Whether product RMC and Concrete are same so as to be eligible for Nil rate of excise duty benefit?

PJ/Case Study/2013-14/65

CASE STUDY

Prepared by: CA Neetu Sukhwani &
Aashish Bohra

Introduction:-

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. A show cause notice no. CE-20/Demand/Range-22/Div-V//CCCL/30/11-12/459 dated 22.02.2012 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 so they have contravened the provisions of Rule 4 of the Central Excise Rules, 2002 and so the duty amounting to Rs. 1,46,040/- is liable to be recovered from them along with interest and penalty. Appellant was of view that RMC and concrete mix both are one and the same thing except the difference of shelf life of RMC being longer than that of concrete mix. Accordingly, the benefit of Nil rate of duty available to concrete mix under serial no. 74 of the notification no. 4/2006-CE dated 01.03.2003 is also applicable for the product RMC. The submissions of the appellant were not accepted by the adjudicating authority and the alleged demand along with interest and penalty was confirmed against them. Thereafter, the appellant preferred an appeal to the Commissioner Appeals.

CONSOLIDATED CONSTRUCTION CONSORTIUM LTD. V/S ASSISTANT COMMISSIONER, CENTRAL EXCISE DIVISION-V, NEW-DELHI.
[ORDER IN ORIGINAL- RS-242/12-13 DATED 27.12.2012]

Relevant Legal Provisions:

Notification no. 4/2006-CE dated 01.03.2003. (Serial No. 74)

Notification no. 01/2011 CE dated 01.03.2011.

Issue Involved:

The Following issue was involved in this case:-
Whether product RMC and Concrete are same so as to be eligible for Nil rate of excise duty benefit?

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. AAACC4214BEM017.

·         A show cause notice no. CE-20/Demand/Range-22/Div-V//CCCL/30/11-12/459 dated 22.02.2012 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, they have contravened the provisions of Rule 4 of the Central Excise Rules, 2002 and so the duty amounting to Rs. 1,46,040/- is liable to be recovered from them along with interest and penalty.

·         Thereafter, personal hearing in the matter was granted to the appellant on 05.10.2012. The authorized representative appeared on behalf of the appellant and made submissions already made in their reply to the show cause notice.

·         The submissions of the appellant were not adhered to and the impugned order in original no. RS-242/12-13 dated 27.12.2012 was passed for confirming the allegations leveled in the impugned show cause notice. The duty demand of Rs. 146040/- (including the EC and SHE cess) was confirmed along with interest and equal amount of penalty under section 11AC.

Appellant’s Contention: The appellant made following submissions before the Commissioner (Appeals)

1)            The appellant submit that the impugned Order in Original issued by the Adjudicating Officer is wholly and totally erroneous and is liable to be set aside.

2)            The appellant submit that their submission that their product Ready Mix Concrete, commonly called as ‘RMC’ and the concrete mix are same has not been accepted by the learned Assistant Commissioner and so it has been held that the exemption provided to concrete mix could not be extended to the product RMC. In this respect, the appellant reiterate that the product concrete and RMC are same only and the only difference between them is of the shelf life. The product RMC is only a technological advancement of the traditional product concrete. Before going into the in-depth analysis of this fact, it would be better to look at the definitions of the product RMC as is available in general terms.

As per Wikipedia-the encyclopedia, Ready-mix concreteis a type of concrete that is manufactured in a factory or batching plant, according to a set recipe, and then delivered to a work site, by truck mounted transit mixers. This results in a precise mixture, allowing specialty concrete mixtures to be developed and implemented on construction sites. Source: www.en.wikipedia.org.

