Interscape vs Commissioner Of Central Excise

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI

COURT No. II

APPEAL No.E/311, 312, 313 & 314/07

(Arising out of Order-in-Original No.83/M-I/2006 dated 26/12/2006 passed by Commissioner of Central Excise, Mumbai)

For approval and signature:

Honble Mr. Anil Choudhary, Member (Judicial) Honble Mr. Raju, Member (Technical)

1. Whether Press Reporters may be allowed to see :No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the :Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy :Seen of the Order?

4. Whether Order is to be circulated to the Departmental :Yes authorities? ========================================

Interscape Vinod Naik Appellants

Vs. Commissioner of Central Excise, Respondent Mumbai

Appearance:

Shri.Rajeev D Waglay, Advocate for appellant Shri.V.K.Agarwal, Addl. Comm. (AR), for respondent

CORAM:

Honble Mr.Anil Choudhary, Member (Judicial) Honble Mr. Raju, Member (Technical)

Date of Hearing : 12/08/2015 Date of Decision : /08/2015

ORDER NO

Per: Raju

1. M/s Interscape are a manufacturer of Furniture for hotels, offices, workshops etc. They were manufacturing various items of furniture like office tables, dining tables, conference tables, counters, cabinets, showcases, wardrobes etc. It was alleged that they failed to take registration and to discharge duty on the furniture manufactured by them.

2. Various notices were issued notices were issued to the appellants. The said notices were decided vide two adjudication orders. Following data have been submitted by the appellant vide letter dated 13/08/2015 after the hearing in respect of appeals filed:

APPEAL NO.

DATE OF SCN & PAGE OF APPEAL MEMO PERIOD OF INVOICES COVERED AND PAGE OF APPEAL MEMO DUTY CONFIRMED FOR THE PERIOD & PAGE OF APPEAL MEMO E/311/07 16.2.96 [P.25-46]

MAY 90 TO OCTOBER 94 [P.42-46] 1991 UPTO OCTOBER 94 [P.208]

E/313/07 16.12.96 [P.26-57] APRIL 91 TO 3.3.95 [P.54-57] & 18.12.95 [P.55] * 1991-1995 [P.345]

18.12.95 [P.325]*

30.10.95 [P.58-103] JULY 92 TO SEPTEMBER 94 [P.101] 92-93 TO SEPTEMBER 94 [P.352]

29.2.96 [P.104-128] AUGUST 91 TO MARCH 95 [P.122-124] 91-92 & 92-93 [P.358]

8.10.96 [P.129-147] 91-92 & 92-93 [P.144-145] 91-92 & 92-93 [P.377]

3. In the said adjudication orders penalty was also imposed on Mr Vinoo Naik, Proprietor of the company.

4. The appellants are in appeal before us against the two adjudication orders of Commissioner. Mr Vinoo Naik, Proprietor of the company has also filed appeal against the imposition of penalty.

5. Learned Counsel for the appellants argued the case both on merit as well as limitation. On merits he argued that the furniture manufactured by them is something which comes into existence fixed to the ground or to the walls. This furniture can not be called goods and therefore can not be charged to duty. He explained in detail how the various items of furniture are manufactured. He claimed that these furnitures are immovable property and therefore can not be called as goods. Since they can not be called goods no central excise duty can be levied on the same. He relied on the decision of Honble Supreme Court in case of CRAFT INTERIORS PVT. LTD 2006 (203) E.L.T. 529 (S.C.). He argued that the items can not be moved without damaging them totally or cannibalizing them. Thrust of his argument was these items manufactured by them are in the nature of fixtures and not furniture and not dutiable.

5.1 He also asserted that at the material time there were decisions of tribunal which lead him to a bonafide belief that these items are not taxable. He argued that at the material time, i.e. before march, 1995, the tribunals decision in case of Arva Cabinet house 1989 (44) E.L.T. 785 (Tribunal) lead them to believe that they are manufacturing handicrafts and Handicrafts were entitled to full unconditional exemption under notification under notification 76/86-CE dated 10th Feb 1986. However, only later, in March 1995, in case of Louise Shoppe, 1996(83)ELT 13(SC) Honble Supreme court clarified the term Handicraft.

