Whether RMC manufactured at the site of construction will be classified as concrete mix with NIL rate of excise duty?

CASE STUDY

Prepared By: CA Preksha Jain

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. It has been alleged in this case 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 The adjudicating authority confirmed the allegations of the show cause notice and passed order upholding the demand of excise duty along with interest and penalty. The assessee also filed appeal to the Commissioner Appeals but could not succeed there. Subsequently, the assessee filed an appeal before the tribunal where the appeal was allowed in their favour. The outcome of the Final Order passed by the Tribunal is the subject matter of the present case study.

M/S CONSOLIDATED CONSTRUCTION CONSORTIUM LTD.

 [FINAL ORDER NO. 53651 / 2017 DATED 31.05.2017]

Relevant Legal Provisions:

i)      Rule 4 of the Central Excise Rules, 2002

ii)             Board circular no. 315/31/97-CX dated 23.05.1997

iii)            Rule 25 of the Central Excise Rules, 2002

iv)           Section 11AC of the Central Excise Act,1944

v)            Circular No. 368/1/98-CX dated 06.01.98

vi)           Notification no. 4/2006-CE dated 01.03.2006

vii)          Notification no. 1/2011 CE dated 01.03.2011

viii)         Section 11AB of the Central Excise Act, 1944

Issue Involved:-

Whether RMC manufactured at the site of construction will be classified as concrete mix with NIL rate of excise duty?

Brief Facts:-

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, they have contravened the provisions of Rule 4 of the Central Excise Rules, 2002 and so the duty amounting to Rs. 4,39,358/- is liable to be recovered from them along with interest and penalty.Accordingly, it was alleged that as excise duty was required to be paid as the assessee is not entitled to avail benefit under Notification No. 4/2006-CE dated 01.03.2006. However, the submissions made by the assessee were not considered by the adjudicating authority and the impugned order in original no. 04/2013-CE-DEMAND dated 31.01.2013  was passed thereby confirming the demand of duty along with interest and penalty. Thereafter, the assessee filed appeal before the Commissioner Appeals along with the stay application. 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 order in appeal, the assessee filed appeal to the Tribunal. 

1)                Appellant’s Contentions:- The assessee made following submissions before the appellate authority:- The appellant submit that the impugned order in appeal (hereinafter referred to as the impugned order) passed by the learned Commissioner (Appeals) confirming the duty demand along with interest and penalty is wholly and totally erroneous and is liable to be set aside.

2)                The impugned order has held that the issue involved in the present appeal is whether the exemption under serial no. 74 of the Notification No. 4/2006-CE dated 01.03.2006 is available to Concrete Mix falling under Chapter 38 also applicable to Ready Mix Concrete classifiable under Chapter heading no. 38245010. As the issue involves determination of the fact whether the appellant are entitled to claim the benefit of the exemption notification no. 4/2006-CE dated 01.03.2006, it is very important to understand whether there is any difference between concrete mix and Ready Mix Concrete (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 concrete is 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 has 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 of Sun 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 in original 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.

4)                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:

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 Versus STATE 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.

5)                It is further submitted that the impugned order in appeal has merely confirmed the duty demand along with interest and penalties by accepting the reliance placed by the adjudicating authorities on the board circular no. 315/31/97-CX dated 23.05.1997 and Circular No. 368/1/98-CX dated 06.01.98 wherein it has been held that Ready Mix Concrete and Concrete Mix are two different products and since exemption under the said notification has been provided only to concrete mix, therefore it is not applicable to ready mix concrete even if both fall under chapter 38. 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. In this respect, the appellant submits that the clarification issued by the said circulars have already been distinguished by the Punjab & Haryana High Court and the Madras High Court and even confirmed by the Supreme Court in the case of Simplex Infrastructures supra, the confirmation of demand on the basis of such circulars is totally improper. The appellant submit that the decisions relied upon by them of Madras High Court in the case of Larsen & Turbo Ltd. Vs. Union of India [2006 (198) E.L.T. 177 (Mad.)] and by the Larger Bench of the Tribunal in the case of Chief Engg. Ranjit Sagar Dam Vs. Commissioner of C.Ex., Jalandhar [2006 (198) E.L.T. 503 (Tri.-LB)] have been passed after considering the above cited circulars. This clearly indicates that the above cited decision of Larger Bench and of Madras High Court were passed after referring the clarification of the said circulars and distinguishing the clarification issued by the said circulars. As such, the interpretation taken by the High Court and the Larger Bench of the Tribunal are binding precedent rather than the clarification issued by the Board. In support of our contention that the clarifications issued by board are not binding on assessees and courts, we wish to place reliance on the Supreme Court decision in the case of Commissioner of C.Ex., Bhopal Vs. Minwool Rock Fibres Ltd. [2012 (278) E.L.T. 581 (SC)]. In this case also, there was classification dispute between the assessee and the revenue department. The assessee claimed classification of their product under chapter 6807.10 whereas the department claimed classification of the said product under chapter 6803 on the basis that entry 6803 specifically covered the product slagwool and a circular issued by the Board dated 17-9-2001 clarified that rockwool and slagwool requires to be classified under sub-heading no. 6803. It was opined by the Supreme Court that the classification claimed by the assessee is to be applied as entry that is more beneficial to the assessee required to be applied. It was further held by the Supreme Court that the issue under consideration was covered by the decision of the Larger Bench of the Tribunal in the case of CCE, Raipur Vs. Punj Star Insulation Fibre Co. [2004 (170) E.L.T. 43 (Tri.-LB)] that held that slagwool and rockwool would fall under sub-heading no. 6807.10 and not under 6803. Hence, the Apex Court held that the departmental circulars are not binding on assessee or quasi judicial authorities or courts and therefore, in that view of the matter, the circular/instructions issued by the Board, would not assist them and hence the appeal filed by the revenue was dismissed as being devoid of merits. Thus, both of the above circulars as relied by the impugned order in the present appeal are ultra vires the provisions of existing Central Excise law. As such, duty demand cannot be confirmed by placing reliance on the above cited circulars and ignoring the law laid down by the High Courts and Supreme Court.  

