Circular No. 3 /2010 - Customs
F.No.609/27/2009-DBK
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Custom
*****
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.
2. 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:-
(i) It must be predominantly made by hand; it does not matter if some machinery is also used in the process.
(ii) 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.
3. 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).
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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)