On perusal of the said definition, it is very clear that RMC is a type of concrete mix only. The process for making the concrete mix and RMC is the same, however, the RMC is the advanced form of traditional concrete mix which have the better shelf life than the traditional concrete mix. Since RMC is a modified form of concrete mix only, it possesses the same characteristics than that of concrete mix. Some of such similarities are reproduced as follows:-

Ø The ingredients or raw material used in making the concrete is the same in both the types. They are classified as Cement, Mineral admixtures, Aggregates (Coarse & Fine), Water, Admixtures (Chemical) and illustrated clearly in IS 456 – 2000 (Plain and Reinforced Concrete – Code of Practice) and the method of mix proportioning (also called as mix design) is the same in both the types and are done in accordance with IS 10262 – 2009 (Concrete Mix Proportioning – Guidelines).
Ø All procedures for sampling, testing and acceptance are the same for both the types of concrete’s sourced and IS 456 – 2000 is used as the base code for both the types for all issues pertaining to material sourcing, testing, mixing, production & transportation.
Ø Thus the concrete mix manufactured either at site or nearer to the site as well as the concrete mix manufactured in commercial plants catering to the needs of different customers, widely perceived as RMC are one and the same.
Ø The development of the product known as RMC was due to technological advancement, mechanization, reduced time in the construction of huge and high raised buildings, and to locate the plant away from the work site to avoid congestion at the work site etc., except for which there is no marked difference in describing the product as concrete mix or RMC.

From analysis of above, it is ample clear that the RMC is a type of concrete mix only. Conceptually, there is no significant difference in the composition of RMC and concrete mix. Therefore, when the exemption notification mentions the term ‘concrete’, it is but natural that it includes all types of concrete mixes and so exemption should be available to RMC also. In this regard, reliance is placed on the decision of hon’ble Mumbai Tribunal in the case ofSun Exports vs Commr. of Cus. (Exp), Nhava Sheva reported at 2008 (228) E.L.T. 545 (Tri.-Mumbai).The verdicts of hon’ble Tribunal are produced as follows:-

“Steel-Stainless steel-Steel is genus and stainless steel is the species- Stainless steel is a type of steel- Any heading which covers steel, will also cover stainless steel unless otherwise specified-No such exclusion in Heading 7323 of the Drawback Schedule therefore heading 7323 ibid also includes articles of stainless steel [Para 9]”

In the above decision, the issue was to be decided whether the term “steel” will also include the “stainless steel”? While deciding the issue, it was held by hon’ble Tribunal that the “steel” is genus and “stainless steel” is the species. Thus, where any heading covers steel, will also cover stainless steel unless otherwise specified. Though the commodities in this case and the appellant’s case are different, yet the ratio of this decision is squarely applicable in their case as the “Concrete mix” is 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 above decision is equally applicable in the instant case as serial no. 74 of the exemption notification no. 4/2006-CE covers the products falling in chapter 38 with description “Concrete mix manufactured at site of construction for use in construction work at such site”. Since the RMC is a species of concrete mix and it is not specifically excluded from this description, it will be included in it and thus the exemption will be available to RMC. The impugned order is not sustainable and is liable to be set aside.

3)            Aligning with the above, for the purpose of better understanding, the appellant wish to explain the short background of the amendments made in the chapter 38 governing the product under consideration. The appellant submit that from the year 1998-99, the chapter 38.24 read as follows:

            “Prepared binders for foundry moulds or cores; chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products), not elsewhere specified or included; Residual products of the chemical or allied industries, not elsewhere specified or included

            38.24.10 Phosphogypsum – 13 %

3824.20 Ready Mix Concrete- Nil

            3824.90 Other- 18%

            Thereafter, from 2006-07, the same chapter reads as follows:

3824 PREPARED BINDERS FOR FOUNDRY MOULDS OR CORES; CHEMICAL PRODUCTS AND PREPARATIONS OF THE CHEMICAL OR ALLIED INDUSTRIES (INCLUDING THOSE CONSISTING OF MIXTURES OF NATURAL PRODUCTS), NOT ELSEWHERE SPECIFIED OR INCLUDED

3824 10 00 - Prepared binders for foundry moulds                          12%
                        or cores
3824 30 00 - Non-agglomerated metal carbides mixed                    12%
                                   Together or with metallic binders
3824 40      - Prepared additives for cements, mortars
                                  or concretes:

3824 40 10 - Damp proof or water proof compounds                       12%

3824 40 90 - Other                                                                                  12%

