Custom, Excise & Service Tax Tribunal
4. Whether Order Is To Be Circulated To ... vs M/S Classic Marbles, Shri S.P. Shah, ... on 18 September, 2012
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT AHMEDABAD
COURT - I
Appeal No.E/1328-1331/2010; E/70/2012
Arising out of: OIO No.05-07/MP/VAPI/2010, dt.30.04.2010
OIO No.14-15/DEM/VAPI/2010, dt.31.05.2011
Passed by: Commissioner of Central Excise & Customs, Vapi
For approval and signature:
Mr.M.V. Ravindran, Honble Member (Judicial)
Mr. B.S.V. Murthy, Honble Member (Technical)
1. Whether Press Reporters may be allowed to see the No
Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the nO
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen
the order?
4. Whether order is to be circulated to the Departmental Yes
authorities?
Appellant:
M/s Classic Marbles, Shri S.P. Shah, Shri K.M. Swamy, Shri A.A. Shah
Respondent:
CCE Vapi Represented by:
For Assessee: Shri V.S. Nankani, Shri S.P. Seth - Advocates For Revenue: Shri S.K. Mall, A.R. CORAM:
MR.M.V. RAVINDRAN, HONBLE MEMBER (JUDICIAL) MR. B.S.V. MURTHY, HONBLE MEMBER (TECHNICAL) Date of Hearing:18.09.12 Date of Decision:
ORDER No. /WZB/AHD/2012, dt._____________ Per: M.V. Ravindran:
All these appeals raises a common issue and hence these are being disposed of by a common order.
2. Appeal Nos.E/1328-1331/2010 are directed against Order-in-Original No.05-07/MP/VAPI/2010, dt.30.04.2010 and Appeal No.E/70/2012 is directed against Order-in-Original No.14-15/DEM/VAPI/2010, dt.31.05.2011, wherein the adjudicating authority has confirmed a demands along with interest and imposed penalties.
3. The relevant facts that arise for consideration are that the main appellant herein M/s Classic Marbles during the period from 01.03.2006 to 31.12.2008 and from 01.09.2009 to 30.09.2010 was holding Central Excise Registration No.AADCC3249HXM002. Based upon the information that the main appellant was indulging in evasion of Central Excise duty on the clearances of marble slabs by resorting to mis-declaration of the products, Central Excise officers of Vapi Commissionerate visited the premises of unit and conducted search under punchnama. On completion of search, Panchnama and after recording various statements, the authorities came to a conclusion that:
i) The unit is involved in the activity of cutting of imported natural marble blocks and agglomerated marble blocks into marble slabs which they were getting done on job-work basis. The natural marble blocks are imported showing the Tariff Heading 25151220 while the agglomerated marble blocks are imported showing the tariff heading 68101990.
ii) The job workers are sending back the natural marble slabs blocks which are merely cut and sawn to the unit by paying duty@ Rs.30 per sq.mtr as applicable under Notification No.04/2006, dt.01.03.2006 classifying the goods under CETSH No.25151220.
iii) On receipt of these marble slabs from the job-workers, the unit is carrying out further processes of resin filling, fibre backing and polishing and in some cases resin filling and fibre backing.
iv) No duty is paid by the unit on these resin filled, fibre backed and polished natural marble slabs when they are cleared from their factory on sale to the various customers or on stock-transfer basis to their depot at Bhandup, Mumbai and Bhiwandi, Dist.Thane (Maharashtra) cleared by them under Commercial invoice showing therein the classification of goods under CETSH No.25151220.
v) Duty on such processed marble slabs was paid by the unit during the period from March 2006 to May 2006 @ Rs.30 per sq.mtr classifying them under CETSH No.25151220 and no duty has been paid by them thereafter.
vi) Agglomerated marble slabs are received from the job workers without Central Excise duties being paid by the job workers on payment of Service Tax on the job charges recovered.
vii) Slabs or agglomerated marble which are merely cut and sawn by the job workers are invariably subjected to polishing and then process of resin filling and fibre backing is carried out as per the requirement, at the factory premises of the unit and thereafter they are sold from the factory premises to the various customers and are also cleared to their own depots at Bhandup and Bhiwandi without payment of duty and commercial invoice mentioning its classification under CETSH No.68101990.
viii) Polished marble slabs imported under CETSH No.68101990 are subjected to resin filling and fibre backing and such processed marble slabs are again polished further and thereafter they are cleared without payment of duty on commercial invoices showing the same tariff heading under which the slabs are originally imported i.e. C.S.H. No.68101990.
4. After coming to such conclusion as indicated hereinabove, the authorities felt that the appellant by engaging themselves in futher processes of resin filling, fibre backing and polishing and in some cases resin filling and fibre backing are engaged in manufacture of a new product which is classifiable under Chapter 68 of Central Excise Tariff and hence are liable to discharge Central Excise duty on such clearances. Coming to such conclusion, the lower authorities issued 3 Show Cause Notices dt.08.08.2008, 08.10.2008, and 10.02.2009 (appeal to 4 Show Cause Notices) directing the main appellant and other appellants to show cause as to why the demand of duty be not confirmed on them along with interest and penalties be imposed. All the appellants herein contested the Show Cause Notice on merits as well as on limitation. The adjudicating authority, after following the principles of natural justice and taking on record the additional evidences filed by the appellant during the personal hearing held that the demand of duty needs to be confirmed and accordingly confirmed the demand along with interest and imposed equal amount of penalty on the main appellant and also imposed personal penalties on other appellants.
5. Aggrieved by such order, the appellants are in appeal before Tribunal.
6. Ld.Counsel Shri V.S. Nankani appearing on behalf of the appellants would submit that the main issue in this case which needs to be addressed is as under:
i) Whether the process of fibre netting, resin filling, polishing and/or edge cutting carried out by the appellant, as may be required, during the relevant period (prior to installation of Gangsaw Machines in their factory) in respect of the duty-paid natural marble slabs received from the job workers amounts to manufacture in terms of Section 2(f) of Central Excise Act, 1944 so as to attract the levy of duty?
ii) If the processes carried out by the appellant in respect of duty-paid natural marble slabs received from the job workers are considered as amounting to manufacture in terms of Section 2(f) of Central Excise Act, 1944, whether the processed natural marble slabs would continue to be classifiable under sub heading 2515 12 20 under which the job workers have paid the Central Excise duty@ Rs.30 per sq mtr under Notification No.4/2006-CE, dt.01.03.2006 or the same would be classifiable under S.H. 6802 91 00 attracting the duty at the ad-valerom rate as held by Commissioner or under S.H. 6802 21 90 and entitled for exemption under Notification No.4/2006-CE.
iii) Whether the natural marble slabs obtained by the appellant by cutting/ sawing from natural marble blocks (after installation of gangsaw machines in the factory) and subjected to further process of fibre netting, resin filling, polishing, edge cutting, etc., as may be required would be classifiable under S.H. 2515 12 20 and eligible for concessional rate of duty of Rs.30 per sq.mtr under Notification No.4/2006-CE ibid as claimed by the appellant or under S.H. No.6802 91 00 attracting duty at the ad-valerom rate as held by Commissioner or under CSH 6802 21 90.
iv) Whether the process of resin filling, polishing etc carried out by the appellant during the relevant period on the agglomerated marble slabs received from the job workers on payment of Service Tax and/or imported or procured indigenously by the appellant amount to manufacture in terms of Section 2(f) of Central Excise Act, 1944.
v) Whether the process of cutting/sawing of agglomerated marble into slabs and further process of resin filling, polishing, etc undertaken in respect of such slabs would amount to manufacture in terms of Section 2(f) of Central Excise Act, 1944 prior to insertion of Note 3 in Chapter 68 w.e.f. 26.02.2010.
vi) Whether the processed agglomerated marble slabs would merit classification under S.H. No.6802 99 90 if the processes as aforesaid {Sr.No.(iv) & (v) refers} are considered as amounting to manufacture in terms of Section 2(f) of Central Excise Act, 1944.
vii) Whether the demand of duty raised and confirmed vide Order-in-Original dt.30.04.2010 is time barred to the extent the same relates to the period beyond the normal period of limitation in terms of Section 11A(1) of Central Excise Act, 1944.
viii) Whether the appellant and the co-appellants are liable for penal action under Section 11AC of Central Excise Act, 1944 or Rule 25 or 26 of the Central Excise Rules, 1944, as the case may be.
