ORDER
P.G. Chacko, Member (J)
1. The Farwood Industries (P) Ltd., appellants in Appeal No. E/3191/1998, were engaged in the activity of furnishing offices and other premises of business organisations. After enquiries conducted through officers, the Department issued a show-cause notice to the Company alleging that they had manufactured and supplied to their customers furniture falling under Headings 94.01 and 94.03 of the CETA Schedule without following the Central Excise procedure and without payment of duty. The show-cause notice, which invoked the extended period of limitation on the basis of alleged suppression of facts by the party, demanded duty on the furniture items for the period 1992-93 to 1996-97. It also proposed penalties on the Company under Section 11 AC of the Central Excise Act and Rule 173Q of the Central Excise Rules, 1944. A separate personal penalty was proposed on the Managing Director of the Company, appellant in Appeal No. E/3192/1998, under Rule 209A of the Central Excise Rules, 1944. The assessee contested the demand of duty by submitting that the items in question were exempt from payment of duty under Notification No. 76/86-CE dated 10.2.1986 (as amended). They contended that the subject items were liable to be treated as “handicrafts” on account of their visual appeal and substantial ornamentation. They relied on the Supreme Court’s decision CCE, New Delhi v. Louis Shoppe, 1996 (54) ECC 109 (SC): 1996 (83) ELT 13 (SC). In respect of a few items, the party contended that these were immovable on account of being fixed to the wall and were not excisable. The demand of duty was also resisted on the ground of limitation. The adjudicating authority rejected the above contentions and confirmed demand of Basic Excise Duty to the extent of Rs. 43,38/152 and Special Excise Duty to the extent of Rs. 5,982 against the assessee by invoking the extended period of limitation on the basis of finding of suppression against them. It also imposed penalties of Rs. 7,52,668 and Rs. 3 lakhs on them under Section 11AC and Rule 173Q respectively. The authority also imposed a personal penalty of Rs. 1 lakh on the Managing Director of the Company under Rule 209A. It is this decision of the Commissioner that is under challenge in the appeals filed by the Company and its Managing Director.
2. Before us, there is another appeal which was filed by the Department. This appeal is against (i) grant of abatement of duty from sale price in the determination of assessable value of the goods under Section 4(4)(d)(ii) of the Central Excise Act, and (ii) non-imposition of penalty, under Section 11AC, for the period prior to 28.9,1996.
3. Heard both sides. Ld. Counsel for the assessee submitted that their plea of non-excisability of some of the items was not properly considered by the Commissioner. The question whether those items were marketable or not was not looked into. According to the test laid down by the Apex Court in the case of Louis Shoppe (supra), where hand-made furniture had visual appeal in the nature of ornamentation of substantial nature, it should be considered as ‘handicrafts’. This test was not correctly applied by the Commissioner, Counsel argued. Had the test been correctly applied to the goods in question, they would have been found to be ‘handicrafts’ attracting the benefit of exemption under Notification No. 76/86-CE. The items such as Storage Units, Cupboards etc., were made according to the specifications of customers and fixed to their buildings as per their requirements. The items so fixed were immovable and hence not capable of being marketed. Such items were not dutiable. Pictures of the subject items were shown to us by the Counsel and it was urged that all the movable items be categorised as ‘handicrafts’ and the remaining items be treated as non-marketable and non-excisable. It was also submitted that it was not correct on the part of the adjudicating authority to demand duty for the entire period (i.e., 1992-93 to 1996-97) without examining the nature of each and every piece of furniture cleared during the said period. In this connection, Ld. Counsel relied on the Supreme Court’s judgment in Telco v. Asst. Commissioner of Commercial Taxes, AIR 1970 SC 1281. Ld. Counsel also reiterated the plea of limitation against the duty demand. He also challenged the penalties imposed under Section 11AC and Rule 173Q. It was also argued that, in any case, there was no valid reason for penalising the Managing Director of the Company under Rule 209A. Opposing the Revenue’s appeal, Ld. Counsel submitted that none of the grounds raised therein was sustainable. Abatement of duty from sale price in the determination of assessable value of the goods was permissible under Section 4(4)(d)(ii) as held by the Supreme Court in CCE, Delhi v. Maruti Udyog Ltd., 2002 (80) ECC 249 (SC) : 2002 (141) ELT 3 (SC). It was pointed out that the Review Petitions filed by the Department against the judgment in Maruti Udyog (Supra) were dismissed by the Apex Court vide 2005 (179) ELT A102. It was also settled law that no penalty could be imposed under Section 11AC in relation to any period prior to 28.9.1996, the date on which the said provision of law came into force. In this connection, Ld. Counsel relied on the Supreme Court’s decision in CCE, Coimbatore v. Elgi Equipments Ltd., 2002 (74) ECC 284 (SC) : 2001 (128) ELT 52 (SC).