5.2 The Learned counsel argued that till March 1995, when the Hon Supreme Court clarified, the Decision of tribunal was the final finding on the issue. Thus they had a bonafide belief that the furniture being manufactured by them was Handicraft exempt under Notification No. 76 of 1986 dated February 10, 1986.

5.3 He produced an order in original and an EA 5 appeal in their own case and pointed out that in the said case the Commissioner of Central Excise Kolkata vide order dated 31.3.2009 dropped the entire demand on furniture holding that till March 1995, the appellants were under bonafide belief that the furniture manufactured by them was Handicraft and exempt under notification No. 76 of 1986 dated February 10, 1986. The said order was accepted for the period of demand pertaining to period upto March, 1995, and only for the period after that the order was reviewed.

5.4 Learned AR pointed out that the Order in original deals with all the issues. He pointed out that the furniture made by them was not of the nature which was not movable. He stated that in respect of movable furniture demand was correctly confirmed. He highlighted that in view of the decision of Honble Supreme Court in case of Louise Shoppe, 1996(83) ELT 13(SC) the said furniture could not be considered as Handicrafts.

6. We have gone through the case records and the submissions made by the learned Counsel and the AR. We find that two issues need to be decided:

i) If the furniture manufactured by the appellants is movable and chargeable to tax, or not movable without cannibalising and not chargeable to tax, in view of Honble Supreme Court decision in the case of Craft Interiors. (supra)

ii) If, in view of the appellants assertion that they were under bonafide belief that the furniture manufactured by them is Handicraft, extended period of limitation can be invoked.

6.1 The law regarding the chargeability of Central Excise duty on the furniture has been settled by the Hon Supreme Court in case of CRAFT INTERIORS PVT. LTD 2006 (203) E.L.T. 529 (S.C.). wherein it has been held that:

17.?In view of the above discussion, we are of the opinion that these appeals have to be allowed. We hold that items which are ordinarily immovable or which ordinarily cannot be removed without cannibalizing e.g. storage units, running counters, overhead unit, rear and side unit, wall unit, pantry unit, kitchen unit and other items which are ordinarily immovable or cannot be removed without cannibalizing are not furniture. However, items like tables, desks, chairs etc. are furniture and hence excisable.

18.?We may add that sometimes chairs, beds, tables, desks, etc. are affixed to the ground, but nevertheless they will still be called as furniture (one may recall the fixed bed in Sherlock Holmes story The Speckled Band). This is because when we interpret a word we should not only see the dictionary meaning but even more the popular meaning which the word has acquired in common parlance. As stated by K.L. Sarkar in his book Mimansa Rules of Interpretation (see second edition published by Modern Law Publication, Allahabad), the popular meaning overpowers the etymological meaning.

6.2 The test laid down by the Honble Supreme Court is that the items which are ordinarily immovable or which ordinarily cannot be removed without cannibalizing e.g. storage units, running counters, overhead unit, rear and side unit, wall unit, pantry unit, kitchen unit and other items which are ordinarily immovable or cannot be removed without cannibalizing are not furniture. However, items like tables, desks, chairs etc. are furniture and hence excisable. The commissioner in the order has rightly referred to the said decision, does not discuss on the issue of movability without cannibalizing or otherwise of the furniture. For example in par 23(k) she goes only by the criterion of common parlance. Just because a Conference Table or a credenza or a reception table is a Table, she holds that same are movable and hence chargeable to Central Excise. She has not discussed in the order about movability without cannibalizing or otherwise of the said goods. The primary test prescribed by the Hon Supreme Court is the test of movability without canalizing and not that of common parlance. To that extent we find that the order of the Commissioner is not a speaking order.

6.3 On the issue of limitation the commissioner has just asserted that the appellants have deliberately suppressed the value. On the issue of limitation we find that the arguments of the learned counsel have substantial force. In the case or Arva Cabinet the Tribunal has observed as follows:

18. The entire question on merits is whether the TV cabinets manufactured by hand, from some parts manufactured with the aid of power, are exempt from duty under Notification No. 55/75-C.E.. The Department seems to have taken the view, among others, that since power is used in some stages, the cabinets cannot be called handicrafts. Shri Chopra relied on an order of the Central Board of Excise & Customs in an appeal filed by Shyam Sunder Metal Industries and Ors. and reported in 1982 ECR 289D. In this order, the Board held that handicrafts exempted from Notification No. 55/75 are necessarily those handicrafts in the manufacture of which the processes are ordinarily carried on with the aid of power. This order, further held that since there is no definition of handicrafts in the notification or elsewhere in Tariff Item 68, the meaning assigned to the terms in common trade parlance or by any person dealing with and conversant with the goods has necessarily to be adopted. In para 35 of the same order, the Board held that the term handicraft 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.