3824 50       - Non-refractory mortars and concretes:

3824 50 10 - Concretes ready to use known as “Ready-                    6%
                                     mix Concrete (RMC)”

3824 50 90   - Other                                                                                  12%

3824 60        - Sorbitol other than that of sub-heading
                                     2905 44:

3824 60 10    - In aqueous solution                                                        12%

3824 60 90   - Other                                                                                 12%

The appellant submit that it is stated in the impugned order that the product ‘concrete mix’ was earlier classified under the chapter sub heading no. 3824.90 while the product ‘RMC’ was classified under chapter sub heading no. 3824.20 from the introduction of Union Budget for the year 1997-98. In this respect, the appellant submit that it is wrong to contend that concrete mix was classified under chapter sub heading no. 3824.29 earlier as the product ‘concrete mix’ is not marketable and so is not excisable goods and as such does not finds place in the Central Excise Tariff Act, 1985 itself. When the product concrete is not excisable then the question of classification does not arise and merely because no specific heading is prescribed in the CETA, 1985, it cannot be held to be classified in the residuary entry. Furthermore, it has been explained above that RMC is included in concrete and so the benefit of exemption should be extended to the appellant.

It has been explained earlier that concrete mix specified in the exemption notification is also meant for the product RMC as the product concrete mix is not marketable and not excisable good and if the description of goods is literally interpreted, it will render the notification meaningless. The fact that concrete mix is not excisable is proved from the fact that there is no specific tariff entry in the Central Excise Tariff Act for Concrete mix and so the mentioning of Concrete in the said exemption notification is actually meant for the product RMC only.

Aligning with the above, the appellant also submit that the question under consideration is not classification of the product RMC and rather it is to determine the fact whether exemption given to the product ‘concrete mix’ could also mean to give exemption to the product ‘RMC’. In this regard, the appellant submit that it is worth mentioning to produce the serial no. 74 of the exemption notification no. 4/2006 CE dated 01.03.2006 for the purpose of reference 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

From the perusal of the said notification, it is very clear that the above exemption will be applicable if the following conditions are satisfied:-

·         The product is falling in chapter 38;
·         The product is concrete mix;
·         It is manufactured at the site of construction;
·         It is used in construction work at that site.

In case of RMC manufactured by the appellant, all the above conditions are satisfied – RMC is a type of concrete mix falling in chapter 38. The appellant’s batching plant is located at site only. They are manufacturing RMC at this batching plant at construction site and it is used there only in the construction work. Thus, all the conditions specified in the above notification are satisfied; therefore, the above exemption is equally applicable to the appellant in absence of specific exclusion therefrom. Thus, the impugned order is mis-interpreting the language of notification which is not justified. In this regard, it is submitted that the language of notification is plain and unambiguous including all types of concrete mixes which are manufactured at site and used for construction work there only. Thus, one cannot take another interpretation of a clear and unambiguous provision as held by the highest court of India in the case of Truetuf Safety Glass Industries vs Commissioner of Sales Tax, UP [2007 (215) ELT 14 (SC)]. In this case it is held that it is a settled principle of law that the Court cannot read anything into a statutory provision which is plain and unambiguous. Similar decision has been given in the case of TATA CONSULTANCY SERVICES VersusSTATE OF ANDHRA PRADESH [2004 (178) E.L.T. 22 (S.C.)] by holding the view that Courts should not be over zealous in searching ambiguities or obscurities in words which are plain. In the case of appellant also, the language of notification is clear and unambiguous including all types of concrete mixes. It does not specifically exclude the RMC from this notification. Since the RMC is also a type of concrete mix and it satisfies all the criteria laid down in the above notification, it cannot be said that the benefit of this notification is not allowable to the appellant. Thus, the impugned order taking out another meaning out of a plain and unambiguous language of the notification is not sustainable and is liable to be quashed.