4. Ld. SDR forcefully defended the Commissioner’s order demanding duty on all the items of furniture which were manufactured and cleared by the assessec without payment of duty during the period of dispute. She submitted that the Commissioner was subjectively satisfied of the fact that none of the items had enough visual appeal in the nature of ornamentation or otherwise to be categorised as “handicrafts’. All the items were found to have been described by the assessee as furniture only in the bills which they raised on their customers. Their album of photographs for display for attracting customers also presented all the items as furniture. None of the items could pass the test laid down by the Apex Court for ‘handicrafts’ in the case of Louis Shoppe (supra). It was also argued by Ld. SDR that the mere fact that the goods were manufactured as per customer’s specifications or that they were fixed to the wall was not a ground for holding that the goods were not marketable. Ld. SDR relied on the following decisions-
(i) Interscape v. Commissioner of Central Excise, Calcutta-I, 2001 (135) ELT 942 (Tri.-Kolkata).
(ii) Interscape v. Commissioner of Central Excise, Jaipur, 2003 (157) ELT 221 (Tri.-Del.)
(iii) Vadehra Furnishers v. Commissioner of Central Excise, Delhi-I, 2004 (173) ELT 500 (Tri.-Del.).
Referring to the case of Telco cited by Ld. Counsel, Ld. SDR submitted that the said case pertained to Sales Tax and, therefore, nothing contained therein could be applied to the instant case arising under the Central Excise Act. However, in the Revenue’s appeal, she could not cite any case law better than Maruti Udyog (supra) and Elgi Equipments (supra) on the respective points.
5. We have given careful consideration to the submissions. We find that the law authority has rendered a reasoned order on the issue whether the subject goods could be regarded as ‘furniture’ or ‘handicrafts’. It appears, the Commissioner carefully examined the photographs produced by the assessee and found that none of the items had any visual appeal in the nature of ornamentation of a substantial nature. We have also seen all the photographs available on record and fully agree with the Commissioner’s observation. According to the test laid down by the Apex Court in Louis Shoppe (supra), for any furniture to qualify as ‘handicrafts’, 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. None of the items would come anywhere near passing this test. We, therefore, uphold the Commissioner’s finding as regards all the goods in question. The case law cited by Ld. SDR also supports his finding. As regards the items which, upon completion of manufacture, were fixed to the wall, the Counsel’s argument that such items were not marketable cannot be accepted. These items were not manufactured after fixing to the wall, nor would it be done in that way. They were manufactured and then fixed to the wall. They were certainly capable of being marketed. The fact that these items were manufactured as per the specifications of customers did not render the goods unmarketable. The submissions of Ld. SDK to this effect are supported by the Tribunal’s decision in the case of Interscape v. Commissioner of Central Excise, Calcutta-I, 2001 (135) ELT 942 (Tri.-Kolkata), wherein it was held that goods finished and then fixed were to be considered as movable goods and that the fact that the goods were manufactured as per the design supplied by customer did not render them unmarketable. In the result, it has to be held that duty was correctly demanded on all the goods in question. It is not the assessee’s case that they had disclosed to the Department that they manufactured and cleared these goods during the period of dispute. In other words, the allegation of suppression was not rebutted in this case. Therefore, the extended period of limitation was rightly invoked for demanding duty. In view of the finding of suppression, penalty, under Section 11AC, imposed by the Commissioner is also justifiable. This penalty is relatable to the quantum of duty demanded for the period from 28.9.1996 only. The Commissioner has not imposed penalty, under Section 11AC, for the period prior to 28.9.1996, the date on which the said provision of law came into force. We also do not find any reason to interfere with the reasonable penalty imposed on the assessee under Rule 173Q inasmuch as manufacture and clearance of excisable goods without following Central Excise procedure and without payment of duty is a proven fact in this case. In the result, the assessee’s appeal will stand rejected and it is ordered accordingly.
6. The Managing Director’s appeal is against penalty under Rule 209 A. For such a penalty, there should be a finding that the person concerned acquired possession of, or otherwise physically dealt with, excisable goods with the knowledge or belief that such goods were liable to confiscation. Such a finding against the appellant is missing in this case. Therefore, the penalty on the Managing Director under Rule 209 A is vacated. Appeal No. E/3192/1998 stands allowed.
7. Ld. Commissioner has rightly treated the sale price of the goods as cum-duty price and allowed the benefit of abatement of duty from sale price while determining the assessable value of the goods. This is in accordance with Section 4(4)(d)(ii) and is well supported by the Apex Court’s judgment in Maruti Udyog (supra). As we have already noted, no penalty was imposable under Section 11AC for any period upto 28.9.1996 as the said provision of law had no retrospective effect as held by the apex court in the case of Elgi Equipments (supra). The Commissioner’s decision in this regard is also perfectly justifiable. Therefore, the Revenue’s appeal is bereft of merit and the same is dismissed.