ORDER
D.M. Vasavada, Member (J)
1. This is an appeal preferred by the Revenue challenging the order-in-appeal dated 21-4-1986 passed by the Collector of Central Excise (Appeals), Madras, in an application under Section 35E(4) of Central Excises and Salt Act, 1944 (hereinafter referred to as the Act), filed by the Assistant Collector of Central Excise, Eluru.
2. Facts, as stated in the appeal memo are briefly summarised as under:
3. The respondents are manufacturers of ‘Agarbathies’ falling under Item No. 68 of the erstwhile First Schedule of the Act (now classified under Heading 3308.10) attracting nil rate of duty. The respondents have been manufacturing the product without the aid of power and they contended that as it is ‘hand-made’, it is ‘handicraft’ coming within the purview of exemption Notification No. 234/82-C.E., dated 1-11-1982. So, they have not taken out central excise licence or filed classification list contending that they are exempt from this procedure under Notification No. 179/77-C.E., dated 18-6-1977. The Assistant Collector, Central Excise, Eluru, on remand from the Collector of Central Excise (Appeals) in order-in-appeal No. 55/85 dated 17-4-85, examined the issue and held that ‘agarbathies’ are handicrafts and dropped further proceedings holding that ‘agarbathies’ are exempt from payment of duty under Notification No. 234/82. A review application was preferred under provisions of Section 35E(4) of the Act which was dismissed by the Collector (Appeals). This order has given rise to the present appeal.
4. We have heard Shri V. Chandrasekharan, Ld. S.D.R. for the appellant and Shri V. Lakshmi Kumaran, ld. Advocate for the respondents.
5. Shri Chandrasekharan submitted that the product, in question, namely, ‘agarbathies’ is not entirely manufactured by hand and machine which pulverised the raw-material used for manufacture of ‘agarbathy’ is run on electricity/power. So, the product is not entitled to claim benefit under Notification No. 234/82-C.E. According to the Ld. S.D.R. the issue is decided, accordingly, by the Hon’ble Supreme Court in Pad-mini Products v. C.C.E., Bangalore -1989 (43) E.L.T 195 (SC).
6. L.A., Shri Lakshmikumaran made following submissions :
Notification No. 179/77 exempted goods classifiable under T.1.68 of the erstwhile First Schedule of the Act in manufacture of which no process is ordinarily carried on with the aid of power. While, by Notification No. 234/82-C.E., certain” goods are granted exemption from payment of C.E. duty and therein the requirement of non-use of electricity power, is not there. So, the only question that arises, whether ‘agarbathies’ would be covered under heading ‘Handicrafts’ at Sl. No. 9 of the notification. In Pad-mini Products case (supra), the production, in question, was not “agarbathies” but “dhoop sticks” and so the said judgment is distinguishable and it is not applicable to the facts of the present case. In Mysore Agarbathi Works v. UOI-1978 (2) E.L.T. (J196) (A.P.), this issue has been decided and as no appeal has been preferred against that order, this has become final. He also cited Arva Cabinet House v. C.C.E, -1989 (44) E.L.T. 785 (Tri.).
7. In reply, the ld. S.D.R. submitted that Mysore Agarbathi Works case (supra) is distinguishable because therein the process involved is “hand work” only. He also submitted that by Notification No. 53/84, “agarbati” has been granted partial exemption which would suggest that “agarbati” is not covered by Notification No. 234/82-CE.
8. We have perused the record and considered the arguments. In Padmini Products case (supra), appeal went to Hon’ble Supreme Court from the decision of the Tribunal which is reported in 1988 (35) E.L.T. 543. Therein, the product concerned was not ‘agarbatie’ but ‘dhoop stick’ and as stated in the order, the manufacture of ‘dhoop stick’ involved use of power. In para 7 of the said order, it has been stated as under:
“In the present case it is not disputed that the raw materials are mixed by hand and the first essential procedure in the manufacture of Dhoop, etc., is kneading of the raw materials and the next essential stage is the formation of the Dhoop into sticks or coils. Both these processes are carried out by the aid of power. Only cutting of the sticks to the desired length is stated to be by hand.”
9. So, in that case whether ‘agarbatie’ would be entitled to exemption benefit under Notification No. 234/82-C.E., was not an issue. We have also noted that the Tribunal has, in para 6, observed as under:
“The main plea of the appellants however is that inasmuch as agarbaties have been held to be handicrafts by various authorities cited by them there is no need to examine the issue beyond that and even if the power has been used in the manufacture thereof, these should be considered as handicrafts only. We observe that even though Agarbaties and Dhoop have been considered to be product alike in view of the end-use and the ingredient used, the two are commercially known as separate things. When a person goes to the market to buy Agarbatties, dhoop is not offered in its place and vice versa. Nowhere it has been stated nor any evidence has been produced before us that Agarbatties and dhoops are manufactured by the same process. These occur in different forms. It is not also the plea of the appellants that the Agarbatties are given their essential shape by use of power as in the case of the appellants’ product and yet the same have been considered by any authority as handicrafts.”
10. Again in para 7, it has been stated as under:
“The dhoop sticks, etc. we have held above, are a product different from Agarbatties even though the two may belong to the same category. If the process of manufacture of the two is different, obviously, the two will have to be treated differently for the purpose of application of the benefit of notification. The clarification given in the context of agarbatties cannot be made applicable to the dhoop sticks, etc.”