In continuation to the above, reliance is also placed on the Apex Court’s judgment in the case of CCE, Vs. Ratan Melting & Wire Industries [2008 (231) E.L.T. 22 (S.C.)] wherein it was held as follows:-

Departmental clarification vis-a-vis Court decisions - Binding nature of - Circulars and instructions issued by C.B.E. & C. binding on authorities under respective statutes - Clarifications and circulars issued by Central and State Governments representing merely their understanding of statutory provisions and are not binding on Court - Court to declare what particular provision of statute says and not the Executive - Circular contrary to statutory provisions having no existence in law - Views expressed in 2004 (168) E.L.T. 145 (S.C.) affirmed - Section 37B of Central Excise Act, 1944. - When the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. [paras 6, 7]

In the above cited decision, it was held that the clarifications issued are not binding on the courts and when the Supreme Court or the High Court declare a law on the issue after considering the clarification, it would not be appropriate for the court to direct that the circular should be followed and not the decision given by the Supreme Court of High Court.  Similarly, in the present appeal, the above cited circulars have been considered by the Hon’ble Madras High Court and the Larger Bench of the Tribunal. Consequently, the said circulars cannot be followed as binding precedent when the issue has already been examined by the High Court. As such, the reliance placed on the above cited circulars is totally misconceived and deserves to be quashed. Similar decision was given by the Apex Court in the case of CCE, Nagpur Vs. Gurukripa Resins Pvt. Ltd. [2011 (270) E.L.T. 3 (S.C.)] thereby holding that :-

Strictures against CESTAT - Fallacious decision - Tribunal based its decision on Board’s clarification which stood rescinded and also when law on the question already declared by Court - Specious ground that said clarification binding on Department - Settled proposition that circulars binding on authorities but when Court declares law, not appropriate to direct that Board’s Circular should be given effect to and not view expressed in Court’s decision - Tribunal decision clearly fallacious. [paras 18, 19]

In light of the above cited decisions of Apex Court, the reliance placed on the board circulars should be rejected as they have been already distinguished by the Madras High Court and the Larger Bench of the Tribunal and the appeal filed by the appellant should be allowed.

Moreover, the assessees are not bound by the board circulars and they have full liberty to challenge them. This has also 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, and Punjab and Haryana High Court and Madras High 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.

Moreover, the duty demand is not only contestable on merits of the case strongly in favour of the appellant but also on the grounds of limitation. It is worth noting that the appellant had sought clarification of duty leviability on their product RMC. This clarification was sought to Deputy Commissioner of Central Excise, Division, Jodhpur (the same office from which the impugned order in original is issued). The clarification was sought vide their letter dated 20.5.2011 which was received by department on 24.5.2011. 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. Not only this, the fact that extended period of limitation could not be invoked in the present case also strengthens from the decision given by the Hon’ble Supreme Court on similar facts in the case of Continental Foundation Jt. Venture Vs. Commissioner of C.Ex., Chandigarh [2007 (216) E.L.T. 177 (S.C.)]. In this case also, the appellants cleared RMC without payment of duty on the bonafide belief of claiming the exemption admissible to the product concrete mix under earlier notification no. 4/97-CE dated 01.03.1997. The hon’ble Supreme Court held in para 9 held as follows:-

“9. We are not really concerned with the other issues as according to us on the challenge to the extended period of limitation ground alone the appellants are bound to succeed. Section 11A of the Act postulates suppression and, therefore, involves in essence mens rea.”

