Whether exemption available to Concrete Mix also admissible to RMC?

Case study

Prepared by: CA Neetu Sukhwani &

Prayushi Jain

Introduction:-The applicant is engaged in the manufacture of Ready Mix Concrete falling under chapter 38 of the First Schedule to the Central Excise Tariff Act, 1985. The case relates to eligibility of benefit of the exemption notification no. 4/2006-CE dated 01.03.2006 to RMC manufactured at site for use in the construction work at the site. The proceedings have been initiated by issuing show cause notice wherein it was alleged that assessee appeared to have contravened the provisions by not paying excise duty on RMC when the same was required to be paid at the concessional rate as specified in the Notification no. 1/2011 CE dated 01.03.2011 and so the same appeared to be recoverable along with interest and penalty. Assessee submitted that the department had demanded the Central Excise Duty on the RMC under notification no. 1/2011-CE. However, they had claimed the benefit of exemption notification no. 4/2006-CE. The adjudicating authority didn’t pay any heed to their contentions and passed the order against them. Consequently, the appellant filed appeal along with stay application. The outcome of the stay application is the subject matter of present case study.

M/S CONSOLIDATED CONSTRUCTION CONSORTIUM LTD. [SO/55100/2014-EX [DB] DATED21.01.2015]
Relevant legal provisions:-
v Notification no. 1/2011 CE dated 01.03.2011
v Rule 4 of the Central Excise Rules, 2002
v Notification no. 4/2006-CE dated 01.03.2006

Issue Involved:

The following issue was made before the Commissioner:-

Whether exemption available to Concrete Mix also admissible to RMC?

Brief facts:-M/s Consolidated Construction Consortium Ltd. (RMC Plant-Najafgarh) (hereinafter referred to as appellant) are engaged in the manufacture of excisable goods i.e. Prepared Binders for Foundry Moulds or Cores (R.M.C.), falling under chapter sub-heading 38245010 of the First schedule to the Central Excise Tariff Act, 1985. Appellant are holder of Central Excise Registration no. AAACC4214BEM013. A show cause notice no. V (38) 30/53/2012/6294 dated 09.05.2012 was issued to the appellant alleging that as the assessee has not paid excise duty on their product RMC under the notification no. 1/2011 CE dated 01.03.2011, and alleging that they have contravened the provisions of Rule 4 of the Central Excise Rules, 2002 and so the duty amounting to Rs. 4,39,358/- was liable to be recovered from them along with interest and penalty. The appellant replied to the above show cause notice issued to them vide their letter. However, the submissions of the appellant were not adhered to and the impugned order in original no. 04/2013-CE-DEMAND dated 31.01.2013 was passed for confirming the allegations levelled in the impugned show cause notice. The duty demand of Rs. 4,39,358/- (including the EC and SHE cess) was confirmed alongwith interest and equal amount of penalty under section 11AC. Furthermore, penalty of Rs. 5,000/- was also imposed under Rule 27 of the Central Excise Rules, 2002 for non-filing of ER-1 returns for the months of February, 2012 and March, 2012.

Thereafter, the appellant filed appeal before the Commissioner Appeals along with stay application on the grounds in addition to that taken in the reply filed to the show cause notice. The hearing for the stay application was held on 30.07.2013, wherein authorised representative of the appellant appeared and filed additional written submissions Thereafter, the Commissioner Appeals granted a conditional stay with a direction to pre-deposit 50% of the duty amount confirmed in the order in original vide Stay Order No. 157 (OPD)/CE/JPR-II/2013 dated 07.08.2013. Aggrieved by the stay order directing them to deposit 50% of the duty demand even when the issue under consideration was already decided in their favour by the Commissioner Appeals under the jurisdiction of Delhi, the appellant filed modification application of stay order. The appellant also pleaded financial hardship in the modification application of stay order.

The personal hearing for the modification stay application was held on 23.10.2013 wherein some additional written submissions were made by authorised representative on behalf of appellant. However, the submissions made by the appellant in the modification stay application and during the course of personal hearing were not accepted and the appellant were communicated to pre-deposit the 50% of the duty demand confirmed by the order in original. Consequently, the appellant complied with the stay order and submitted the compliance report vide their letter thereby depositing 50% of the duty demand.

Thereafter, final personal hearing for the appeal was held on 24.12.2013, which was duly attended by their authorised representative. The additional contentions were made vide the written submissions. However, the submissions made in the grounds to the appeal memorandum and during the course of personal hearing were not adhered to and the impugned order in appeal no. 204 (OPD) CE/JPR-II/2013 dated 30.12.2013 was passed upholding the demand confirmed along with interest and penalties vide the impugned order in original.