Issue at Sr. No. (i) :
Leviability of duty on Natural Marble Slabs processed from the duty- paid slabs:
Processes undertaken by the Appellant do not amount to manufacture:
> that, the various processes like fibre netting, resin filling, polishing, edge cutting, etc. undertaken by them in respect of duty paid natural marble slabs received from the job workers during the relevant period (prior to installation of Gangsaw machines in the factory) do not amount to manufacture as envisaged under Section 2 (f) of the Act as no new product having a distinct name, character or use emerges as a consequence of the said processes;
> that, the said processes undertaken by them are not nor can be considered as incidental or ancillary to the completion of a manufactured product;
> that, as the processes undertaken by the Appellant do not amount to manufacture in terms of Section 2(d) of the Act, the levy of duty is not attracted at all in respect of processed slabs and the demand of duty raised and confirmed thereon is without authority of law and cannot be sustained.
Reliance placed on Note 1 of Chapter 25 is misplaced:
> that, the reliance placed by the Ld. Commissioner on Note 1 of Chapter 25 so as to conclude that the natural marble slabs subjected to the said processes would be classifiable under Chapter 68 is entirely misplaced and improper;
> that, on harmonious reading of Note 1 and Note 6 of Chapter 25 and in view of the opening qualifying phrase Except where the context or Note 4 to this Chapter otherwise requires, used in Note 1 and sizing and polishing being specifically included in Note 6, the inference is obvious that even after the natural marble slabs are subjected to the said processes, the final product would remain classified under Chapter 25;
> that, further, the said Chapter Note 1 does not state nor it can be interpreted to mean that the said processes carried out by the Appellant on natural marble slabs would amount to manufacture.
Explanation to Section 2 (d) inserted w.e.f. 10.05.2008 has no relevance or applicability:
> that, the reliance placed by the Ld. Commissioner on the explanation inserted in Section 2 (d) w.e.f. 10.05.2008 is also misplaced and improper in as much as the said Explanation has no relevance so far as the issue of determination of excisability of the processes undertaken by the Appellant, whether prior to or after 10.05.2008 is concerned;
> that, assuming, for the sake of argument, the relevance of the said Explanation, the same is effective only prospectively i.e. from 10.05.2008 and cannot be applied retrospectively.
Definition of job work as per Rule 2(n) of CCR, 2004 is irrelevant:
> that, the reliance placed by the Ld. Commissioner on the definition of job work given vide Rule 2 (n) of CCR, 2004 is also misplaced and out of context as the same has no relevance nor any bearing on the issue of the excisability of the process/es undertaken by the Appellant in respect of the duty paid marble slabs.
Reliance placed by the Ld. Commissioner on the judgment in Emptee Poly Yarns case is improper and misplaced:
> that, the reliance placed by the Ld. Commissioner on the judgment of the Honble Supreme Court in Emptee Poly Yarns case 2010 (250) ELT 321 (SC) is absolutely unjustified, improper and misplaced;
> that, the finding of the Ld. Commissioner, to the extent that only after undertaking the said processes, the marble slabs are rendered fit to use and therefore, the said process/es fall within the meaning of the term manufacture are beyond the scope of the show cause notice in as much as there was absolutely no charge in the show cause notices to the effect that the said process/es fall within the term manufacture since this process/es alone render the product viz. marble slabs fit for use and marketable. Thus, the Ld. Commissioner has made out a completely new case merely on the basis of the aforesaid judgment of the Honble Supreme Court and the observations made therein have been incorporated in the finding by the Ld. Commissioner in an improper and self-serving manner and also out of context;
> that, It is a well settled legal position that show cause notice is the foundation of a case and an adjudicating authority cannot go beyond the show cause notice while confirming the demand. The Appellant relies upon the following judgments:
1. CCE V/s. Ballarpur Industries
- 2007 (215) ELT 489 (SC);
2. CCE V/s. Toyo Engineering India Ltd.
- 2006 (201) ELT 513 (SC);
3. HPCL V/s. CCE
- 2011 (269) ELT 422 (Tribunal);
> that, the aforesaid finding of the Ld. Commissioner is otherwise also baseless, incorrect and improper. The Appellant say that the marble slabs (natural or agglomerated) which are not subjected to such process are also capable of being bought and sold in the market and are in fact being sold. The Appellant undertakes one or more of such processes only if required and it is not the case of the department nor the department has established that the same are undertaken invariably in all cases;
> that, the judgment in M/s. Emptee Poly Yarns case (supra) was rendered in the context of the provisions of Section 80-IA of the Income Tax Act, 1961 and has no applicability nor can be relied upon so as to determine whether the process carried out by the Appellant would amount to manufacture in terms of Section 2 (f) of the Act. It is well established that the terms like production and manufacture which are used in different statutes and particularly, in taxing statutes like Income Tax, Sales Tax, Central Excise, etc. have to be interpreted in light of the provisions contained in each of the said statutes and also keeping in mind the object and purpose behind the same;
> that, the said judgment considered the process of twisting or texturising of yarns and after taking note of the factual position, the Honble Apex court held that such process amounted to manufacture for the purposes of Section 80IA of the Income-Tax Act, 1961. It is pertinent to note here that the process of twisting or texturising have been specifically declared as deemed manufacture vide relevant Note to Chapter 51, 52, 54 and 55 of CETA, 1985. In other words, but for this Chapter Note/s, the said process would not amount to manufacture in terms of Section 2 (f) of the Act and would not attract the levy of excise duty. The judgment is therefore clearly distinguishable;
> that, the said judgment cannot prevail upon nor does the same overrule the judgments of the Honble Apex Court and/or the Honble High Court or the Honble Appellate Tribunal rendered in the context of Section 2 (f) of the CEA and the interpretation of the term manufacture thereunder. The Larger Bench i.e. 3-Judges Bench of the Honble Supreme Court, in Associated Stone Industries V/s. CCE 2010 (251) ELT A 147 (SC) has affirmed the Order of the Honble Tribunal in Associate Stone Industries V/s. CCE 1992 (60) ELT 639 holding that :
The Marble Slabs that are sawn from the marble blocks cannot be called a distinct commodity. The end-product which would come into existence after the activity is completed, would still be called marble. Thus, the original identity continues despite the several processes undergone. In the trade circles, marble slabs or the marble tiles that are manufactured after cutting the edges, trimming, polishing and other processes, continue to be known as marble., Unless it is proved that by virtue of the sawing process, a different or distinct commodity comes into existence, the process cannot be equated to manufacture.
The aforesaid judgment of the Larger Bench in the context of Section 2 (f) of the CEA and dealing with the same process/product would prevail upon the Division Bench judgment of the Honble Supreme Court in Emptee Poly Yarns case (supra) rendered in the context of the provisions of Income Tax Act, 1961.
> that, the Ld.Commissioner has also ignored the mandate/ caution of the Honble Supreme Court in Emptee Poly Yarns case that the said judgment would be confined to the facts of that case only.
The issue is no longer res integra in view of the judgment in Oriental Trimex case:
> that, in the case of Oriental Trimex Ltd. V/s. CCE 2010 (249) ELT 259 (Tri.-Del.), the Honble Tribunal took note of the various judgments and finally, held that the activities of sawing of marble blocks into slabs and subjecting the same to further processes viz. sizing, edging, trimming and polishing for making the cut-to-size, polished marble slabs and polished marble tiles would not amount to manufacture prior to 01.03.2006.
The ratio laid down in this judgment would be applicable in respect of the processes undertaken by the Appellant in respect of duty paid natural marble slabs even after 01.03.2006;
> that, in view of this authoritative and binding judgment of the Honble Tribunal, the mere process of fibre netting, resin filling, edge cutting and polishing, carried out by them, as may be required, in respect of duty-paid natural marble slabs cannot be considered as amounting to manufacture in terms of Section 2(f) of the Act prior to 01.03.2006.
The Appellant therefore submits that the demand of duty raised and confirmed in respect of duty-paid Natural Marble Slabs received from the job workers and subjected to further processes by the Appellant is invalid, without authority of law and cannot be sustained.