As the facts and circumstances of the above cited decision of Supreme Court are very much similar to the present case, its benefit should be extended and the impugned order in appeal should be quashed on the grounds of limitation itself as in the present case, everything was within the knowledge of the revenue department. Consequently, equal penalty confirmed under section 11AC is also not tenable and the same deserves to be quashed.

6)                The impugned order has also held that the appellants have contended that there is no difference between Ready Mix Concrete and Concrete Mix and if RMC is manufactured at site of construction for use in construction work at such site it would be eligible for exemption under serial no. 74 of the Notification No. 4/2006. It is not in dispute that the appellants are manufacturing RMC at the site of construction which is used in construction at such site. The appellants have established a RMC batching plant at the site of construction of AIIMS building for use in the construction of said building. As per exemption notification, the exemption would be applicable if the concrete mix falling under chapter 38 is manufactured at the site of construction and is used in construction work at that site. It is seen that the adjudicating authority had comprehensively discussed the issue and referred to various case laws and circular. It appears that Ready Mix Concrete and Concrete Mix are different products, main difference being shelf life and stability. Since concrete mix has less shelf life and generally used immediately after manufacture, it has been exempted. However, the RMC is technologically advanced product and has longer shelf life and can be stored and transported to places other than site of manufacture. Therefore, only the concrete mix has been exempted and not the RMC. In fact the Indian Ready Mix Concrete Association, Mumbai had also in their representation to the Board had stated that Ready Mix Concrete and Concrete Mix are two separate commodities. In fact the appellants have also admitted that whenever they clear RMC to other sites, away from the site of construction, they pay duty on it. It is well settled proposition that exemption notification is construed strictly and exemption granted to one commodity does not extend to similar goods, even if having identical use and classifiable under same heading. Thus, no exemption is intended on the RMC. In view of the above, it has been held that there is no force in the contention of the appellants that Concrete Mix and Ready Mix Concrete is one and the same product and is exempted under serial no. 74 of the Notification No. 4/2006-CE dated 01.03.2006. In this regard, it is submitted that the exemption contained in the present notification was earlier covered by serial no. 51 of the Notification no. 4/97-CE dated 01.03.1997 wherein the said serial provided Nil rate of excise duty for “Concrete Mix manufactured at the site of construction for use in construction work at such site”. From perusal of the above serial no., it is very much clear that concrete mix manufactured at the site of construction for use in construction work at such site was fully exempted since inception. There has been no change at all and exactly same words are written in serial no. 74 of the Notification no. 4/2006-CE dated 01.03.2006. Moreover, the decisions relied upon by the appellant also clearly reflect and confirm the finding that the exemption available to the Concrete Mix is actually meant for RMC and all the relied upon decisions extend the benefit of the exemption to RMC manufactured at site and used in the construction work at such site. Concurrently, on analysing the amendments made in the chapter 38 of the Central Excise Tariff Act, 1985 from time to time, it is also clear that concretes do not specifically find mention in the Central Excise Tariff Act, 1985. Moreover, it has been explained that the product concrete and ready mix concrete are one and the same product as their ingredients, characteristics and use are also same. The only difference between the product concrete and ready mix concrete is of the shelf life. The product ready mix concrete is technologically advanced version of the product concrete mix and practically the reason for concrete mix not finding any place in the Central Excise Tariff Act is its non-marketability. As the product concrete mix has extremely short shelf life, it is not possible to sale concrete mix and consequently is not marketable and is also not excisable. On the contrary, the product ready mix concrete is an advanced version of the product concrete mix that has longer shelf life and is marketable and so also excisable and finds specific mention in the Central Excise Tariff Act also. The appellant submits that if the contention of the Commissioner Appeals is accepted that the ready mix concrete is different from concrete mix, then the notification specifying nil rate of duty for concrete mix would be held as redundant because the product concrete mix is not excisable and does not even finds mention in the Central Excise Tariff Act, 1985. If the notification is interpreted to provide exemption only to concrete mix, then there would be no relevance of the said serial no. because when concrete mix is not excisable itself, there is no need to provide exemption to it. However, the interpretation taken by us is legal and proper because as ready mix concrete is a type of concrete mix that has reasonable shelf life, consequently, it would be rightly eligible for benefit of the exemption provided in the notification no. 4/2006-CE dated 01.03.2006. In support of our contention that ready mix concrete is also covered by the exemption notification 4/2006-CE dated 01.03.2006, we would like to place reliance on the decision given in the case of SIMPLEX INFRASTRUCTURES LTD. VERSUS COMMISSIONER OF C. EX., BELAPUR [2012 (278) E.L.T. 539 (Tri. – Mumbai)]. In the above cited case, the appellant was engaged in the manufacture of ready mix concrete (RMC). They undertook manufacture of RMC in two project sites and availed the benefit of the notification no. 4/97-CE dated 1.3.1997 which granted exemption to concrete mix manufactured at the site and used in the site. Since the site area was fairly large, batching plant was set up in one part of the site and concrete mix manufactured was transported to the other parts of the site of construction.  The department was of the view that as the concrete mix was transported to other parts of site of construction, the benefit of exemption was not admissible to them. The Mumbai Tribunal, while allowing the stay application stated that merely because the project site being big in size and the construction is taking place in various parts of the site, it does not mean that ready mix concrete is manufactured at a place other than the project site. Notification No. 4/97 dated 1-3-1997 grants exemption to concrete mix manufactured at the site of construction for use in construction work at such site. From the work orders available for the construction work, it is seen that the appellant has undertaken civil work and for the same he has manufactured concrete mix. Merely because the RMC has been transported from the Batching Plant installed at the site to various places in the site, it does not mean that the goods are not produced at the construction site. The Notification does not prescribe any spatial dimensions/restrictions for the site. It merely says that the concrete mix should be manufactured at the site of construction. Since the project site is the site of construction and the Batching Plant is installed at the project site, the benefit of Notification cannot be disallowed. Thus, the Mumbai Tribunal was of the view that the appellants have made out a strong prima facie case in their favour for complete waiver of pre-deposit of the dues adjudged.