4)            The appellant submit that the impugned order is placing the reliance on the circular no. 315/31/97-CX dated 23.05.1997 wherein it is clarified that concrete mix and RMC are two different commodities. It is further placing the reliance on the circular no. 368/1/98-CX dated 6.1.1998 wherein it is clarified that the exemption of concrete mix manufactured at site of construction for use at site only as available at serial no. 74 of notification no. 4/2006-CE is not applicable to RMC. In this regard, it is submitted that the RMC is merely the species of concrete mix and it cannot be considered as a distinct commodity. This is ample clear from the discussion hereabove and in the light of decision of M/s Sun Exports cited hereabove. Further, the language of notification no. 4/2006-CE is clear and unambiguous covering all types of concrete mixes if manufactured at construction site and used therein. Thus, in the light of hon’ble Supreme Court decisions cited hereabove, any other meaning cannot be taken out as given in the above referred circular dated 6.1.98. Thus, both of the above circulars as relied by the impugned order are ultra vires the provisions of existing Central Excise law. Therefore, these circulars are not binding on the assessees and they have right to challenge the same. This has been held in the case of Birla Jute and Industries Ltd. v/s Assistant Collector of C. Ex. [1992 (57) E.L.T. 674 (Cal.)]. In this case it was held that Board Circulars are not binding on the assessees and they may opt not to follow these Circulars. The verdicts of hon’ble Calcutta High Court are produced as follows:-

“Departmental circulars and trade notices - Binding on departmental officers but not binding on quasi-judicial authorities and assessees - Court can compel Central Excise officers to comply with such instructions as are for benefit of assessee - Section 37B of Central Excises and Salt Act, 1944 - Rule 233 of Central Excise Rules, 1944.

Similar decision was given in the case of Commissioner of Central Excise v/s Eswaran & Sons Engineers Ltd. [2005 (179) E.L.T. 272 (S.C.)]. In the light of above judgments rendered by hon’ble Supreme Court, the reliance placed by the impugned order on these circulars is totally erroneous and not binding on the appellant. The impugned order is thus liable to be quashed.

5)            It is further submitted that the impugned order has placed reliance on the decision of Larsan and Toubro Ltd. Vs Commissioner of Central Excise, Hyderabad [2005 (190) ELT 132 (Tri.-Bang)]. In this regard, it is submitted that the above decision is not applicable on the appellants as the hon’ble High Court has passed the decision in favor of the same party (M/s Larsan and Toubro Ltd.) on the even issue. This decision of the Hon’ble Madras High Court is reported at 2006 (198) E L T 177 (Mad). In this case, hon’ble High Court have also approved the eligibility to the benefit of the exemption on the RMC manufactured at site concerning an identical earlier notification viz. 4/1997 CE dated 01.03.97. The head note of the case is reproduced as follows:

“Ready Concrete Mix - Exemption from duty available only if manufactured at site by builder for use for its own construction at site of construction - Duty leviable under sub-heading 3824.20 of Central Excise Tariff when ready concrete mix manufactured in a Ready Mix Unit and supplied to sites of construction different from site of mixing plant. [paras 7, 8]”

The appellant had submitted that on perusal of the above case also, it is clear that exemption to RMC will be available if it is manufactured at the construction site for further use at the site. In their case also RMC is manufactured at site and further used at the construction site itself and so the exemption under notification should be made available to them. Thus, this judgment is squarely applicable in their case and since judgment of hon’ble High Court has precedence over the judgment of Tribunal, the decision relied by impugned order is not applicable and impugned order is liable to be set aside.

6)            Aligning with above, it is submitted that they had also placed reliance on the decision given 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 has also been confirmed by the Hon’ble Punjab & Haryana High Court reported in 2007 (217) E L T 345 (P&H). The synopsis of the case are reproduced as follows:

