CIR NO.773/06/2004-CX, DT. 28/01/2004

Circulation of the views of the Development Commissioner (Handicrafts) regarding classification of ready made garments/apparel as handicrafts

I am directed to say that the Board has circulated the views of Development Commissioner (Handicrafts) vide circulars No. 128/39/95-CX dated 25-5-1995-CX and No 280/114/96-CX dated 19.12.96 about the classification of goods to be classified as "Handicrafts" for availing exemption of excise duty under notification No. 76/86-CX dated 10-2-86. The circular dated 19.12.96 was issued in the light of judgment of the Hon"ble Supreme Court in the case of CCE., Delhi Vs Louis Shoppe & others ( 2002-Taxindiaonline-126-SC-CX ) wherein the Apex Court has held that the goods can be characterized as handicrafts if the following criteria are satisfied.

(a) It must be predominantly made by hand. It does not matter if some Machinery is also used in the process

(b) It must be graced with visual appeal in the nature of ornamentation or ln-la work or some similar work lending it an element of artistic improvement Such ornamentation must be of substantial nature and not a mere pretence.

2. Even after the above mentioned judgment by the Hon"ble Supreme Court, doubts have been raised about the criteria to be followed for the classification of the articles as "Handicrafts". especially in the case of textiles articles, which are predominantly made by hand or are having substantial ornamentation. Therefore, the views of the Development Commissioner (Handicraft). Ministry of Textiles have again been sought. The Development Commissioner (Handicrafts) has stated that if the article (readymade garment/apparel) is having one or more of the following features Ted same may be treated as "Handicrafts"-

1. Hand painting (including Kalamkari) or hand printing or handicrafts Tie & dye or handicrafts Batik

2. Embroidered or crocheted ornamention.

3. Applique work of sequins, glass or wooden beads, shells, mirrors or Ornamental motifs of Textiles & other material.

4. Extra warn/wept ornamentation of cotton, silk, zari (metal thread in Gold/Silver) wool or any other fibre yarn.

3. It is hereby clarified that while deciding the cases as per the Board"s circulars, the above mentioned views of the Development Commissioner (Handicrafts) may also be considered.

4. This may be brought to the notice of the field formation.

5. Receipt of this letter may please be acknowledged

6. Hindi version will follow.

(Ashok Kumar)
Under Secretary to the Govt. of India

F. No. 56/3/2003-Cx.1

(Please refer CIR NO.789/22/2004-CX, DT. 31/05/2004 - Excise Duty on readymade garments claimed as `Handicrafts’)

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