Issue at Sr. No. (ii): Classification of processed Natural Marble Slabs:
The processed natural marble slabs are classifiable under sub-heading 2515 12 20:
> that, even if it is assumed without admitting that the processes carried out by them, in respect of duty-paid Natural Marble Slabs amount to manufacture in terms of Section 2(f) of the Act, the processed slabs would continue to be classifiable under sub-heading 2515 12 20 and eligible for concessional rate of duty of Rs.30/- per sq.mtr. in terms of Notification No. 4/2006-CE and hence, no duty liability arises in respect thereof;
> that, on conjoint and harmonious reading of Note 1 and Note 6 of Chapter 25, the natural marble slabs subjected to the said processes would remain classified under sub-heading 2515 12 20 even if it assumed without admitting that the said processes amount to manufacturer in terms of Section 2(f) of the Act;
> that, in Oriental Trimax case (supra), the Honble Tribunal has categorically held that the Natural Marble Slabs or Tiles, obtained by cutting of blocks and subjected to further processes of fibre netting, resin filling and polishing would be classifiable under Chapter 25 and entitled for exemption under Notification No. 4/2006-CE ibid after 01.03.2006;
> that, when polished natural marble slabs obtained from Blocks in an integrated manner in a factory remain classified under Chapter heading 2515 12 20 as held by the Honble Tribunal, the duty-paid natural marble slabs subjected to the said processes cannot be classified under Chapter 68;
> that, as the polished natural marble slabs would continue to remain classified under sub-heading 2515 12 20, no further duty liability would arise in respect thereof as the job workers have already paid the duty @Rs.30/- per Sq.Mtr. on the slabs in terms of Notification No.4/2006-CE and which is available to the Appellant by way of Cenvat Credit.
Classification of polished Natural Marble Slabs under Chapter 68 :
> that, even if it is assumed without admitting that the said processes carried out by them in respect of duty paid natural marble slabs amount to manufacture and the resultant product i.e. polished natural marble slabs would be classifiable under Chapter 68, the same would be properly and appropriately be classifiable under sub-heading no. 6802 21 90 and not under sub-heading 6802 91 00 as wrongly and improperly held by the Ld. Commissioner;
> that, the Ld. Commissioner has failed to appreciate that sub-heading 6802 91 00 and the 3 sub-headings following it are a sub-classification of group of Articles described as other and which is preceded by -. In other words, sub-heading 6802 91 00 and the 3 sub-headings following it are in the nature of residual entries and the question of considering the same would arise only if the subject goods are not classifiable under the preceding entries of heading 6802. However, from the careful reading and perusal of heading 6802 21, it would be evident that the subject goods i.e. polished natural marble slabs are appropriately classifiable under sub-heading 6802 21 90 which covers the Articles/goods not covered by the previous sub-headings 6802 21 10 or 6802 21 20.
Clarification issued by the Board vide TRU Circular dated 16.03.2012:
> that, explaining the Budgetary changes made vide Finance Bill, 2012 in respect of marble products, the CBEC, vide its Letter D.O.F. No. 334/3/2012-TRU dated 16.03.2012 has stated as under vide para 13:
13. Classification of Natural marble Slabs subjected to processes of resin filling, fibre netting and Polishing:
13.1 Marble slabs and tiles are classified under Chapter 25 or Chapter 68 of the Central Excise Tariff depending on the extent to which they have been finished. Polished marble slabs are classifiable under heading 6802 21 90 which attracts the general effective rate of 10% ad val. Concessional excise duty of Rs 30 per square meter is applicable to marble slabs and tiles falling under heading nos. 25151220, 25151290 or 6802 21 10 in terms of notification no.4/2006-CE dated 1.3.2006. Representation were received by the Board that the benefit of this exemption is not being extended to polished marble slabs of heading 68022190 as the latter does not find specific mention in the exemption entry even though covered by the description. It is pertinent to mention that the Board has examined similar issues in the past on more than one occasion and clarified that the benefit of exemption will be available to goods as long as they are covered by the description. It is clarified that the benefit of concessional rate of Rs 30 per square metre is available to polished marble slabs of heading 68022190 under the said notification. For the removal of doubts, however, the relevant exemption entry is being amended to specifically include CETH 6802 21 90. [Notification No.12/2012-CE dated 17th March, 2012 refers] [Emphasis provided] > that, this clarification, which is in the nature of contemporanea exposito, is binding on the departmental authorities who are not permitted in law to argue against the same. Moreover, the circular, being clarificatory in nature, the same would apply retrospectively;
> that, even if it is assumed without admitting that the subject goods i.e. polished natural marble slabs would merit classification under sub-heading 6802 91 00 as held by the Ld. Commissioner, the benefit of concessional rate of duty under Notification No. 4/2006-CE would be still admissible to the Appellant in view of the aforesaid clarification issued by the Board in as much as irrespective of the classification, the goods are covered by the description in the exemption entry of the Notification > that, as the benefit of exemption under Notification No.4/2006-CE is, admissible to the subject goods i.e. polished natural marble slabs, whether considered as classifiable under Chapter 25 or Chapter 68, the demand of duty raised and confirmed thereon vide the impugned order cannot survive in the eyes of law and is liable to be set aside.
The Appellant therefore submits that viewed from any angle, the demand of duty raised and confirmed in respect of polished natural marble slabs is not sustainable.
Issue at Sr. Nos. (iii) Classification of polished Natural Marble Slabs obtained by cutting of blocks and further processing :
> that, the natural marble slabs obtained by cutting/ sawing of blocks (after installation of Gangsaw Machines in their factory) and subjected to further processes including polishing would remain classified under sub-heading 2515 12 20 and eligible for concessional rate of duty under Notification No. 4/2006-CE and hence, demand of duty raised and confirmed thereon is not sustainable;
> that, even if it is assumed without admitting that such polished natural marble slabs obtained by the Appellant from Blocks are classifiable under Chapter 68, the same would still be eligible for the exemption under the said Notification No.4/2006-CE, whether considered as classifiable under sub-heading 6802 21 90 or 6802 91 00.
The Appellant in this regard refers to the submissions made vide the preceding paragraphs dealing with issue at Sr.No.(ii) above which are relevant for the purpose of present issue and the same are adopted and reiterated herein to avoid repetition.
Issue at Sr. No. (iv) Levy of duty on Agglomerated Marble Slabs obtained by processing of slabs:
Submissions:
Processes undertaken by the Appellant do not amount to manufacturer:
> that, the process of resin filling, polishing, etc. carried out by them during the relevant period on the Agglomerated Marble Slabs received from the job workers on payment of service tax and/ or imported procured indigenously do not amount to manufacture as envisaged under Section 2(f) of the Act as no new product having a distinct name, character or use emerges as a consequence of the said process;
> that, admittedly, the job workers have paid service tax in respect of the process of cutting/ sawing of Agglomerated Marble Blocks (supplied by the Appellant) into slabs on job work basis prior to introduction of Note 3 in Chapter w.e.f. 26.02.2010 since such process was not considered as manufacture in terms of Section 2(f) of the Act in view of the settled legal position. It is submitted that when the activity of cutting/ sawing of Agglomerated Marble Blocks into slabs did not amount to manufacture prior to 26.02.2010, the subsequent processes of resin filling, polishing etc. of such service tax-paid slabs cannot be considered as or equated with manufacturer in terms of Section 2(f) of the Act.
That the Note 3 of Chapter 68 has no relevance or applicability:
> that, Note 3 of Chapter 68 inserted w.e.f. 26.02.2010 has no relevance or applicability so far as the processes of resin filling, polishing etc. of tax-paid Agglomerated Marble Slabs is concerned. This Note declared certain specified processes including cutting or sawing of Blocks into slabs as amounting to manufacturer. However, as the perusal of Note 3 would show, the process specified therein shall be for conversion of Blocks into Slabs and it cannot by any stretch of imagination, said that process of resin filling, polishing etc. undertaken on slabs would stand covered by the said Note. 3.