“Ready Mix Concrete” manufactured at site - Exemption under Sl. No. 51 of Notification No. 4/97-C.E. available provided it is manufactured at site of construction. - Ready mix concrete and Concrete mix falls under Chapter 38 of Central Excise Tariff Act, 1985, fact not disputed. Exemption to Concrete mix at Sl. No. 51 of Notification No. 4/97-C.E. should not be given a narrow meaning as to include only Concrete mix and to exclude from its ambit Ready mix concrete manufactured at site. Concrete mixing plant, by necessity, to be located at place within vicinity of the area where dam is being constructed. Fact of manufacturing Concrete mix away from site and transporting the same to the site itself would not exclude the Concrete mix manufactured from exemption granted under Sl. No. 51 of Notification No. 4/97-C.E. Entry at Column No. 2 at Sl. No. 51 of Notification No. 4/97-C.E. refers to only Chapter 38 ibid and not to any heading or sub-heading No. If the law makers did not intend to exempt Ready mix concrete falling under sub-heading 3824.20/3824.90 ibid, they would have categorically said so. [paras 9, 10, 11, 12]”

From the judgement given in the above case, it is very clear that in a similar exemption notification in respect of concrete which was in force earlier, it was held that concrete includes RMC within its ambit and exemption was also made available to RMC. As the facts of the instant case are similar to the above cited case, the benefit of the decision should have been extended to them. But this decision has not even been discussed while passing the impugned order. As such, the said order has turned to be a non-speaking order in light of the decision given by the Hon’ble Supreme Court in the case of Commissioner of Central Excise, Bangalore versus Srikumar Agencies [2008 (232) E.L.T. 577 (S.C.)] wherein it was held that:-

“Appellate Tribunal’s order - Non-speaking order - Facts not analysed in detail in impugned order by Tribunal - Disposal of appeals by mere reference to decisions not proper way to deal with appeals - Applicability of decision cited by Revenue not considered - Appeals involving different goods - CESTAT ought to have examined cases individually and articles involved - Manner of disposal not proper - Impugned order set aside - Question referred to Larger Bench of Supreme Court not answered as matter remitted to CESTAT for fresh decision by appropriate Bench - Section 35C of Central Excise Act, 1944. - By clubbing all the cases together and without analyzing the special features of each case disposing of the appeals in the manner done was not proper. [para 6]”

            As the facts of the cited case were similar to the present case, its benefit should have been extended to the appellant but the impugned order has not even discussed and distinguished the cases cited by them. Therefore, the impugned order is not tenable in the eyes of law and is liable to be quashed.

7)            The appellant submit that in view of the above detailed discussion, it is very much clear that the concrete mix and RMC are same and they are entitled to avail the benefit of exemption notification no. 4/2006 CE dated 01.03.2006. They further submit that the learned Assistant Commissioner has denied the applicability of decision given in the case of 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)] and Share Medical Care versus UOI [2007 (209) E L T 321 (SC)] by stating that the above judgements are related only with those cases where there are two notifications in force for the same goods and it is the option of the assessee to choose the one beneficial to them. The impugned order has held that the RMC and concrete mix are two different products, thus, the benefit of above decision cannot be extended to them. In this respect, they submit that on the basis of submissions made in the forgoing paras, it is proved that the RMC is the species of the concrete mix. Thus, the description given for concrete mix will automatically include the RMC unless otherwise specified. Therefore, it is concluded that since both products are the same, the above referred decisions are very well relevant in the present case and their benefit was supposed to be extended to the appellants which has not been done. It is reiterated that here also the appellant has the option either to avail the benefit of the notification no. 1/2011 CE dated 01.03.2011 providing concessional rate of duty or the notification no. 4/2006 CE dated 01.03.2006 providing Nil rate of duty. As the appellant finds notification no. 4/2006 CE dated 01.03.2006 as more beneficial, the benefit of the same has been taken by them. Therefore, the impugned order has erred in rejecting the application of the above cited cases in the facts and circumstances of the present case and is liable to be quashed.

8)            The appellant further submit that the interpretation which brings harsh consequences on the assessee should not be followed. In this regard attention is also invited towards the ratio of Supreme Court judgment in the case of SNEH ENTERPRISES Versus COMMISSIONER OF CUSTOMS, NEW DELHI [2006 (202) E.L.T. 7 (S.C.)], in which the hon’ble Apex Court has held that:-

“25. While dealing with a taxing provision, the principle of ‘Strict Interpretation’ should be applied. The Court shall not interpret the statutory provision in such a manner which would create an additional fiscal burden on a person. It would never be done by invoking the provisions of another Act, which are not attracted. It is also trite that while two interpretations are possible, the Court ordinarily would interpret the provisions in favour of a tax-payer and against the Revenue.”

