Central Excise (Appeals). We uphold his orders and both the appeals filed by the revenue are dismissed.