In light of the above cited decision, the appellant submit that there is no doubt as regards admissibility of benefit of the exemption notification to RMC as it can be observed that the appellant in the above cited case was a manufacturer of RMC.  Moreover, in the present case, the learned Commissioner Appeals has confirmed that there is no doubt as regards use of RMC manufactured by the appellant in the site of construction of AIIMS building. The appellant submits that the benefit of the exemption notification claimed by them is admissible if the concrete mix is manufactured at the site of construction and is used in the construction work at the site. In the present case, the Commissioner Appeals has confirmed that the RMC manufactured by them were used in the construction of AIIMS building. However, the sole reason to deny the benefit of the notification no. 4/2006-CE dated 01.03.2006 was that product concrete mix is different from RMC and the benefit admissible for concrete mix cannot be extended to the product RMC. In view of the above cited case, there is no room for any doubt that the benefit of nil rate of duty is also admissible with respect to RMC. Consequently, the duty demand confirmed against the appellant on erroneous contention that the benefit of exemption is not available for RMC is not sustainable and the same should be quashed by allowing the appeal.

7)                Similarly, reliance is also placed by the decision given by the hon’ble Supreme Court in the case of COMMISSIONER OF C. EX., BELAPUR VERSUS SIMPLEX INFRASTRUCTURES LTD. [2008 (225) E.L.T. 338 (S.C.)] wherein it was held as follows:-    

Appellate Tribunal order - Basis for findings when factually wrong - Order not sustainable - Ready mix concrete (RMC) eligible for excise duty exemption only if produced at site - ‘Site’ defined in circular but not in the exemption notification - Tribunal order containing finding that manufacture at site not in dispute, not sustainable as adjudicating Commissioner held RMC manufactured at certain places and moved to construction site - Matter remanded to Tribunal to decide on the dichotomy between existence of batching plant, its location, mobility and area of site - Impugned order set aside - Tribunal to consider the matter afresh - Section 35C of Central Excise Act, 1944. [para 3, 4, 5]

On analysing the above decision, it is further clear that the benefit of nil rate of duty specified for the product concrete mix is also extendable to the product RMC. However, the Supreme Court remanded the matter to the Tribunal for determining the facts that the RMC so manufactured has been used in the construction work at site. In the present case, there is no dispute as regards utilisation of RMC manufactured by the appellant in the construction of AIIMS building at the construction site. The only objection raised by the Commissioner Appeals is regards admissibility of the benefit of the above exemption notification to RMC. As such, there remains no ambiguity as regards availability of the said exemption even to RMC in view of the above cited decision of the Supreme Court. Moreover, it is also worth observing that the exemption by way of specifying nil rate of duty in notification no. 4/2006-CE dated 01.03.2006 to concrete mix manufactured at construction site for use in the construction site is exactly worded as the earlier notification no. 4/97-CE dated 01.03.1997 which clearly indicates that the product RMC was eligible for the benefit of the said exemption since its inception. Therefore, the impugned order in appeal confirming the duty demand along with interest and penalty should be quashed and the appeal should be allowed.