The analysis of above decision makes it clear that the interpretation of any provision should not create additional fiscal burden on the assessee. In the instant case, the department has wrongly interpreted that the benefit of notification no. 4/2006 is not available to RMC as it specifies product concrete but in reality, product concrete and RMC are one and the same thing. Therefore, the impugned order denying benefit of the said notification is not sustainable and is liable to be quashed.

9)            Without prejudice to the above contentions, they also submit that the product described as concrete mix has to be necessarily construed as one referring to the Ready Mix Concrete only, for the following reasons:

(a)   The product referred to as concrete mix capable of produced only at the site of construction with no shelf life and which is not in a marketable state cannot be regarded as excisable goods within the meaning of the Central Excise Law.

(b) There is no tariff entry concerning the said goods under the Central Excise Tariff Act whereas the only entry available under the Tariff relates only to the Ready Mix Concrete.

(c)   Notification no. 4/2006 CE dated 01.03.06 having referred to the concrete mix as falling under Chapter heading 38 of the Central Excise Tariff Act. It is but necessary to treat the said entry as only referring to the RMC, particularly in the absence of any other entry in the said chapter referring to the Concrete mix, as otherwise notification no. 4/2006 CE would be rendered meaningless which is not permissible under law as has been held in a plethora of judgments of the courts and tribunals.

(d) The above contentions of the appellant are further strengthened by circular no. 601/38/2001 CX dated 20.11.01 issued by the Central Board of Excise & Customs. In this circular it has been informed that the Board has accepted the decision of the tribunal in the case of Associated Cement Co., Ltd., reported in 2011 (138) E L T 911 (Tri.-Mum) consequent to the dismissal of the revenue appeal by the Hon’ble Supreme Court and accordingly modifying their earlier circular and deciding that the RMC prior to its being brought within the ambit of the entry under sub heading 3824.10 of the CETA with effect from 01.03.97 cannot be classified under chapter sub heading 38.23 of the Central Excise Tariff Act as earlier clarified by them. They submit that the ratio of the said judgment would equally apply to the concrete mix also in the absence of any specific classification for the said product under Chapter 38 of the Central Excise Tariff Act and therefore it is but necessary to regard the said entry as only referring to the RMC. This is because the product concrete mix for the various reasons mentioned above cannot at all be held to be excisable goods since it is not a product capable of being bought and sold in the market.

10)         The appellant further submits that in view of the aforesaid submissions, when the demand of duty itself is not sustainable, the question of recovering interest does not arise and therefore, the impugned order demanding interest under section 11AA of the Central Excise Act, 1944 should be quashed.

11)         The appellant also submits that the impugned order has also imposed penalty under section 11AC of the Act read with Rule 25 of the Central Excise Rules, 2002. In this respect it is submitted that the penalty under section 11AC is imposable only if the non-payment or short payment of excise duty has been due to any fraud, collusion or any willful misstatement. This is clear from the language of section 11AC during the relevant period which is reproduced as follows:-

“SECTION 11AC. Penalty for short-levy or non-levy of duty in certain cases – Where any duty of excise has not been levied or paid or has been short-levied or short paid or erroneously refunded by reasons of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (2) of section 11A, shall also be liable to pay a penalty equal to the duty so determined:………………..”