That the Note 3 of Chapter 68 apply prospectively:
> that, assuming without admitting that the said Note 3 of Chapter 68 has any relevance so far as the processes of resin filling, polishing etc. carried out on the tax-paid Agglomerated Marble Slabs are concerned, the said Note is effective only prospectively i.e. w.e.f. 26.02.2010 and cannot apply respectively as is the settled law.
The demand of duty raised and confirmed in respect of such processed Agglomerated Marble Slabs is therefore invalid and untenable in law.
Issue at Sr. No. (v) Levy of duty on processed Agglomerated Marble Slabs obtained by cutting of blocks and further processing:
> that, the process of cutting or sawing of Agglomerated Marble Blocks into slabs and further processes of resin filling, polishing etc. undertaken in respect thereof did not amount to manufacture in terms of Section 2(f) of the Act prior to insertion of Note 3 in Chapter 68 w.e.f. 26.02.2010, in view of the ratio laid down in Aman Marbles case (supra) and other judicial pronouncements as discussed above;
> that, the said Note 3 inserted in Chapter 68 vide the Finance Act, 2010 w.e.f. 26.02.2010 is also effective only prospectively and cannot apply retrospectively as is the settled law.
The demand of duty raised and confirmed in respect of Agglomerated Marble slabs obtained from Blocks by cutting/ sawing and further subjected to the processes of resin filling, polishing etc. is therefore without authority of law and unsustainable in law.
Issue at Sr. No. (vi) Classification of processed Agglomerated Marble Slabs :
The processed Agglomerated slabs are correctly classifiable under sub-heading 6802 19 90:
> that, even if it is assumed without admitting that the processes undertaken by it in relation to the agglomerated marble slabs received on payment of service tax from the job workers or procured through imports or and/or obtained by the process of cutting/sawing of blocks and further processing in the factory of the Appellant during the relevant period amount to manufacture in terms of Section 2(f) of the Act, such processed agglomerated marble slabs would be correctly and appropriately classifiable under heading 6810 19 90 only and not under heading 6810 99 90 as wrongly held by the Ld. Commissioner vide the impugned order;
> that, the Ld. Commissioner has failed to appreciate that sub-heading 6810 99 90 is not only a residual sub-heading but is also a sub classification of the residual heading 6810 99 which in turn is also the sub classification of the group of Articles described as other articles which preceded by -. Therefore, the question of considering the applicability of sub-heading 6810 99 90 would arise only if the subject goods are not classifiable under the preceding entries of heading 6810. However, the Ld. Commissioner has failed to establish that the subject goods cannot merit classification under any of the sub-headings preceding the sub-heading 6810 99 90. The Applicant further submits that from the careful reading and perusal of sub-heading 6810 19 90, it would be evident that the subject goods are appropriately classifiable thereunder which covers the articles/goods not covered by either sub-heading 6810 19 90 or the sub-headings under the heading 6810 11.
Issue at Sr. No. (vii) Limitation:
Submissions:
> that, the demand of duty raised vide the show cause notice dated 08.08.2008 and upheld vide the impugned order is partly time-barred and unsustainable in law in so far as the same relates to the period prior to July, 2007;
> that, the allegations of suppression, willful mis-statement, and mis-declaration of facts with intent to evade duty made and upheld against them are absolutely baseless and invalid and untenable in law and consequently, the invocation of extended period of limitation and confirmation of the demand of duty thereunder is absolutely unjustified, without authority of law and therefore unsustainable in law;
> that, the Appellant was also under bonafide belief, in view of the various judicial pronouncements, that such activities of fibre filling/resin backing/polishing carried out by them in respect of Natural Marble Slabs or Agglomerated Marble Slabs did not amount to manufacture as envisaged under Section 2 (f) of the Act and in the absence of any enabling Chapter Note or Section Note in the relevant Chapter/Section declaring such activities as amounting to manufacture;
> that, the bonafide belief of the Appellant was further fortified in view of the fact that other manufacturers/ processors involved in identical activities in and around Silvassa and elsewhere have also not been paying any Excise duty on such activities. The belief on part of the Appellant was also strengthened by the fact that the department had accepted the payment of Excise duty on the clearances of Natural Marble Slabs cut or sawn, on job work basis from Natural Marble Blocks by the job worker in pursuance of the insertion of Note 6 in Chapter 25 w.e.f. 01.03.2006 as well as the payment of service tax in respect of Agglomerated Marble Slabs cut or sawn by the job workers from the Agglomerated Marble Blocks on job work basis as there was no enabling Chapter Note in Chapter 68 during the relevant period declaring such process of cutting or sawing as amounting to manufacture;
> that, all the activities undertaken by them during the relevant period were within the full knowledge of the department since the Appellant, after insertion of Note 6 in Chapter 25 w.e.f. 01.03.2006, had initially even obtained the Central Excise Registration and were paying the duty from March, 2006 to May, 2006, albeit, reeling under bonafide mis-understanding of the scope of the said Chapter Note. Thereafter, once it became clear to them that the activities being undertaken by them did not amount to manufacture, it had stopped the payment of duty thereafter. However, the Appellant had continued to file the Nil monthly Returns with the department as there was no production and clearance of any dutiable excisable goods as far as the Appellant was concerned. Admittedly, such statutory returns were duly received by the Range Office which had not objected to the non-payment of Excise duty by the Appellant. This also shows that all the activities of the Appellant were within the full knowledge of the department and there was no question of any suppression etc much less, deliberate or willfulof any facts with an intent to evade payment of duty on part of the Appellant;
> that, the Appellant had also declared its activities vide letter dated 10.07.2007 which, in any case, were within the full knowledge of the department since 01.03.2006, and therefore, the belated issue of show cause notice dated 08.08.2008 nearly after one year of receipt of such letter, rendered the demand of duty for the extended period time-barred and untenable in law.
12.2 The demand of duty raised vide show cause notice dated 08.08.2008 and confirmed vide the impugned order dated 30.04.2010 is thus time-barred to the extent the same relates to the period prior to July, 2007.
Issue at Sr. No. (viii) Maintainability of penalty on the Appellant and the co-appellants:
Submissions:
> that, as the demand of duty raised and confirmed against them on various counts is not sustainable in law on merits itself, the penalty imposed on them under Section 11AC of the Act cannot be sustained in law;
> that, the demand of duty raised vide the show cause notice dated 08.08.2008 is also time-barred as discussed above and therefore, the penalty under Section 11AC of the Act is not maintainable;
> that, moreover, the demand of duty raised vide the subsequent show cause notices dated 08.10.2008 and 10.02.2009 (upheld vide Order-in-Original dated 30.04.2010) and show cause notices dated 20.01.2010 and 23.11.2010 (upheld vide Order-in-Original dated 31.05.2011) were only in the nature of follow-up demand. Consequently, assuming without admitting the validity of such demand of duty on merits, the invocation of penal provisions of Section 11AC of the Act and/or Rule 25 of the Rules and the imposition of penalty thereunder in terms of such follow-up show cause notices cannot be sustained;
> that, so far as the co-appellants are concerned, the essential ingredients of Rule 26 of the Rules are not conclusively established as existing against them vide the impugned orders and therefore, the penalty imposed on each of the co-appellants is liable to be set aside.
Judicial Pronouncements:
The Appellant submits that the various submissions as summarized above have been discussed in detail in their appeals and in support thereof, various judicial pronouncements have also been relied upon therein. To avoid repetition, the Appellant have not reproduced the same here, but refers to and relies upon the same.