Aggrieved by the impugned order in appeal confirming excise duty demand along with interest and penalties, the appellant preferred appeal to the Tribunal along with stay application.

Appellant’s Contention:-The appellant submitted the following contentions:-

The issue involved in the appeal was whether the exemption under serial no. 74 of the notification no. 4/2006-CE dated 01.03.2006 that is for concrete mix falling under chapter 38 is also applicable for Ready Mix Concrete classifiable under Chapter 38245010. In this regard, it is submitted that the product Ready Mix Concrete is nothing but technologically advanced version of the concrete mix with increased shelf life. Conceptually, there was no significant difference in the composition of RMC and concrete mix. RMC is a type of concrete mix and so the exemption available for concrete mix was also meant for RMC. In this regard, reliance was placed on the decision given by the Mumbai Tribunal in the case of Sun Exports Vs Commissioner of Customs (Exp), Nhava Sheva reported as [2008(228) E.L.T. 545 (Tri.-Mumbai)] wherein it was concluded that steel was genus and stainless steel was the species and so any heading that covers steel also covers stainless steel. Therefore, the benefit of drawback available for steel also covers stainless steel in its ambit. Similarly, concrete mix was genus and ready mix concrete was species and the benefit of exemption admissible to concrete mix will squarely apply to ready mix concrete. It was also worth noting that the product concrete mix was not excisable and there was no specific entry for concrete mix in the Central Excise Tariff and if the wordings of the notification are literally interpreted, it will defeat the purpose of the notification. Therefore, the impugned order in appeal confirming duty demand along with interest and penalty and denying the benefit of exemption was liable to be quashed.
The applicant further submitted that they were entitled to avail the benefit of the serial no. 74 of the notification no. 4/2006-CE dated 01.03.2006 as all the requirements of the exemption were being satisfied. The entry no. 74 of the notification reads as follows-

*S.No.*	*Chapter or heading or sub-heading or tariff item of the First Schedule*	*Description of Excisable goods*	*Rate*
74	38	Concrete mix manufactured at the site of construction for use in construction work at such site.	NIL

It was submitted that the applicant is eligible to avail the benefit of the above entry because:-
·         The product falls under Chapter 38.
·         The product is Ready Mix Concrete, which is a type of concrete mix.
·         The product is manufactured at the site of construction.
·         The product is used in construction work at the site.

The applicant submitted that when all the conditions of the notification were being fulfilled by them, the benefit of the said notification should not be denied to them and the duty demand confirmed against them along with interest and penalties should be set aside.
The applicant further submitted that the issue under consideration is covered by the decision given by the Hon’ble Madras High Court in the case of Larsen & Turbo Ltd. Vs Union of India reported as 2006 (198) E L T 177 (Mad) wherein it was clearly pronounced that the benefit of exemption is available to Ready Mix Concrete if it is manufactured at the site of construction for use at the site itself. It is also worth noting that the serial no. 51 of the notification no. 4/97-CE dated 01.03.1997 was exactly same as the present serial no. 74 of the notification no. 4/2006-CE dated 01.03.2006. Therefore, the ratio of the above case is squarely applicable to the present case and so the benefit of the above cited decision should be extended to the applicant. Similarly, reliance was placed on the decision given by Larger Bench of Delhi Tribunal in the case of Chief Engineer, Ranjit Sagar Dam versus Commissioner of Central Excise, Jalandhar reported in 2006 (198) E L T 503 (Tri.-LB) which decision on appeal had also been confirmed by the Hon’ble Punjab & Haryana High Court reported in 2007 (217) E L T 345 (P&H). It had been concluded in this case that the exemption given to concrete mix should not be taken meaning so as to exclude from its ambit Ready Mix Concrete manufactured at site. Furthermore, reliance was also placed on the Apex Court judgment in the case of Commissioner of C.Ex. Belapur Vs. Simplex Infrastructures Ltd. [2008(225) E.L.T. 338 (S.C.)] wherein it was held that the Ready Mix Concrete was eligible for excise duty exemption only if produced at site. The above cited decisions clearly supported the contention of the applicant that the excise exemption given to concrete mix was also applicable for ready mix concrete and so the denial of benefit of exemption to them was not tenable.
The applicant also submitted the fact that they were eligible for claiming the benefit of serial no. 74 of the exemption notification no. 04/2006-CE dated 01.03.2006 was also strengthened by the favourable decision given by the Hon’ble Commissioner Appeals in their own case on exactly the same issue. The said decision had been given vide Order in Appeal No. 115/2013-C.E./DLH/2012 dated 03.06.2013wherein it had been categorically mentioned that the applicant’s product RMC falls within the description of exempted goods as appearing at serial no. 74 of the notification no. 04/2006-CE dated 01.03.2006 and were therefore entitled to the benefit of the said exemption notification. It was worth noting that the above decision of the Commissioner Appeals was also relied upon in front of the first appellate authority but the impugned order had been passed without considering the decision and moreover, had not even assigned the reasons for distinguishing the decision. Furthermore, the Commissioner Appeals ought to have considered the decision given by an authority of equivalent hierarchy and ranking. However, the impugned order in appeal had been passed ignoring the decisions cited by the applicant of Apex Court, High Court and the Commissioner Appeals of Delhi. As such, the impugned order turned out to be a non-speaking and a non-reasoned order which was not relevant in the eyes of law.
The applicant submitted that the ready mix concrete was leviable to concessional rate of excise duty vide notification no. 01/2011-CE dated 01.03.2011 subject to the condition of non-availment of the cenvat credit facility. The applicant submitted that the applicant had option either to avail the benefit of concessional excise duty under notification no. 01/2011-CE dated 01.03.2011 or avail complete exemption under notification no. 04/2006-CE dated 01.03.2006 because when there were two options available, then the assessee may chose the option most beneficial to him. This position of law has been time and again reiterated by the Hon’ble Supreme Court in the following judgments