The analysis of opening para of section 11AC makes it ample clear that the penalty under this section can be imposed if the non-payment or short payment of duty is because of fraud, collusion or suppression of facts. In the given case, the details of manufacturing process carried on by the appellant and product manufactured by them was already in knowledge of the department. In fact, the appellant had themselves asked about the clarification of duty leviability on their product RMC. This clarification was sought to Deputy Commissioner of Central Excise, Division-V, Janakpuri, New Delhi (the same office from which the impugned order is issued). The clarification was sought vide their letter dated 20.5.2011 which was received by department on 30.5.2011.In this letter, it was specifically being asked to clarify whether the excise duty is leviable on RMC produced and used in the site by the service provider? Several other issues were also mentioned in this letter; which were asked to be clarified. This shows that the department was well-aware of the fact that the RMC is being manufactured by the appellant at their site and is used therein. Thus, there was no suppression on part of the appellant, rather they had taken a genuine step to clarify the doubts regarding the excisability of RMC. But their genuineness is equated to the fraud and suppression of facts. When the things were already in knowledge of the department, it cannot be said that there was any suppression on part of the appellant. Therefore, the penalty under section 11AC (which is leviable only in case of fraud, collusion or willful mis-statement to evade payment of duty) is not sustainable and impugned order is liable to be quashed.

12)         In continuation to above, they submit that for imposing penalty, presence of mens-rea is a mandatory requirement and in the absence of which imposition of penalty is unjustified, as enshrined by the Hon'ble Supreme Court in the case of Hindustan Steel Ltd v/s. State of Orissa - [1978 (2) ELT (J-159)] and number of subsequent judgments from various judicial fora based thereupon. They submit that they have claimed exemption on the basis of various decisions given by High Courts and Tribunal as cited supra. Thus, none of the acts were backed up with any ulterior motive or malafide intention to evade duty and therefore, imposition of penalty is incorrect and uncalled for based on settled position on the issue. Thus, mens-rea is a mandatory requirement for imposition of penalty, in support of which reliance is placed on the ratio of following judgments:

·         2010 (258) ELT 465 (SC) – Sanjiv Fabrics
·         2007 (207) ELT 27 (P &H) – UT Ltd
·         2007 (5) STR 251 (P & H) – Kamal Kapoor
In view of the above submissions, the impugned order levying penalty under section 11AC is not tenable and is liable to be set aside.

13)         Further, they also place reliance on the decision given by Apex court in the case of Commissioner of Central Excise, Trichy versus Grasim Industries Ltd. [2005(183) E.L.T. 123 (SC)] wherein it was held that where the act of assessee is based on the interpretation taken by the Tribunal, penalty cannot be imposed as the act is based on bonafide belief. In the instant case, their act was based upon the decisions given in the case of M/s Sun Exports and M/s L & T as discussed hereabove. Thus, being an act based upon bonafide belief, the impugned order is not sustainable and is liable to be quashed.

14)         Also, the confirmation of penalty is not tenable in the light of decision of CCE, Goa vs M/s Betts India Pvt Ltd [2008-TIOL-2057-CESTAT-MUM] wherein it is held that where the issue pertains to interpretation of any provision, penalty is not imposable. Similar decision has been given in the case of M/s Arani Agro Oil Industries Ltd. vs CCE, Vishakhapatnam [2008-TIOL-1883-CESTAT-BANG]. In this case, it is held that where the assessee had a bonafide belief of eligibility due to interpretation of provisions, penalty is not imposable. The appellant’s case also involves interpretation as regards availment of benefit of the notification and so penalty should not be imposed on them. Therefore, the benefit of these decisions should be extended to them and the impugned order in original should be quashed.

Reasoning of Judgment:

The issue before commissioner (Appeals) is whether the appellant is entitled to get the benefit of notification No. 4/2006 dated 1.3.2006(S. N. 74). The Appellant is manufacturing Ready Mix Concrete(RMC) falling under heading 38245010 of the schedule to Central Excise Tariff Act 1985. Central Excise duty @1% on Ready-Mix- Concrete (RMC) was levied w.e.f. 1.3.2011 vide notification no. 01/2011-CE dated 1.3.2011. The above notification reads as under:-

S.NO	CHAPTER OR HEADING OR TARIFF ITEM OF THE FIRST SCHEDULE	DESCRIPTION OF EXCISABLE GOODS	RATE
74	CHAPTER 38	CONCRETE MIX MANUFACTURED AT THE SITE OF CONSTRUCTION FOR USE IN CONSTRUCTION WOK AT SUCH SITE.	NIL