7. Ld.D.R., on the other hand, submits that the process of fibering in which the back side of the slabs are pasted with the mat with the help of binding material i.e. unsaturated polyester resin, marble slabs filled with color pigment for the purpose of filling the cracks and pin holes present on the surface of the slabs and edge cutting is done in which the uneven sides of the slabs are being cut to give proper size to the marble slabs and polishing is undertaken in which the front side of the slabs are polished with the help of radial polish machine which is moved manually. Unless these above processes are undertaken, the slabs will not become ready for sale. After these processes are done, then only the marble slabs become saleable and are sold to various customers. It is his submission that after the change in the definition of manufacture in Section 2(b) of Central Excise Act, 1944, any incident or ancillary process for completion of manufacture, the product will amount to manufacture of new product and unless the process undertaken by the appellant are carried on marble slabs, the said product will not become marketable to be bought and sold. It is his submission that Hon'ble Supreme Court in the case of UoI Vs Delhi Cloth & General Mills Co.Ltd 1997 (1) ELT (J199 (SC), specifically said so. He would also submit that the judgment of Hon'ble Supreme Court in the case of CIT Vs Emptee Poly Yarn Pvt.Ltd. 2010 (250) ELT 321 (SC), also specifically states that if an operation/process renders a commodity or article fit for use for which it is otherwise not fit, the operation/process falls within the meaning of the word manufacture. He would also submit that the statement of the production and technical incharge of the main appellant specifically indicate that the activity of resin filling etc and after completion of these processes only, the marble slabs are dispatched to their customers. It is submission that unless fibre backing/netting and resin filling is done, the marble slabs during transportation may get cracked or broken and hence these processes undertaken by the appellant should be equated and compared with packing and manufacturing activity. He would also rely upon the decision of the Hon'ble Supreme Court in the case of Shyam Oil Cake Ltd 2004 (174) ELT 145 (SC), holding that once there is definition of deemed manufacture, brought into chapter note as regards product being processed and manufactured, the same will override all other propositions given by the ld.Counsel. It is his submission that the decision relied upon by the ld.Counsel in the case of Oriental Trimex Ltd 2010 (249) ELT 259 (Tri-Del), is today not a good law as the same has been overruled by the decision of Hon'ble Supreme Court in the case of Emptee Poly Yarn Pvt.Ltd. He also replied upon the decision of Hon'ble Supreme Court in the case of Arihant Tiles & Marbles Pvt.Ltd. 209-TIOL-127-SC-IT-LB, wherein the Hon'ble Supreme Court has specifically held that cutting of marble blocks to slabs and tiles would amount to production. It is his submission that once such law is settled by Apex Court, any argument of the counsel would be incorrect. He would also rely upon the decision of Sterlite Cable Ltd 1991 (53) ELT 367 (Tri-Del).
8. Ld.Counsel in rejoinder, would submit that the case of Arihant Tiles & Marbles Pvt.Ltd was in respect of issue whether an activity would fall under the category of manufacture or production or not is in respect of Income Tax Act. It is submitted that we are concerned here today of the interpretation of word manufacture as per Central Excise Act, 1944. It is his submission that there is a direct judgment of Tribunal in the case Associated Stone Industries Ltd 2003 (10) STC 771 (SC). It is also his submission that in the case of Oriental Trimex Ltd also selfsame and identical issue arose and it was held that the process or activity conducted by the appellant will not be amounting to manufacture of marble slabs.
8.1 It is his further submission that Chapter Note V of Chapter 25, if properly read, would indicate that the final product will also remain classified in Chapter 25 only or at least cannot be read in isolation as given in the said Chapter Note. As regards Notification No. 12/2002, it is his submission that the point is not about classification but whether the process would amount to manufacture and end product is nothing but processed marble slabs. It is also his submission that there is no case of manufacture even if the appellant imported marble slabs and classified the same under chapter heading as contended by the lower authorities and argued by ld.D.R.
9. We have considered the submissions made at length by both sides and perused the records.
10. The period involved in these appeals is from 01.03.2006 to 30.09.2010.
10.1 The issue involved in this case is whether the imported natural marble blocks, imported agglomerated blocks and imported marble slabs after being subjected to processes such as cutting or sawing into slabs, fibre backing, resin filling, polishing and further edging etc are classifiable under CSH No.25151220, 68101990 and 68022190 of Customs Excise Tariff Act, 1985 as contended by assessee or would merit same classification under CSH No.68021900, 68109990 and 68029100 of Customs Excise Tariff Act, 1985 as contended by the Revenue.
11. We find that the facts in issue are not in dispute from both sides. Both sides agree that the appellants herein are importing marble blocks both natural as well as agglomerated. From their factory, the same are sent to different job workers for processes of sawing/cutting i.e. the process of cutting the said blocks into slabs as the appellant did not have the facility of sawing in the factory. It is also undisputed that the natural blocks, after being cut into natural marble slabs, are received in the factory of the assessee under the cover of Central Excise invoices from the job worker on discharge of Central Excise duty @ Rs.30 per sq.mtr, after availing the benefit of Notification No.4/2006-CE, dt.01.03.2006. There is also no dispute that the agglomerated marble blocks, after being cut into agglomerated marble slabs, are received from the job workers under the cover of delivery challans on payment/discharge of Service Tax under the category of Business Auxiliary Service.
12. The adjudicating authority, in the entire Order-in-Original, has dedicated the findings as to whether the process of fibering of the marble slabs, filling of the marble slabs with resin, filling with color pigments in order to fill the cracks and pin holes present on the surface of the slabs, process of edge-cutting in which un-even sides of the slabs are being cut to give proper size to the slab and process of polishing wherein the front side of the slab is polished, will amount to manufacture as per the Section 2(f) of Central Excise Act, 1944 read with Chapter Note to Chapter 25 of Customs Excise Tariff Act, 1985.
13. In order to come to a conclusion, we would like to address the issue for the different periods i.e. from 01.03.2006 to March 2008 and for the period beyond March 2008, in respect of dutiability of the processed natural marble slabs and in respect of leviability of duty of processed agglomerated marble slabs for the period 01.03.2006 to March 2008 and for the period after March 2008 to 26.02.2010 and also on the issue of leviability of duty on processed imported natural marble slabs.
14. As regards dutiability of processed natural marble slabs for the period 01.03.2006 to March 2008, it is undisputed that the appellant had no gangsaw machinery installed in their unit. It is also seen from the record and admitted that the appellants were getting the natural marble slabs cut/sawn into slabs on job work basis from independent job workers and the said job-workers were clearing such slabs on payment of Excise duty by virtue of Note No.6 of Chapter 25 w.e.f. 01.03.2006. The said note specifically declares that the activity of cutting/sawing of blocks into marble slabs would be deemed manufacturing activity. It is also undisputed that the job workers discharge the duty liability by availing the benefit of Notification No.4/2006-CE dt.01.03.2006 @ Rs.30 per sq.mtr. We find as recorded by us hereinabove that there is no dispute that the processes which the appellant is carrying out is resin filling, fibre backing/netting, grinding, edge cutting and polishing before the product i.e. processed natural marble slabs are sold in the market. In our view, the processes undertaken by the appellant on duty-paid natural marble slabs would not amount to manufacture in terms of Section 2(f) of Central Excise Act, 1944 as no new, distinct separately identifiable and marketable product emerges as a result of such processes. We find that principle of law, in respect of identical product i.e. marble slabs, the judgment of Hon'ble Supreme Court in the case of Aman Marble Industries Pvt.Ltd. 2003 (157) ELT 393 (SC) and the judgment in the case of Associated Stone Industries Ltd 2003 (10) STC 771 (SC) would apply.
15. We also find that the decision of the Tribunal in the case of Nitco Tiles Ltd 2004 (155) ELT 50 (Tri-Mum) and in the case of Oriental Trimex Ltd 2010 (249) ELT 259 (Tri-Del) is on the self same issue. We find that the reliance placed by the adjudicating authority on the Chapter Note 6 of Chapter 25 is inserted w.e.f. 1.3.2006 would not have any applicability inasmuch as the said note would apply only when processes specified therein are undertaken for conversion of blocks into slabs or tiles. In order to appreciate correct position, we produce said chapter Note 6 as under:
In relation to products of heading 2515 and 2516, the process of cutting or sawing or sizing or polishing or any other process, for converting of stone blocks into slabs or tiles, shall amount to manufacture.
16. It can be seen from above reproduced chapter note that this note will be applicable to a situation wherein an assessee brings entire stone blocks into his factory, cuts into the slabs and tiles and does all other activities. It cannot be read into this Chapter note that an activity performed by the appellant on the duty paid slabs shall also amount to manufacture. We find that reliance placed by the Commissioner on the judgment on Hon'ble Supreme Court in the case of Emptee Poly Yarn Pvt.Ltd. is misplaced as the said judgment was rendered in context of Section 80 (IA) of Income Tax Act, 1961, which is beneficial legislation and cannot be interpreted and applied in the manner so as to create duty liability under indirect taxes legislation. We also find that Hon'ble Supreme Court itself has emphasized that applicability of said judgment would remain restricted to a specific case only and judgment cannot overrule nor can be said to have overruled the judgments of Hon'ble Supreme Court rendered in context of Section 2(f) of Central Excise Act, 1944, more specifically in respect of the processes undertaken on or in relation to the marble blocks/slabs. The judgment of Honble Apex Court in the case of Associated Stone Industries Ltd, is direct on the issue under consideration and will be applicable more than the judgment which is given under the different acts.
