2017 (5) TMI 552 - AT - Central Excise

Handicrafts - N/N. 76/86-CE - case of appellant is that since the impugned goods are in the nature of handicraft and exempt under N/N. 76/86-C.E. no demand of duty can be confirmed against the appellant - circular no. 128/396/95-CX dated 25.05.1995 - Held that - the onus to establishing that the goods cleared by them are handicraft is on the appellant - the appellant have produced certain certificates from the Development Commissioner wherein certain products have been certified to be handicrafts. The said certificates are not in respect of the impugned goods. It is also not clear if the said certificates are in respect of similar goods. The revenue had given the appellant an option to get the goods examined before clearance however the appellant chose not to do so. In the absence of any evidence to support the claim by the appellant that the goods are handicraft we are unable to interfere with the impugned order in so far as the demand of duty is concerned. Penalty u/r 25 of CER - Held that - the penalty u/r 25 cannot be imposed as the issue is of interpretation. The appellant had a bonafide belief and were in connection with the revenue for this purpose - penalty set aside. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
Confirmation of demand of duty on readymade garments under notification 76/86-CE, whether goods qualify as handicrafts, evidentiary value of certificates from Development Commissioner, burden of proof for exemption under notification 76/86-CE, imposition of penalty under Rule 25 of Central Excise Rules.

Confirmation of Demand of Duty:
The appeal was against the confirmation of demand of duty on readymade garments cleared during a specific period. The appellant argued that the goods qualified as handicrafts exempt under notification 76/86-CE. They relied on a Supreme Court decision to support their claim. The appellant contended that the products were manufactured largely by hand and met the criteria of handicrafts as per the apex court's test. They also referred to a circular clarifying that certain products made from duty-paid materials were classified as handicrafts. The appellant presented certificates from the Development Commissioner certifying certain products as handicrafts, which were rejected without adequate reason. The appellant's argument was that the decision to treat the goods as non-handicrafts was arbitrary.

Qualification as Handicrafts:
The Revenue argued against the appellant's submission, emphasizing that exemption under notification 76/86-CE could not be granted if machine work predominated in the garment. The Dy. Commissioner highlighted that determining whether a garment is a handicraft involves examining various factors like design intricacies, originality of ornamentation, and value addition due to handwork. The burden of proof to establish eligibility for exemption rested on the claimant, as per Supreme Court precedents. The appellant's admission that the garments were initially manufactured by machines was used to counter their claim of being handicrafts.

Evidentiary Value of Certificates:
The appellant produced certificates from the Development Commissioner certifying certain products as handicrafts. However, these certificates were not specific to the impugned goods and lacked evidentiary value. The Tribunal's precedent highlighted that certificates not pertaining to the disputed goods at the relevant time could not be accepted for claiming exemption under notification 76/86-CE. The appellant had the option to get the goods examined before clearance but chose not to do so. Without concrete evidence supporting the claim that the goods were handicrafts, the Tribunal upheld the demand of duty.

Burden of Proof for Exemption:
The Tribunal reiterated that the onus was on the appellant to establish that the cleared goods qualified as handicrafts under notification 76/86-CE. The certificates provided did not directly relate to the disputed goods and were deemed irrelevant for the claim. The lack of evidence and failure to avail the option for examination before clearance led to the Tribunal upholding the demand of duty.

Imposition of Penalty:
Regarding the penalty imposed under Rule 25 of the Central Excise Rules, the Tribunal found that it could not be justified as the issue was one of interpretation. The appellant had a genuine belief and had engaged with the revenue in good faith. Therefore, the penalty under Rule 25 was set aside.

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