In the above said notification the manufactured items has been mentioned as "Concrete mix manufactured at the site of construction for use in construction work at such site". The original authority seeks to make a distinction between 'Concrete Mix' and 'Ready Mix Concrete' only on the basis of the nomenclature used without providing any other basis like difference in composition, use, trade parlance, test report, product specification or technical literature about the products and so on. The product 'ready mix concrete' cannot be distinguished from 'concrete mix' in the absence of any separate tariff heading for the same and also the fact that the identity and use of both products remain the same. The following grounds have to be taken into consideration:-

The ingredients or raw material used in making the concrete is the same in both the types. The ingredients are Cement, Mineral admixtures, Aggregates (Coarse & Fine), Water, Admixtures (Chemical) and illustrated clearly in IS 456-2000 (Plain and Reinforced Concrete Code of Practice) and the method of mix proportioning (also called as mix design) is the same in both the types and are done in accordance with IS 10262-2009 (Concrete Mix Proportioning- Guidelines) Copies of these were also enclosed for perusal and record.

All procedures for sampling, testing and acceptance are the same for both the types of concrete sourced and IS 456-2000 is used as the base code for both the types for all issues pertaining to material sourcing, testing, mixing, production & transportation.

Thus the concrete mix manufactured either at site or nearer to the site as well as the beneficial to him. The above position has been clarified by various judgment by Hon'ble Supreme Court in following cases:

1. Collector of Central Excise, Baroda versus India Petro Chemicals reported in 1997 (92) E L T (SC)

2. H.C.L Ltd., versus Collector of customs New Delhi -2001 (130) EL t 405 (SC)

3. Share Medical Care versus U01- 2007 (209) E L T 321 (SC)

4. Chief Engineer, Ranjit Sagar Versus Commissioner of Central Excise, Jalandhar reported in 2006 (198) ELT 503(Tri-LB)

5. Hon'ble Punjab & Haryana High Court reported in 2007(217) ELT 345 (PH).

6. Hon'ble Madras High Court in the Larsen & Toubro case reported in 2006 (198) ELT 177 (Mad) have approved the eligibility to the benefit of the exemption on the RMC manufactured at site concerning an identical notification viz. 4/1997 CE dated 01.03 97.

In the Board Circular No. F. N. 456/22/99-CX dated 18.5.1999 it has been held that the expression 'site' may not be given a restrictive meaning and shall include any premises made available to the manufacturer of goods falling under heading no. 68.07 of the schedule to the Central Excise Tariff Act, 1985 by way of a specific mention in the contract/agreement for such construction work provided that the goods manufactured at such premises are solely used in the said construction work only. Using the same analogy, the meaning of `site' appearing in the notification No. 4/2006-CE dated 1.3.2006(S. N 74) should be dealt with therein similarly and should not be given a restrictive meaning and shall include all premises made available to the manufacturer of goods provided that the goods manufactured at such premises are solely used for the said construction only. The appellant has also stated that the RMC manufactured therein is being utilized exclusively for the said project only and the original authority has not refuted the same. No evidence has been adduced by the original authority that the RMC manufactured by the appellant are not exclusively used in the said project only.

In the view of the above it seems that appellant’s product falls within description of the exempted goods as appearing at SL. No. 74 OF the notification no. 04/2006-CE dated 1.3.2006 and was therefore entitled to the exemption under notification no. 04/2006- CE dated 01.03.2006.

Order of Commissioner (Appeals): -

The Commissioner (Appeals) find merit in the appeal filed by the appellant and accordingly, the appeal was allowed.

Decision: The appeal was allowed.

Conclusion: The essence of this case is that the product RMC and concrete mix are primarily the same and the only difference between them is that of the shelf life. The product RMC is a technologically advanced version of the product concrete mix, having longer shelf life than the product concrete mix. Moreover, the ingredients and composition of both the products are the same and accordingly, the benefit of nil rate of excise duty available for the product concrete mix is also extendable to the product RMC.

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PJ/Case Study/2013-14/65
03 August 2013

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PJ/Case Study/2013-14/65 03 August 2013

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PJ/Case Study/2013-14/65
03 August 2013