17. As regards the activities for the period post March 2008 on the imported natural slabs, we find that the appellant herein was undertaking cutting/sawing of blocks on their own and thereafter such slabs were subjected to one or more processes like resin filling, fibre netting or backing, grinding, edge cutting and polishing before being dispatched for sale into the market. As we have already held hereinabove that this kind of activity of converting stone blocks into slabs or tiles would amount to manufacture including the processes undertaken if an assessee had done so in his factory premises by doing such activity on the stone slabs. We find that the appellant-assessee in this case, after doing such activity after March 2008, on natural marble slabs has discharged the duty liability under Heading 2515 1220 on payment of duty @ Rs.30 per sq.mtr in terms of Notification No.4/2006-CE. It is the case of the Revenue that post March 2008, the appellants activity of processing natural marble slabs into processed natural marble slabs would be classifiable under CSH 6802 9100 and chargeable to duty at ad-valerom basis is incorrect as the word polishing which is mentioned in Note 6 of Chapter 25 is to be read in respect of product which is falling under Heading No.2515, 2516 and cannot be taken out and read independently in isolation, so as to read that the appellant is manufacturing polished natural marble slabs and would get covered under Chapter 68 of Customs Excise Tariff Act, 1985. In our view, the activity undertaken by the appellant from cutting of the marble blocks till the polishing of the same would remain classifiable under Chapter 25 and would fall under Heading 2515 1220 and is eligible for benefit of Notification No.4/2006. Our view is fortified by the decision of the Tribunal in the case of Oriental Trimex Ltd (supra). We find in that judgment, the co-ordinate Bench of the Tribunal was considering an identical issue for the period prior to 01.03.2006 and also post 01.03.2006. In that case also, Revenue was canvassing a view that the product processed marble slabs would fall under Chapter 68. With respect, we reproduce the entire judgment, which is as under:
1. Common issue is involved in these appeals and, therefore, both are being taken up together for disposal.
2.?The relevant facts of the case as per record, in brief, are that the appellants were purchasing marble blocks and marble slabs for processing thereon. The blocks were subjected to processing of sizing to make it rectangular and cut into slabs of uniform thickness by using Gangsaw machines. The slabs got cracks and pin holes in some cases and pasted fibre glass sheets on one side and resin is applied to fill-in holes the cracks on the other side of the slabs for smooth transportation. The final products are rough marble slab, cut to size marble slabs (polished stroke by rough) and marble tiles (polished). In view of the decision of the Honble Supreme Court in the case of Aman Marble Industries Pvt. Ltd. v. CCE - 2003 (157) E.L.T. 393 (S.C.), the appellant claimed that prior to 1-3-2006 the processes undertaken by them do not amount to manufacture and no duty was paid. From 1-3-2006, Note 6 was inserted to Chapter 25 of CETA, 1985. The appellants claimed the classification of the products would come under sub-heading no. 2525 12 20 and 2515 12 90 and availed concessional rate of duty under Notification No. 4/2006-C.E., dated 1-3-2006. On 5-7-2006, the Central Excise Officers visited the appellants factory and examined the processes undertaken by the appellants. They had recorded the statements of the representative of the appellants. Show cause notices were issued time to time proposing demand of duty and imposition of penalty. Commissioner confirmed the demand of duty for the entire period from April, 2005 to September, 2007 and imposed penalties along with interest.
3.?In the impugned orders, Commissioner held that after introduction of 8-digit classification code from 1st March 2005 in the Central Excise Tariff Act, 1985 the decision of the Honble Supreme Court in the case of Aman Marble Industries v. CCE, 2003 (157) E.L.T. 393 (S.C), would not apply and the products are not classifiable under Chapter 25 of the Tariff. Rough Marble Slabs/Polished Marbles are classifiable under sub-heading no. 6802 91 00, Polished Marble Tiles are classifiable under sub-heading no. 6802 21 10 and Granite Blocks and Granite Tiles are classifiable under sub-heading no. 6802 23 10 and 6802 93 00 of the Tariff respectively.
4.?Ld. Advocate on behalf of the appellants submits that the entire period of demand of duty may be divided in two parts, as under :
(A)?From April, 2005 To February, 2006 (i.e. Prior to 1-3-2006)
(a) The processes are cut-to-size rough marble slabs cut-to-size marble slabs (basically rectangular pieces of slabs) and polished marble tiles.
(b) It is well settled by the various decisions that the processes do not amount to manufacture prior to 1-3-2006 :-
(i) Associated Stone Industires (Kotah) Ltd. v. CCE, 1992 (60) E.L.T. 639, affirmed as reported at (2003) 10 SCC 771 (cutting into marble slabs and tiles).
(ii) Rajasthan SEB v. Associated Stone Industries - (2000) 6 SCC 141 (cutting and polishing of stones into slabs).
(iii) Aman Marbles Industries v. CCE - 2003 (157) E.L.T. 393 (S.C.) (Cutting into marble slabs).
(iv) Bell Granito Ceramica Ltd. v. CCE, 2006 (198) E.L.T. 161 (S.C.) (Polishing of tiles).
(v) Anmol Granites v. Union of India, 2006 (199) E.L.T. 769 (Raj.) cutting and polishing of granites into slabs.
(vi) Calcutta High Court in the case of Oriental Tiles Ltd. v. Union of India vide its judgment dated 18-5-2006. (cutting of marble into slabs and polishing).
(c) The Central Government introduced 8 digit classification in Central Excise Tariff with effect from 1-3-2005. CBEC vide Circular no. 808/5/2005-CX., dated 25-2-2005 clarified that Government had no intention to vary the duty structure on goods while transition from 6 digits to 8 digits.
(d) In view of the above CBEC Circular, the Department cannot change its stand post 1-3-2005 and the decisions are applicable even in 8 digit tariff.
(e) There was a uniform practice all over the country that no marble processing unit was paying duty during that period.
(B) From 1-3-2006 and Notification No. 4/2006-C.E., dated 1-3-2006.
(a) Note 6 was inserted in Chapter 25 of the Tariff w.e.f. 1-3-2006 providing that the process of cutting or sawing or sizing of polishing or any other process for converting of stone blocks into slabs or tiles shall amount to manufacture.
(b) The marble slabs processed by the appellants are classifiable under sub-heading No. 2515 12 20 and eligible for concessional rate of duty under notification No. 4/2006-C.E., dated 1-3-2006.
(c) There is no Chapter Note in Chapter 68 deeming the process of sizing/treaming or polishing would amount to manufacture as mentioned in Note 6 of Chapter 25.
(d) CBEC vide Circular F.No. 134/2/06-CX., 4 dated 3-9-2008 clarified that when the marble slabs still have uneven surface as when it was cut or sawn, the application of glass fibre net or resin/hardner on the marble slabs shall not take these marble slabs out of Chapter 25. Such marble slabs shall continue to be classified in Chapter 25 and the concessional rate of duty under ANotification No. 4/06-C.E., shall be available to them.
(e) As per Chapter Note 1 to Chapter 68, products of Chapter 25 are excluded from the scope of Chapter 68. Thus, the products which are otherwise classifiable under Chapter 25 are excluded from Chapter 68.
(f) Goods under CETH 6802 are shaped articles and worked by a stone-mason or sculptor. Marble slabs in question are not such goods which are simply sawn/cut from blocks. Net fibre pasting, resin filling of holes and cracks of such slabs, would not change the character, name and use of marble slabs to that of articles mentioned within the scope of Heading 6802. Such processes would thus not take out their classification out of Chapter 25.
(g) It is stated that all the marble slab processors are availing concessional rate of duty under the said notification and the appellants should not be treated separately.
