Sabyasachi Mukharji, J. - (1.) This is an appeal by the Revenue under S. 35L of the Central Excises and Salt Act, 1944 (hereinafter referred to as 'the Act') against the Order No. 195 of 1988-C dated 8th March, 1988 passed by the Customs, Excise and Gold (Control) Appellate Tribunal (hereinafter referred to as 'the Tribunal).
(2.) The appellants at all relevant times were manufacturing agarbatis, dhoop sticks, dhoop coil, dhoop powder falling under Tariff Item No. 68 of the erstwhile Central Excise Tariff. The relevant period involved in the present Civil Appeal is from the year 1979 to 1983-84. The appellants claimed exemption under Notification No. 55/75 dated 1 st March, 1975. By the said notification, the Central Government had exempted goods of the description in the Schedule annexed to the notification and falling under Tariff Item 68 of the First Schedule to the Act from the whole of duty of excise leviable thereon. In the serial No. 8 of the Schedule to the said notification, 'Handicrafts' were listed. It is, therefore, clear that 'handicrafts' were fully exempt from payment of duty of excise, according to the appellants. Under the Notification No. 111/78 dated 9th May, 1978, the appellants were exempted from licensing control. That is the case of the appellants. The provision requiring a manufacturer to take out a licence is controlled by R. 174 of the Central Excise Rules, 1944. The relevant provision of R. 174 at the relevant time provided, inter alia, as follows: "Rule 174. Persons requiring a licence: Every manufacturer, trader or person hereinafter mentioned, shall be required to take out a licence and shall not conduct his business in regard to such goods otherwise than by the authority, and subject to the terms and condidtions of a licence granted by a duly authorised officer in the proper' form ........."
(3.) It is the case of the appellants that by this notification, all goods which were exempt from the whole of duty of exicse leviable thereon unconditionally were exempted from the operation of R. 174. The appellants were manufacturing dhoop sticks, coil and powder which the appellants contended before the Tribunal, were handicrafts under Notification No. 55/75 and as such were exempt from licensing control under Notification No. 111/78. It is, therefore, necessary at this stage, in view of the contentions raised in this appeal, to refer to the notifications. By first notification i.e., Notification No. 55/75, in exercise of the powers conferred by sub-rule (1) of R. 8 of the Central Excise Rules, 1944, the Central Government had exempted goods of the description specified in the Schedule annexed thereto and falling under Item No. 68 of the First Schedule to the Act from the whole of the duty of excise leviable thereon and, as mentioned hereinbefore, Item No. 8 of the Schedule annexed to the notification included among the exempted goods 'Handicrafts'. The second notification, i.e., Notification No. 111/78-CE dated 9th May, 1978, the Central Government exempted from the operation of R. 174 of the said Rules, inter alia, all goods that are exempt from the whole of the duty of excise leviable thereon unconditionally. The effect of this notification, was that manufacture of such goods were exempt from the operation of R. 174 of the said Rules. As a result, it was not necessary to take out a licence as enjoined by R. 174. The appellants had indicated the process of manufacture of dhoop sticks, coil and powder before the Tribunal and the process was as follows: "1. The various ingredients/raw materials like perfumes, essential oils, natural oils and other raw materials are first mixed in specific proportions, by manual Labour. 2. These raw materials along with jigget and saw dust after seiving by hand are mixed in a barrel with a stirrer with hand and made into a paste. 3. This paste is kneaded in the kneading machine operated by power. ' 4. This paste is put by hand in the extruder. 5. The extruder extrudes the paste in the form of needles with the aid of power. 6. As the paste is extruded from the extruder it is collected on a wooden tray which is of a particular size. As it is collected on the tray it is cut on both sides to the accurate size by hand. 7. The thin long incense is then transferred by hand from the individual trays of long big tray by hand. 8. After transferring it is properly arranged by hand in a consolidated manner on the long big tray. 9. Another tray which has four slits called the cutting tray is placed on top of the long tray with the incense. 10. After placing the cutting tray a hand roller cutter is rolled along the slits of the cutting trays to cut the incense to the required sizes. 11. The extra length or width of the incense on the tray is then removed by hand. 12. The cut incense is then transferred to a drying tray by hand. 13. The incense is dried by stocking the trays in the drying yard. 14. The dried incense is broken at the cut ends. 15. The ten incense sticks are inserted into the packet. 16. The incense packets are first punched with an eyelet. 17. Then twelve packets are wrapped in a cellophane wrapper.";