·         Collector of Central Excise, Baroda versus India Petro Chemicals reported in 1997 (92) E L T (SC).
·         H.C.L Ltd., versus Collector of customs New Delhi [2001 (130) E L T 405 (SC)].
·         Share Medical Care versus UOI [2007 (209) E L T 321 (SC)].

In view of the above submissions it was stated that merely because notification no. 1/2011 CE governs the goods manufactured by the applicant, they should not be denied the benefit of notification no. 4/2006 CE which also equally governs the impugned goods particularly when the applicant had complied with the requirement of the said notification namely manufacture as well as use the goods at the construction site. Therefore, the availment of notification no. 4/2006-CE dated 01.03.2006 should be allowed by extending the ratio of the above cited cases.

It was further submitted that the merits of the case were strongly in favour of the applicant in view of the above cited submissions. Moreover, the applicant had already deposited 50% of the duty demand confirmed against us amounting to Rs. 2,19,679/- vide challan identification no. 01701990611201300003 dated 06.111.2013. Therefore, the interest of the revenue had also been sufficiently safeguarded. As such, the balance of convenience lied in favour of the applicant. Hence, the stay application should be allowed and an unconditional stay should be granted to the applicant till the disposal of appeal in the interest of justice.

Reasoning of the judgment:- The Tribunal held that there was no dispute that the goods in question-concrete mix had been manufactured at site for use in the construction project. There was no evidence that any additives for enhance the shelf life had been added in the concrete mix in question. In view of this the goods cannot be presumed to be ready mix concrete. It was further found that the issue involved in the case already stood decided in the appellant’s favour by the Larger Bench decision of the Tribunal in the case of Chief Engineer, Ranjit Sagar Dam (supra).
At this stage the learned counsel for the appellant stated that an amount of Rs 2, 19,679/- had already been deposited by the appellant. Since, as discussed above the appellant had been able to establish a prima-facie case in their favour, the amount already deposited by them is sufficient for hearing of the appeal. The requirement of pre-deposit of balance amount of duty demand, interest and penalty was therefore waived for hearing of their appeal and recovery thereof is stayed.

Decision:- Stay application allowed.

Conclusion:- The gist of the case above is that the RMC is a type of concrete mix only. There is no significant difference in the composition of RMC and concrete mix. It is basically addition of shelf life in concrete mix which gives birth to RMC. As the exemption notification mentions the term ‘concrete’, it evidently includes all types of concrete mixes and therefore exemption is available to RMC. The “Concrete mix” was the genus and “RMC” is the species. Therefore, where any description covers the concrete mix, it will also cover the “RMC” unless otherwise specified. Thus, the benefit of serial no. 74 of the exemption notification no. 4/2006-CE which covers the products falling in chapter 38 with description “Concrete mix manufactured at site of construction for use in construction work at such site” is also available to RMC. Since the RMC is a species of concrete mix and was not specifically excluded from this description, the exemption would be available to RMC.

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PJ/Case Study/2014-15/101
21 February 2015

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PJ/Case Study/2014-15/101 21 February 2015

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PJ/Case Study/2014-15/101
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