8)                In continuation to the above, the appellant also wishes to submit that the impugned order has accepted that the difference between the product Ready Mix Concrete and Concrete Mix is of shelf life. However, it has held that since the concrete mix has less shelf life and generally used immediately after manufacture it has been exempted. However, the RMC is technologically advanced product and has longer shelf life and can be stored and transported to places other than the site of manufacture, therefore only concrete mix has been exempted and not the RMC. In this regard, the appellant submits that the above contention is absurd and sounds improper in view of the above cited decision of the Supreme Court holding that RMC is also eligible for the benefit of the exemption notification. Moreover, it is not understandable that on one hand, the impugned order is accepting that ready mix concrete has longer shelf life and is marketable while on the other hand it is contending that exemption is given to concrete mix as it has very less shelf life and is used immediately after manufacture. The appellant submit that for a product to be excisable, it is essential that product is marketable and is in position to sale the same. When a product is having no shelf life and is required to be immediately used after it is manufactured, it cannot be held to be marketable and capable of being bought and sold in the market. When a product is not marketable, it is also not leviable to excise duty. When the concrete mix is not excisable, and also does not finds specific mention in the Central Excise Tariff, the question of granting exemption to it seems to be illogical and absurd. When there is no excise duty is leviable on concrete mix, there is no requirement to give exemption to concrete mix and the exemption contained in the notification no. 4/2006-CE dated 01.03.2006 is meant for ready mix concrete. As such, even the Supreme Court has extended the benefit of the said exemption notification to the RMC manufacturers. Accordingly, the contention that the benefit of notification is not extendable to ready mix concrete is totally erroneous and misplaced and deserves to be quashed.

Moreover, the impugned order has also contended that the Indian Ready Mix Concrete Association, Mumbai has also in their representation to the Board had stated that the ready mix concrete and concrete mix are two separate commodities. It is submitted that this contention does not has force as it is covered by the clarification given by the Board vide Circular no. 315/31/97-CX dated 23.05.1997 which has been already distinguished by the appellant in the earlier paragraphs. Moreover, the submission of any association cannot be the sole basis to deny the benefit of exemption notification and the admissibility of benefit is to be examined in the light of conditions and provisions of the notification. As all the conditions stands satisfied by the appellant, they are rightly eligible for availing the benefit of the exemption notification no. 4/2006-CE dated 01.03.2006. Furthermore, it has also been held by the impugned order that the appellants have also admitted that whenever they clear RMC to other sites away from the site of construction, they pay duty on it. In this regard, the appellant submits that there is no harm in their paying duty on clearance of RMC to other sites of construction because the exemption under notification no. 4/2006-CE dated 01.03.2006 is admissible only when the concrete mix is manufactured at the site and used for construction work at such site. Accordingly, payment of excise duty on RMC cleared to other construction sites cannot become hurdle in claiming the exemption with respect to RMC manufactured at site and used in the construction work at such site. Further, this also proves the bonafides of the appellant that they have availed exemption under this notification only when all the conditions were fulfilled by them. Consequently, the impugned order that has confirmed duty demand along with interest and penalty on improper and absurd contentions is totally illegal and erroneous and deserves to be set aside. The appeal should therefore be allowed.

 It is further submitted that the impugned order has also held that it is well settled proposition that exemption notification is to be construed strictly and exemption granted to one commodity does not extend to similar goods, even if having identical use and classifiable under same heading. In this respect, the appellant submit that the above contention is not at all tenable at the outset as all the conditions for availing the benefit of the said notification have been strictly complied by them. The fact that the benefit of the exemption under this notification is also available to RMC manufacturers is clear by the above cited decision of Supreme Court in the case of Simplex Infrastructures Ltd. When there is no doubt as regards admissibility of benefit of the notification to the product RMC, the only thing that is to be checked is that whether the condition of the notification has been satisfied. The only condition in the exemption notification is that the “Concrete mix is manufactured at the site of construction for use in construction work at such site.” In simple words, 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.

Furthermore, the RMC manufactured by us falls under chapter 38 and the learned Commissioner Appeals itself have confirmed the fact that the RMC manufactured by appellant were used by them at the construction work at the site of AIIMS building itself. As such, all the conditions have been strictly complied by the appellant and they are rightly eligible for claiming the benefit of the exemption notification. Moreover, it is worth observing that the mentioning of Chapter 38 in the notification itself indicates that the intention is to provide exemption to all the types of concrete mix classifiable under chapter 38 and the exemption is not restricted to specific or particular chapter sub-heading. As such, the impugned order upholding the order in original is bad in law and deserves to be set aside. The appeal should be allowed.

