Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Custom
Circular No. 3 /2010 - Customs
New Delhi, 12th February, 2010
To
All Chief Commissioners of Customs
All Chief Commissioners of Customs & Central Excise
All Commissioners of Customs /Customs (Preventive)/Customs & Central
Excise/Central Excise
DG, CEIB, New Delhi
DGRI/DGCEI/DG (Systems & Data Management) DG (Export Promotion)/DGI/DG, NACEN/DG
Audit
Chief Departmental Representative, Customs, Excise & Service Tax Appellate
Tribunal, New Delhi.
Sir/Madam,
Sub: Classification of artware / handicraft items and composite goods in the
Drawback Schedule - reg.
It has been brought to notice of the Board that difficulties are being faced by
exporters in classification of articles declared as handicraft/artware items. It
has also been brought to notice that divergent practices are being followed in
classifying the goods made of different constituent materials in the Drawback
Schedule and applying Note 14 of the Drawback Schedule notification
No.103/2008-Cus (N.T.), dated 29.08.2008 in this regard.
- The matter has been examined. I am directed to state that it may be recalled
that the Board vide circular no. 128/39/95-CX, dated 25.5.1995 had clarified
that since the office of Development Commissioner (Handicraft) has treated
imitation or real zari as handicrafts the same may be treated as handicrafts by
the Customs and central Excise authorities. However the Board vide circular no.
280/114/96-CX, dated 19.12.1996 modified this guideline by stating that the
following criteria laid down by the Supreme Court in the case of Louis Shoppe
[1996 (10) CXLT (SC) CE-277=(1996)(13)RLT 507 (SC)] for treating any goods as
handicrafts may also be followed:-
- It must be predominantly made by hand; it does not matter if some machinery
is also used in the process.
- 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 substantial nature and not a mere pretence.
- The Board reiterated these guidelines vide circular No. 32/99-Cus dated
04.06.99. The Board vide subsequent circular No. 56/99-Cus, dated 26.08.99
advised the field formations that they can accept the certificates issued by
either the Development Commissioner (Handicrafts) or by the Export Promotion
Council for Handicrafts (EPCH).
- It is hereby clarified that the assessing authorities should normally accept
the certificates issued by the Development Commissioner (Handicrafts)/EPCH. A
decision to reject the certificate issued by the Development Commissioner
(Handicrafts)/EPCH certifying the goods as artware/handicraft should be taken
only with the approval of the Commissioner of Customs / Central Excise and after
discussions with the certificate issuing authority. The exports should not, in
the mean time, be held up.
- Doubts have also been expressed relating to interpretation of note and
condition (3) of the Drawback Schedule notification No.103/2008-Cus (N.T.) dated
29.08.2008. The note and condition provides as follows:
"Notwithstanding anything contained in the said Schedule, all artware or
handicraft items shall be classified under the heading of artware or handicraft
(of constituent material) as mentioned in the relevant Chapters."
The essence of this condition is that while the Drawback Schedule is aligned
with the Customs Tariff at the 4 digit level, this alignment is not applicable
to Artware/Handicraft items. Artware/handicraft item made of a particular
constituent material has to be classified under the heading of Artware/Handicraft
(of that constituent material) as mentioned in the Chapter relevant to that
constituent material. It may be noted that according to this note, the artware/handicraft
items may fall in a heading/sub-heading in a chapter other than the chapter in
which they fall according to Harmonized System of classification. To illustrate,
a handicraft table made of stainless steel would fall under CTH 9403 as per HSN.
It would, however, fall under Drawback Schedule heading 732606 (Handicraft/Artware
of Stainless Steel) as per the above note. It may also be noted that if the
artware or handicraft item is made of more than one constituent material, it
should be classified as if it is made of that constituent material which
predominates in it by weight. For example, an artware/handicraft item made of
brass, iron and wood; consisting, say, 40% by weight of brass, 35% by weight of
iron and 25% by weight of wood, should be classified as artware/handicraft of
brass under Drawback Schedule heading 741903 and granted drawback at the rate
and cap prescribed there under.
- Further, it is also clarified that the relevant headings/sub-headings in the
Drawback Schedule for handicraft/artware items include handicraft/artware items
with coating/ plating unless specifically provided otherwise.
- Problems have also been reported in classification of composite articles.
Note and condition No. 14 of the Drawback Schedule notification ibid, provides
that whenever a composite article is exported for which any specific rate has
not been provided in the said Schedule, the rates of drawback applicable to
various constituent materials can be extended to the composite article according
to net content of such materials. It may be noted that this Note is applicable
only to composite articles for which no specific rate has been provided in the
Drawback Schedule and not to articles which fall in one or the other
headings/sub-headings of the Drawback Schedule (which could be a residuary
heading 'others') and have a drawback rate. Therefore, it is clarified that
articles made of more than one constituent material should be classified under a
heading/sub-heading of the Drawback Schedule in accordance with conditions (1)
and (2) of the Drawback Schedule or if the goods are artware or handicraft items
in accordance with condition (3) of the Drawback Schedule as discussed in para 5
above. Once, classification of an article (whether artware/handicraft or other)
in a heading/sub-heading of the drawback schedule has been determined, then the
drawback rate and cap prescribed against that heading/sub-heading should be
applied to the whole article irrespective of the value or weight of different
constituents.
- Note and condition 14 of the Drawback Schedule notification ibid should be
invoked only if it is found that an article cannot be classified in any of the
headings/sub-headings of the Drawback Schedule(not even in residuary
heading/sub-heading "others"), in accordance with the above principles. However,
such cases may be immediately brought to notice of the Board so that suitable
headings/sub-headings may be created in the Drawback Schedule for future.
- A suitable Public Notice for information of the Trade and Standing Order for
guidance of the staff may be issued. Difficulties faced, if any, in
implementation of the changes may be brought to the notice of the Board at once.
Kindly acknowledge receipt of this Circular.
Yours faithfully,
(PRAMOD KUMAR)
Technical Officer (Drawback)
F.No.609/27/2009-DBK