(1.) The interesting question I have to decide in this writ petition is whether handmade 'Agarbathis' are handicraft products to claim exemption from payment of Excise duty under the Central Excise and Salt Act, 1944. 'Agarbathis' is not a specified item in the Act. Duty was being paid on 'Agarbathis' under the residuary item 68 of the First Schedule of the Act. While so, under Rule 8 (1) of the Central Excise Rules 1944, the Government of India exempted handicrafts with effect from 30-4-1975 under notification No. 114/75 from payment of Central Excise Duty levied under item No. 68 of the First Schedule to the Act.
(2.) The petitioner is a manufacturer of 'Agarbathis' at Secunderabad' They are hand-made. No power or machinery is used in their manufacture. On the ground that 'Agarbathis' is a handicraft he claimed exemption from payment of duty. The Assistant Collector, Central Excise Hyderabad informed him on 1-10-75 that 'Agarbathis' are included in the list of items coming under 'handicrafts' as approved by the All India Handi Craft Board and, therefore, they are attracted by the exemption granted by the Central Government with effect from 30-4-75. But the Ministry of Finance, Government of India, in their letter dated 1-5-1975, laid down certain guidelines for deciding what handicraft goods are. They observed that, "The test to decide the eligibility of exemption for a controversial product would, inter-alia, be as to how the product is commonly known in commercial parlance, how the goods are advertised and marketted, how the goods are produced, what are its end uses etc. In the case of handicraft goods it may further be added that handicraft industry is a labour intensive industry where the production of goods is mainly done by band with small tools and equipment requiring little investment. The goods find market mainly because of their attractive designs, craftsmanship and workmanship the value added by skill of labour generally forming the major part of the cost of the goods." The Collector, Central Excise, Hyderabad issued a standing order on 4-10-1975 stating that:
(3.) It is submitted by the learned counsel for the petitioner that hand-made 'Agarbathies' are handicrafts and therefore, they are exempt from payment of Excise Duty. On the other hand, it is submitted by the learned counsel for the Central Government that Chemical process is involved in the manufacture of 'Agarbathies' and therefore, they are not handicrafts.