9)                The appellant also submits the fact that they are eligible for claiming the benefit of serial no. 74 of the exemption notification no. 04/2006-CE dated 01.03.2006 is 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 has been given vide Order in Appeal No. 115/2013-C.E./DLH/2012 dated 03.06.2013 wherein it has been categorically mentioned that the appellant’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 are therefore entitled to the benefit of the said exemption notification. It is 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 has been passed without considering the decision and moreover, has 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. As such, the impugned order turns out to be a non-speaking and a non-reasoned order which is not relevant in the eyes of law.

10)           It is further submitted that the hon’ble High Court has passed the decision in favour of M/s Larsen 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, the impugned order is liable to be set aside.

11)           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. It has also been discussed in earlier paragraphs that the present exemption notification and the earlier exemption notification are worded exactly the same. 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.

12)           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. 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.

13)           The appellant further submits 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.

It is also worth mentioning that the above case law was also relied upon in their reply to the show cause notice and in the appeal filed to the Commissioner Appeals but the same has not even been considered while passing the impugned order. As such, the impugned order is not tenable, as it has turned out to be a non-speaking order in view of judgement given in the case of CC Vs Essar Oil Limited [2010-TIOL-560-HC-AHM-CUS] wherein it has been held that:-

“CESTAT is required to pass reasoned speaking orders - while setting aside the order of the Commissioner the Tribunal has not recorded any finding as to in what manner the findings recorded by Commissioner are erroneous or as to why it was required to take a different view.

It is a matter of regret that the Tribunal still continues to ignore the same: Despite there a being plethora of precedents holding that an appellate authority is required to record facts, contentions as well as reasons for arriving at its conclusions, it is a matter of regret that the Tribunal still continues to ignore the same and pass orders like the present one without recording facts or reasons.”

Hence, in the light of the above cited decision, the impugned order is not sustainable and is liable to be set aside.

14)           The appellant submit that apart from the above submissions, most of the submissions made by the appellant in their reply to the show cause notice as well as the appeal memorandum to the appeal filed to the Commissioner Appeals have not been considered while passing the impugned order in appeal. The said submissions are reproduced herein below and also form part of the grounds of appeal.

Ø 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:

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.

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.

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.

Ø In continuation to the above, it is also submitted that it has been again alleged that the appellant have claimed ineligible exemption vide serial no. 46 of the Notification no. 4/2006-CE dated 01.03.2006 for the clearances made from April, 2011 to June, 2011. In this respect, it was submitted that the exemption claimed in the ER-1 Return was erroneously claimed under Serial No.46 of the Notification 4/2006-CE dated 01.03.2006 during the months April 2011 to June 2011. The Exemption sought was actually meant under Serial No.74 of the Notification 4/2006-CE dated 01.03.2006. The appellant regret for the erroneous claim in the return. However, they submit that though they have claimed under incorrect Serial No. 46, the exemption sought was meant under Serial No.74. But, these submissions have not been accepted by the learned Deputy Commissioner while passing the order and so the impugned order is not sustainable.

Ø It is further submitted that it was contended in the order that the DSR Rates claimed in the Running Account Bill viz., Rs.2237.75 Per Cum and Rs.4147.40 Per Cum are for M15 grade and M30 grade Ready Mix Concrete, of which Rs.4147.40 Per Cum was determined to be the Transaction Value holding that the appellant have mis-declared the facts. It is once again submitted that the determination of Transaction Value of Rs.4147.40 Per Cum is totally unjustifiable considering the submissions made as follows. The learned Deputy Commissioner has erred in determining the Transaction Value as Rs 4147.40 for Ready Mix Concrete. The Rate adopted by Learned Deputy Commissioner is the DSR Rate for M30 grade Ready Mix Concrete and this rate includes labour cost for laying such Ready Mix Concrete which cannot be construed to be assessable value. It is submitted that the Ready Mix Concrete manufactured is of different grades viz., M10, M15 and M30. Each grade of Ready Mix Concrete has different components of mixtures at different ratios, and accordingly each grade has different rates. Hence, DSR rates specified in the agreement for different grades are only to be considered as transaction value and there has been no suppression from the department with intention to evade duty. Moreover, there is no reason for the appellant to mis-declare wrong DSR rates as ultimately, they are eligible to avail exemption of nil rate of duty under the notification no. 4/2006 and hence the above mentioned contention of the impugned order is not tenable and is liable to be quashed.

Ø 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.

Ø 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, Jodhpur (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 24.5.2011. Copy of this letter is enclosed. 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. 

Ø 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.

Ø 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.

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.