(h) Without prejudice to the above contention, it is submitted that the demand of duty was not properly quantified and cum-duty benefit was not extended.
5.?Ld. DR on behalf of the Revenue reiterates the findings of the Commissioner. He submits that the Commissioner classified the goods under Chapter 68 for the entire period. He submits that the process undertaken by the appellants is not merely cutting by saw. He submits that besides cutting a number of processes were being undertaken by them on the raw materials received by them. The process undertaken by them are sizing, surfacing, applying fibre paste, filling of resin, cutting in sizes, edge trimming, polishing, etc., and such processes are cleary beyond the process of cutting of crude or roughly trimmed marble. He also submits that Shri S.C. Anand, DGM (Operation) in his statement dated 6-7-2006 stated that the stone blocks are subjected to the processes like sizing and surfacing of the faces before being cut into slabs of uniform thickness by Gangsaw machine. It is his submission that on physical examination of the goods, it was found that the goods were neither in crude form nor merely cut by sawing etc. So, it would not come within the purview of Chapter 25.
6.?He submits that decision of the Honble Supreme Court in the case of Aman Marble Industries Pvt. Ltd. (supra) would not apply for the reasons that in the said case, the process was simply mere cutting of marble blocks into slabs. But, in the present case, the appellants were undertaking various processes by which the goods does bring into existence a distinct commodity. He also submits that marble blocks and slabs were further worked to the varieties of stone referred to in Heading No. 2515 or 2516 and, therefore, it would come within the purview of Heading No. 6808 of the Tariff. The appellant is not eligible for the exemption benefit. He submits that Board Circular would not apply in this case, because, the appellants undertook various processes as stated above and Note 2 of Chapter 68 of Tariff would apply.
7.?After considering the submissions of both the sides and on perusal of the records, we find that the main contention of the ld. DR is that in the present case, marble blocks were not simply sawn but more processes were undertaken viz. sizing, edging, trimming and polishing for making the cut to size, polished marble slabs and polished marble tiles. So, the case laws relied upon by the ld. Advocate are not applicable after 1-3-2005. As such, the case laws relied upon by the appellants are discussed below :-
(a) The Tribunal, in the case of Associated Stone Industries (Kotah) Ltd. v. CCE - 1992 (60) E.L.T. 639 (Tribunal) held that the marble slabs that are merely sawn from the marble blocks cannot be called as distinct commodity. The end-product, which would come into existence after the activity is completed, would still be called marble. Thus, the original identity continues despite the several processes undergone. In the trade circles, marble slabs or the marble tiles that are manufactured after cutting the edges, trimming, polishing, and other processes, continue to be known as marble. It has been held that marble blocks and slabs after cutting edging, trimming, polishing and other processes, it does not amount to manufacture as there is no transmission of marble into any other commodity.
(b) Revenue filed appeal before the Honble Supreme Court against the order of the Tribunal in the above case of Associated Stone Industries (Kotah) Ltd. (supra). The Honble Supreme Court dismissed the appeal filed by the Revenue as reported in (2003) 10 SCC 771 (Collector of Central Excise, Jaipur v. Associated Stone Industries (Kotah) Ltd. held as under:-
2.?We have gone through the judgment and order passed by the CEGAT. It cannot be held that cutting, edging, trimming, polishing and other processes on the marble slabs amount to a process of manufacture as it does not bring in a distinct product. Hence, this appeal is dismissed. There shall be no order as to costs.
(c) The Honble Supreme Court in the case of Aman Marble Industries Pvt. Lid. v. Collector of Central Excise, Jaipur reported in 2003 (157) E.L.T. 393 (S.C.) held that the cutting of blocks into marble slabs involves only sawing of the marble blocks and thereby does not bring into existence as distinct commodity so as to state that when such activity is completed a new substance has come into existence and marble will remain marble and, therefore, this activity does not amount to manufacture.
(d) The Honble Rajasthan High Court in the case of Anmol Granites v. Union of India reported in 2006 (199) E.L.T. 769 (Rajasthan) allowed writ petition, wherein, the issue was involved as to whether cutting and polishing of granite slabs and tiles from block amounts to manufacture and the end-product becomes subject to charge of excise duty under the Central Excise Act, 1944.
(e) The Tribunal in the case of NITCO Tiles Ltd. v. CCE, Mumbai-II reported in 2004 (165) E.L.T. 50 (Tribunal-Mumbai) held that marble slabs obtained by cutting, polishing and fibre glass reinforcement of marble slabs does not amount to manufacture as no new distinct commodity having emerged.
(f) The Tribunal in the case of R.K. Marble Pvt. Ltd. v. CCE, Jaipur-II vide Final Order No. 839/2008-Ex, dated 5-8-2008 held as under:-
3.?Contention of revenue is that as per chapter note 1 of Chapter 25 of the Central Excise Tariff, this chapter covers the products which are in the crude state or which have been washed, crushed, ground etc. but not the products which have been roasted, calcined or subjected to processing beyond that mentioned in each heading, while in the present case, the slabs, in question, are processed by applying resin and reinforced with the fibre netting and, therefore, the same are not covered under Chapter 25. The Chapter 68 of the Tariff specifically covered the articles of stone, plaster, cement etc. and Heading No. 6802.21 covers other monumental or building stones. The contention is that as the appellant undertaken the process of dressing of Marble Blocks, Sawing Process, Netting Process, Crack Filling & Resin Treatment and Tiling process, therefore, the processes undertaken by the appellant amount to manufacture as the marble slabs will not remain the marble in the crude form. In these circumstances, the goods, in question, are rightly classifiable under Chapter 68 of the Central Excise Tariff. We find, the appellant are engaged in the manufacture of Marble Slabs and clearing the same under the Chapter 25 of the Central Excise Tariff. During the process of slitting, of the blocks into slabs, in 10% to 12% marble slabs there are some cracks. The appellant undertakes the process such as applying Resin, Sawing and also applying fibre netting at the back and also filling the cracks. The Revenues contention is that the process undertaken by the appellant amounts to manufacture and the resultant product is classifiable under Chapter 68 of the Tariff. We find that this issue came before the Tribunal in the case of Nitco Tiles Ltd. (supra), whereas the Tribunal held that the process of polishing, Resin coating and fibre glass reinforcement of marble slabs does not amount to manufacture. In the present case, the appellants are undertaking the similar processes. Therefore, the ratio of above decision is applicable, in the facts of the present case. In view of the above decision, the impugned order is set aside. The appeal is allowed.
8.?The Commissioner observed that the case of Associated Stone Industries (Kotah) Ltd. (supra) and Aman Marbles Ltd. (supra) are not applicable in the present case as the said cases pertain to the period prior to 1-3-2005 (i.e. date of introduction of 8 digit Tariff). We are unable to accept the finding of the Commissioner. We find that ratio of the above decisions are squarely applicable in this case. The activities carried out by the appellants on the marble blocks and slabs do not amount to manufacture even after introduction of 8 digit classification code in the Tariff on 1-3-2005, unless by Section Note or Chapter Note of the Tariff or by wording of the relevant heading or sub-heading, the said process has been specified as manufacture.
9.?We find that Note 6 was inserted in Chapter 25 of the Tariff with effect from 1-3-2006, as under :-
In relation to products of heading 2515 and 2516, the process of cutting or sawing or sizing or polishing or any other process, for converting of stone blocks into slabs or tiles, shall amount to manufacture.
It is observed by the Commissioner in the impugned order that Note 6 to Chapter 25 is clarificatory in nature. It is also observed that even if note 6 was not in existence before 1-3-2006, the processes undertaken by the appellants rendered their product classifiable in a Chapter other than 25. We find that as per Section 2(f)(ii) of Central Excise Act, 1944, manufacture includes any process, which is specified in relation to any goods in the Section or Chapter Notes of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture. So, the process specified in Note 6 of Chapter 25 of the Tariff cannot be clarificatory nature. We agree with the submission of the ld. Advocate that the activities carried out by the appellant prior to 1-3-2006 do not amount to manufacture.