19. The Boards Orders are not binding on this Tribunal, but prior to the establishment of this Tribunal, the Board was the highest Appellate Authority. Therefore, this order has a persuasive value.

20. A similar view was taken by the Tribunal also in Padmini Products v. Collector of C. Ex., 1988 (35) E.L.T. 543 (Tribunal). In this order, the Tribunal held that goods may be produced partly by 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. In paragraph 7 of the Order, the Tribunal observed that 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. It is the appellants case here that though some jobs are done with the aid of machines, the final assembly of the T.V. Cabinets is done by hand, including the decorative work, where necessary. Therefore, the ratio of the judgment in Padmini Products (supra) is applicable to the facts of this appeal also. Our attention was also drawn to Order Nos. 123-126/81B-1 dt. 24-2-87 in G.S. Industries v. Collector -1989 (43) E.L.T. 148 (Tribunal).

21. In Padmini Products while examining whether the goods were handicrafts or not, the Tribunal relied on various documents similar to those produced before us here, including the report of UNCTAD. In this matter before us the appellants placed reliance on the UNCTAD Report, and a Survey Report of the DSIDC and some other documents, DSIDC is one which surveyed the production of handicrafts and its findings have to be given due consideration as being representative of the knowledge of people who know the subject. The Collector completely ignored the evidence produced by the appellants. Our assessment of the evidence convinces us that as a fact, the T.V. cabinets assembled by the appellants are handicrafts. This view is in consonance with the findings of the Tribunal and the Central Board of Excise and Customs, earlier referred to. The process of manufacture as declared by the appellants was not questioned or disproved by the Department. Therefore, as there is enough evidence before us, we see no need to remand the matters to the Collector. On the basis of all the evidence placed before us, we hold that TV cabinets assembled by the appellants were handicrafts entitled to the benefit of the Exemption Notification. Therefore, we further find that the entire demands are on merits, unsustainable. Demands for the period preceding six months in both appeals are set aside also on the ground of limitation.

6.4 The decision of tribunal in case of Arva Cabinet house 1989 (44) E.L.T. 785 was the interpretation prevailing at the material time till it was clarified by Hon Supreme Court in case of Louise Shoppe, 1996(83) ELT 13(SC). The Honble Supreme Court clarified as follows:

2.?The question is whether wooden furniture by itself can be treated as handicrafts within the meaning of Notification No. 76 of 1986 dated February 10, 1986? It must be said straightaway that furniture as such does not qualify as handicrafts. It may be characterised as handicrafts 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."

3.?Whenever the above question arises, the authorities shall examine the matter from the above stand-point and pass orders accordingly.

4.?The above principles shall apply to all pending matters and to all matters arising hereinafter. This direction we are making because it appears that the view taken by the Tribunal in the order under appeal - which is clearly not in accordance with the tests/principles laid down by us herein appears to have been followed by the Tribunal since 1989 at least. The cases concerned herein shall not be re-opened in view of the above principles.

6.5 The revenue, in the appellants own case has accepted that the extended period cannot be invoked for demands pertaining to period prior to March 1995. The said order has also been accepted by the Revenue. In view of above we find that the impugned orders in so far as it pertains to demands for the period prior to March 1995 are not sustainable on limitation. These demands are set aside on limitation.

6.6 That leaves one item namely, wall ceiling, paneling, boxing frames, units, partitions appearing in show-cause notice dated 16/12/96. It is seen from the Annexure A-2 attached to the order-in-original dated 29/12/2006 that demand in respect of these items has not been confirmed.

7. Since the demands have not been found to be sustainable the two appeals on penalty also can not be sustained and are set aside. The appeals are consequently allowed. (Pronounced in Court on ..)

(Anil Choudhary) Member (Judicial) (Raju) Member (Technical)

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