Ø It is further submitted that penal actions are concluded against the appellant in terms of the provisions of Rule 27 of the Central Excise Rules, 2002, for non-filing of ER-1 returns for the months of February, 2012 and March, 2012 and for delayed filing of returns for the months of March, 2011; April, 2011 and August, 2011. In this respect, the appellant reiterate that Rule 27 prescribes for general penalty and is a kind of residuary penalty which is at the discretion of the department to impose or not. Therefore, as in their case, there is no loss to the Revenue as they are eligible to avail the benefit of nil rate of duty on excisable goods cleared by them under notification no. 4/2006, they request not to impose penalty on them due to non-filing of nil return. They also place reliance on the decision given by Hon’ble Tribunal in the case of Rajwani Synthetics P. Ltd. vs Commissioner of Central Excise, Surat [2004 (176) ELT 240 (Tri.-Mum)] in which it was held that penalty was not warranted when nil return has not been furnished. The synopsis of the above cited case is as follows:

“Penalty - Export-Oriented Units - Failure to file RT-13 returns not having serious consequences on Government revenue, returns for the period being ‘nil’ without there being any production and clearance - Imposition of penalty not warranted - Rule 210 of erstwhile Central Excise Rules, 1944 - Rule 27 of Central Excise Rules, 2002. [para 5]”

The facts of the above cited case are also similar to their case as they also have failed to furnish or delayed in furnishing nil returns as they were eligible to avail exemption notification in respect of their goods. Therefore, extending the ratio of this decision to them, penalty should not have been imposed on them under Rule 27 of the Central Excise Rules, 2002, and the impugned order in original should be quashed.

Ø It is also submitted that the impugned order has also placed reliance on the decision given by the Hon’ble Supreme Court in the case of Union of India v/s Dharmendra Textile Processors [2008 (231) E.L.T. 3 (S.C.)] wherein it has been held that equal penalty is imposable and language employed in statue is determinative factor of the legislative intent. In this regard, the appellant submit that as per language of the section, penalty can be imposed only if the short-payment is due to any of the ingredients referred in the section like fraud, collusion, willful misstatement or suppression of facts. However, in the instant case, none of these ingredients are present. As such, the judgment of the hon’ble Supreme Court has been delivered by ignoring the provisions of the section mentioned in the law. It has been held in the case of A-One Granites v State of U.P. (2001)3SCC537; AIR2001 SC 1203; Salmond on Jurisprudence, 12th Edn. Pg 167 that the decision given by the hon’ble Apex Court which has been rendered per incuriam, i.e. by ignoring the provisions of the Act, is not binding under article 141 of the Constitution. The doctrine of per incuriam is an exception of the rule of precedents and it says that any expression resulting from ignorance is not a binding authority and it may be ignored. In the instant case, the mens rea/willful suppression has been mentioned as essential ingredients for the purpose of imposing the penalty as contemplated by the provisions of the Central Excise Act, 1944. But the hon’ble Supreme Court has rendered decision of Dharmendra Textiles by ignoring this vital fact. As such, it is not binding precedent as per doctrine of per incuriam. In the instant case, there was no willful suppression by the appellant but this is a simple case of availing the benefit of notification no. 4/2006. Further all the facts of the case were well within the knowledge of the department as clarification regarding applicability of excise duty on product RMC was also sought by the appellant. Further, returns have also been filed by the appellant. When everything was known to department, there cannot be any suppression of facts. Thus, allegation of suppression is not leveled. As such, the penalty under section 11AC that is leviable for the charge of suppression cannot be imposed upon them by relying on the case of Dharmendra Textiles. As such, the impugned order is not tenable and it should be set aside.

Ø In continuation to above, it is submitted that the decision of hon’ble Supreme Court in the case of M/s Dharmendra Textiles has been referred by hon’ble Punjab and Haryana High Court in the following case:-

·        CCE, Chandigarh-II Vs M/s Sarvpriya Industries Ltd [2010-TIOL-523-HC-P&H-CX.]-

Central Excise - Supreme Court decisions in Dharmendra Textile as well as in Rajasthan Spinning & Weaving Mills do not lay down that for every short payment of duty, penalty is automatic: Dharmendra Textile as well as in Rajasthan Spinning & Weaving Mills is that mandatory penalty under Section 11AC of the Act was not applicable to every case of non-payment or short-payment of duty. Thus, even though the authorities may have no discretion once conditions stipulated under Section 11AC of the Act exist, in absence of fulfilment of such conditions, penalty could not be levied. In this view of the matter and the finding of the Tribunal that there was no allegation of suppression of facts with intent to evade the payment of duty, the penalty under Section 11AC of the Act was not warranted. No substantial question of law arises: PUNJAB AND HARYANA HIGH COURT

Thus, hon’ble High Court has ruled that penalty is not warranted in each and every case of non-payment of duty or short payment of duty. This should happen only due to suppression of facts with an intent to evade the payment of duty. In the light of this decision, since the impugned order has not been able to prove the ulterior motive, the penalty is not sustainable.