10.?The Commissioner observed that Heading Nos. 2515 and 2516 cover Marble and Granite respectively in crude or roughly trimmed form or merely cut into blocks/slabs. But, if the same are carried out those processes, it would come under the expression worked monumental or building stone classifiable under Heading No. 6802. Reliance was placed on Note 2 of Chapter 68 of Tariff. For the convenience, the relevant portion of Chapter 68 is reproduced below :-
CHAPTER 68 Articles of stone, Plaster Cement, Asbestos, Mica or similar materials Notes :
1. This Chapter does not cover :
(a) goods of Chapter 25;
xxx ?????xxx??????? xxx
2. In heading 6802, the expression worked monumental or building stone applies not only to the varieties of stone referred to in heading 2515 or 2516 but also to all other natural stone (for example, quartzite, flint, dolomite and steatite) similarly worked; it does not, however, apply to slate.
xxx ?????xxx??????? xxx 6802 Worked monumental or building stone (except slate) and articles thereof, other than goods of heading 6801, mosaic cubes and the like, of natural stone (including slate), whether or not on a backing; artificially coloured granules, chippings and powder, of natural stone (including slate) 6802 21 10 Marble blocks tiles
11.?It is clear that Note 1 of Chapter 68 specifically excluded the goods of Chapter 25. It is revealed from HSN Explanatory Notes, that Heading 6802 covers natural monumental of building stone (except slate), which has been worked beyond the stage of normal quarry products of Chapter 25. In the present case, Commissioner observed that the activity carried out by the appellants are worked beyond the stage of normal quarry products of Chapter 25. We are unable to accept the finding of Commissioner in view of the HSN Explanatory Notes of Heading 6802 as under :-
The heading therefore covers stone which has been further processed than mere shaping into blocks, sheets or slabs by splitting, roughly cutting or squaring, or squaring by sawing (square or rectangular faces).
The heading thus covers stone in the forms produced by the stone-mason, sculptor, etc.
12.?It is not the case of department that the goods in question are monumental or building stone or the stone in the form produced by stone-mason, sculptor, etc. So, the classification of goods under Chapter 68 and demand of duty after 1-3-2006 are not justified.
13.?It is seen that the CBEC vide Circular No. 134/02/2006-CX., 4 dated 3-9-2008 clarified as under :-
A question has arisen as to whether marble slabs on which resin and hardner are applied on one side and fibre net on the other side would be covered by the exemption under notification no. 4/06-C.E., dated 1-3-2006.
2.?The process of manufacture is that glass fibre net is applied on one side of the marble slabs to strengthen the slabs which are fragile and to enable safe handling and transportation. On the other side of this slab, polyester resin is applied to repair the cracks and pin holes in the slabs. The surface of the slabs still remains uneven as it was when it was cut or sawn. The glass fibre net is peeled off before fixing by the customer or finishing.
3.?The matter has been examined. The Board is of the view that when the marble slabs still have uneven surface as when it was cut or sawn, the application of glass fibre net or resin/hardner on the marble slabs shall net take these marble slabs out of chapter 25. Such marble slabs shall continue to be classified in chapter 25 and the concessional rate of duty under notification no. 4/06-C.E., shall be available to them.
14.?In view of the above discussions and Board Circular dated 3-9-2008, we hold that the activities carried out by the appellants prior to 1-3-2006, would not amount to manufacture. From 1-3-2006, the goods in question are classifiable under Chapter 25 and benefit of Notification No. 4/2006-C.E., dated 3-2-2006 are admissible. Hence, the demand of duty and penalty are not sustainable. The impugned orders are set aside. The appeals are allowed with consequential relief.
18. One another aspect which needs to be mentioned herein is that the adjudicating authority has denied the benefit of exemption Notification No.4/2006 as regards polished natural marble slabs on the ground that the said slab will not fall under CSH 6802 21 90. We find that the adjudicating authority has failed to note that sub-heading 6802 9100 and three sub-headings following it are a sub-classification of group of articles described as other which is preceded by __. It would mean that sub-heading and three entries are in the nature of residual entries and can be considered only if the subject goods are not classifiable under preceding entries. In the case in hand, we find that the goods are polished marble slabs and are covered under sub heading No.6802.21 and hence merit classification under sub heading No.6802 2190. We find that the position seems to have been clarified by the Board vide Budgetory Circular dt.16.03.2012, wherein CBEC has specifically stated that the appropriate heading of polished marble slab shall be 6802 2190 only and the benefit of exemption Notification No.4/2006-CE would be admissible. The clarification issued by the Board would indicate that the appellant is eligible for the benefit of exemption Notification No.4/2006-CE extending the analogy of the said circular of CBEC, the duty liability, if any, arises on the appellant, on the marble slabs which they received prior to March 2006 from their job workers on payment of duty, the appellant is eligible to avail the CENVAT Credit on such amount and he would have been eligible for benefit of Notification No.4/2006-CE and they would discharge of duty liability @ Rs.30 per sq.mtr as indicated in the said notification, which is revenue neutral position.
19. As regards leviability of duty on the processed agglomerated marble slabs for the period from 01.03.2006 to March 2008, we find that it is undisputed that job worker used to cut the agglomerated marble slabs on job work basis and were sending the slabs to the appellant on payment of Service Tax under the category of Business Auxiliary Service for the reason that after cutting/sawing of agglomerated marble blocks, the processed agglomerated marble slabs would fall under Chapter Heading No.68 would not amount to manufacture as there was no deemed manufacture definition. The Revenue authorities have been accepting the discharge of Service Tax liability by job worker holding that such an activity does not amount to manufacture. We find that this proposition of the appellant is vindicated by the judgment of Hon'ble Supreme Court in the case of Aman Marble Industries Pvt.Ltd. (supra) and various other judicial pronouncements as there was no enabling chapter note in Chapter 68, declaring that such process of cutting/sawing of agglomerated marble blocks into slabs would be considered as deemed manufacture. The appellant received such agglomerated marble slabs, and undertook the activity of resin filling and polishing as may be required before dispatch of such agglomerated marble slabs into the market. As already held by us hereinabove that the process of resin filling, polishing etc will not amount to manufacture in view of the facts discussed above, fortified by the judgment of co-ordinate Bench in the case of Oriental Trimex Ltd (supra), we find that the activity of resin filling, polishing by the appellant on agglomerated marble slabs will not amount to manufacture. Hence, the demand of duty on such processed agglomerated marble slabs for the period prior to March 2008 is un-sustainable in law. As regards the clearance of processed agglomerated marble slabs after March 2008 upto 26.02.2010, the activity undertaken by the appellant of cutting/sawing of agglomerated marble blocks into slabs during this period resin filling and polishing would not amount to manufacture as the judgment of Hon'ble Supreme Court in the case of Aman Marble Industries Pvt.Ltd. is applicable in this case. With effect from 26.02.2010, vide Finance Bill 2010, as a Chapter note was inserted in Chapter 68 declaring such activities as deemed manufacture, such declaration and chapter note inserted w.e.f. 26.02.2010 will be effective from that date and cannot be applied to an activity for the earlier period. In our view, the demand of duty raised and confirmed on processed agglomerated marble slabs falling under Chapter 68 for the period March 2008 to 26.02.2010 is not sustainable under the law. As a matter of fact, post 26.02.2010, it is submitted by the ld.Counsel that the appellant has been discharging duty liability under the relevant Chapter 68.
20. As regards leviability of duty on the processed imported slabs, we find that the appellant is importing the marble slabs and does the process of fibre netting, resin filling, grinding, cutting and polishing as may be required. As already held by us hereinabove, by relying on the judgment of co-ordinate Bench of the Tribunal in the case of Oriental Trimex Ltd (supra), this activity would not amount to manufacture during the relevant period on the imported marble slabs.
21. In view of the foregoing, we are of the considered view that the duty liability raised and confirmed against the appellant in both appeals E/1328-1331/2010 and E/70/2012 is not sustainable and consequently the penalties imposed are also not sustainable.
22. As we have decided the entire issue on the merits of the case and relying upon the judicial pronouncements on identical issue, we have not recorded any finding on the various other points urged by both sides including limitation.
23. In view of the foregoing, the impugned orders are set aside the appeals are allowed with consequential relief.
(Pronounced in Court on ______________________)
(B.S.V. Murthy) (M.V. Ravindran)
Member (Technical) Member (Judicial)
cbb
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