11. It may be mentioned that the Bench has referred to the clarification issued through a Trade Notice No. 15/75 by Central Excise authorities. So, it is obvious that as the Tribunal was concerned with the product ‘dhoop sticks’, the Hon’ble Supreme Court was also concerned with the same product and so the decision of the Hon’ble Supreme Court would not apply to the present case. It is also pertinent to note that the Tribunal itself has distinguished dhoop sticks and agarbatties in Padmini Products case (supra). So, we have to consider the issue independently of the decision in Padmini Products case (supra) by the Hon’ble Supreme Court.
12. According to the learned Advocate, this issue is settled by a decision of Hon’ble Andhra Pradesh High Court in the case of Mysore Agarbathi Works (supra). We have perused that order and therein, it has been decided as under:
“Agarbatties fall under Item ‘handicrafts’ and therefore they are exempt from payment of excise duty.”
Therein, the Hon’ble High Court was concerned with the interpretation of Notification No. 114/75-C.E., dated 30-4-1975. This notification is an amending notification whereby Notification No. 55/75-C.E., dated 1-3-1975 was amended and some more items were added to the list of beneficiaries. By Notification No. 55/75-C.E., the Government exempted goods of the description specified therein and falling under Item No. 68 of the First Schedule of the Act (as was in existence at the relevant time) from the whole of the duty of excise leviable thereon.
13. Here, we are concerned with Notification No. 234/82-C.E., dated 1-11-1982 which was issued in supersession of Notification No. 104/82-C.E., dated 28-2-1982. Notification No. 104/82-C.E. superseded Notification No. 55/75 and by Notification No. 104/82-C.E., several products falling under Item 68 listed in notification were exempted from levy of duty of excise thereon and Notification No. 234/82-C.E. also made similar provision. At Sl. No. 9 of the Notification No. 234/82, the product mentioned is ‘handicrafts’. While in Notification -No. 114/75 also, the product was described as ‘handicrafts’. So, Mysore Agarbathi Works case (supra) would be squarely applicable to the facts of the present case, provided the process of manufacture undertaken by the respondents would be the same as that in the case of Mysore Agarbathi Works (supra). This aspect was examined by the adjudicating authority and it has been held in para 5 of the adjudication order as under:
“I have carefully examined all the points enumerated above and I am satisfied that the facts of the case pertaining to M/s. Ambica Chemical Products, Eluru are in no way different from the ascertained facts in respect of M/s. Mysore Agarbathi Works, Secunderabad as also several other such units situated at Bangalore which is a leading centre for Agarbathies, and that even though that the manufacture of Agarbathies in all those units is carried on by manual labour, there is no doubt that the required raw materials are being subjected to crushing and pulverising with the aid of power in regular pulverising mills and that none of the units referred to above is paying excise duty apparently in view of the High Court Judgment in the case of Mysore Agarbathi Works, Secunderabad. I do not find any point of contrast between the facts relating to M/s. Mysore Agarbathi Works, Secunderabad and those of M/s. Ambica Chemical Products, Eluru, in regard to manufacturing operations. As the relevant facts of both the units are identical I find no reason to differentiate M/s. Ambica Chemical Products, Eluru from M/s. Mysore Agarbathi Works, Secunderabad. I also observed that Notification No. 234/82 has not been modified in any manner after the issue of the Notification No. 53/84-C.E., dated 1-3-1984 and it follows that the units which were eligible to exemption prior to 1-3-1984 under the said notification would continue to enjoy the exemption even after the issue of the Notification No. 53/84, dated 1-3-1984, in case where the judgment of Andhra Pradesh High Court is applicable on the basis of similarity of facts.”
14. This aspect is not challenged by the Revenue, but it has been contended that as power is used in pulverising the raw materials which are used in the manufacture of agarbatie, the agarbaties could not have been covered by definition of ‘handicrafts’. But, then, the notification does not say that the product, in question, for to be described as ‘handicraft’ should be manufactured without aid of power at any stage. In fact, in Padmini Products case (supra), the Tribunal, again in para 7 after referring to various literature produced by the appellants, has stated as under:
“Likewise, in the case of agarbaties/dhoop even when the kneading of the raw materials may have been done by machine if their formation had been done by hand, these could be considered as handicrafts.”
15. It is not the case of the Revenue that agarbaties are prepared from the mould and not given final shape by manual labour. The only contention is about aid of power, in pulverising the raw-material. But, in our view, this aspect has been discussed in Pad-mini Products case (supra) and discussion would help the case of the respondents. This issue had again come up before this Tribunal in Arva Cabinet House (supra) wherein it has been held as under:
“The goods may be produced partly by hand and partly by use of machine 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 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.”
16. In that case, the product was T.V. cabinet, but the principle laid down, as excerpted above, can well be followed in the present case also. Moreover, as rightly pointed out by LA., Sh. Lakshmikumaran, even though the process was not discussed in Mysore Agarbathi Works (supra), as can be seen from the adjudication order, the process followed by the manufacturer in the present case is the same that was being followed by Mysore Agarbathi Works (supra) and both were using the raw-materials, which were pulverised with the aid of power.
17. So, we are satisfied that the Revenue has failed to make out any case or to point out any infirmity in the impugned order.
18. So, we dismiss the appeal.