15)           With reference to submissions made herein para no. (14) above, it is submitted that these are the submissions that were made before learned adjudicating authority in the reply to the show cause notice as well as in the appeal memorandum to the Commissioner Appeals. However, none of these submissions have been discussed and distinguished by the learned adjudicating authority while passing the impugned order in original and by the learned Commissioner Appeals while passing the order in appeal. Thus, the order has proved to be a non speaking and non-reasoned order which is not sustainable in the light of following decisions:-

·        M/s Ashbee Systems Pvt Ltd v/s CCE, Delhi [2011-TIOL-181-HC-DEL-CX]-

Central Excise – procurement, erection and commissioning of pit and pitless type of Electronic Weigh Bridge – whether manufacture – CESTAT has not considered the grounds and case law relied upon by the petitioner – Matter remanded: It is noticed that the impugned order passed by the CESTAT does not notice and take into consideration the contentions raised by the petitioner including case law relied upon by them have not been referred to in the impugned order. Keeping in view the afore-said facts, the impugned order is quashed and CESTAT asked o decide the application for stay afresh. The Tribunal will keep in mind the contentions and reasons including the case law relied upon by the petitioner. It is clarified that this Court has not expressed any opinion on merits of the controversy and issue. CESTAT will independently apply its mind.: DELHI HIGH COURT;

·        UoI Vs M/s V E Commercial Vehicles Ltd [2011-TIOL-68-SC-CX]-

Appreciation of the evidence- matter remanded: findings recorded by the High Court in the impugned judgment and order and the conclusions arrived at thereto are contrary to the decision of this Court in Rajasthan Spinning & Weaving Mills (2009-TIOL-63-SC-CX) as also the evidence that is available in the nature of the show cause notice, reply submitted and the findings arrived at by the adjudicating authority. Those findings and the evidence on record should have been considered and appreciated by the High Court. Despite the availability of such evidence on record, the High Court was not justified to hold that there was no evidence adduced or brought on record in support of the contention that there was no malice or clandestine approach to evade payment of duty. The findings are without reasons and without appreciation of the evidence available on record. : SUPREME COURT;

·        CC Vs Essar Oil Limited [2010-TIOL-560-HC-AHM-CUS]:-

“CESTAT is required to pass reasoned speaking orders - while setting aside the order of the Commissioner the Tribunal has not recorded any finding as to in what manner the findings recorded by Commissioner are erroneous or as to why it was required to take a different view.

It is a matter of regret that the Tribunal still continues to ignore the same: Despite there a being plethora of precedents holding that an appellate authority is required to record facts, contentions as well as reasons for arriving at its conclusions, it is a matter of regret that the Tribunal still continues to ignore the same and pass orders like the present one without recording facts or reasons.

In the light of above cited decisions, an order passed without discussing the decisions cited by the appellant is not sustainable. In the instant case also, the impugned order in appeal has not discussed the decisions as well as other submissions given by the appellant, as such it has proved to be a non speaking and non reasoned order which has wrongly rejected their claim. Such an order is not sustainable as it is a non speaking order and is liable to be quashed. The appeal should therefore be allowed

Reasoning adopted by the appellate authority:

The learned commissioner have gone through the Order-in Appeal, corrigendum, Case records, reply to the Appeal, written submission, documents furnished by the assessee as well as the submissions made during course of personal hearing.

On perusal of records, it transpires that the issue is regarding Whether RMC manufactured at the site of construction will be classified as concrete mix with NIL rate of excise duty

The assessee contends that he is eligible to take the 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. It is submitted that when the product of assessee is falling in two notifications, it is purely the sweet will of the assessee to opt for benefit under any one of the notification. This has been decided by hon’ble Supreme Court 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)]. 

The issue in appeal has been decided in favour of assessees 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). This decision has also been confirmed by the Hon’ble Punjab & Haryana High Court reported in 2007 (217) E L T 345 (P&H). Further, in the case of M/s Larsen and Toubro reported at 2006 (198) E L T 177 (Mad), hon’ble Madras 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.

In view of the forgoing, impugned order is set-aside and the appeal is allowed.

 Decision:- Appeal allowed.

Conclusion:- The essence of this case is that as far as merely using a different name for the same product cannot result in a different product thereby leading to denial of exemption to which the appellant are lawfully entitled The decision was given by placing reliance on the Delhi Tribunal decision given in the case of Consolidated Construction Consortium Ltd. It is submitted that it is by well settled position of law that when two notifications are in force, it is purely the option of the assessee to choose the one beneficial to him.

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