Customs, Excise and Gold Tribunal - Delhi
Jaypee Rewa Cement Ltd. vs Collector Of Central Excise on 24 August, 1993
Equivalent citations: 1994(50)ECR210(TRI.-DELHI)
ORDER G.P. Agarwal, Member (J)
1. This is an application for dispensation of the mandatory requirement of pre-deposit of the duty amounting to Rs. 17,20,467.32 demanded and penalty amount of Rs. 3 lakhs imposed on the appellants by the Collector vide his impugned Order-in-Original.
2. The short facts leading to the present application are that, the applicants are admittedly manufacturers of cement They also have lime stone mines. They undertake crushing of limestone falling under Chapter 25.05 of the Central Excise Tariff Act and use in concrete mixture for their civil construction works. It was the case of the Department that during the period November 1988 to 6.12.1991 they manufactured in their Batching Plant 134,117.11 MT of crushed limestone and used the same for their civil construction works without obtain -ing the Central Excise Licence and without payment of Central Excise duty. Consequently, a Show Cause Notice dated 22/255.1992 was issued to them calling upon to show cause as to why duty amounting to Rs. 17,20,467.32 be not demanded and recovered from them and also to show cause as to why penalty be not imposed. The applicants contested the Show Cause Notice mainly on the ground that crushing of limestone does not amount to manufacture and further that crushing has not been specified as a process amounting to manufacture in the Section/Chapter Notes relevant to limestone as is required under Section 2(f) of the Central Excises and Salt Act, 1944. However, the Collector negatived the said defence of the applicants and demanded the duty, as aforesaid, and also imposed a penalty of Rs. 3,00,000/- on the applicants observing as follows:
The process of crushing of limestone undertaken by the noticee brings about irrevocable transformation in the limestone lumps and the resultant crushed limestone has its own distinctive name, character and use. Thus, the process involved and the resultant product squarely stands the test for determining manufacture laid down by the Supreme Court in the case of Delhi Cloth and General Mills .
As regards the decision of Madhya Pradesh High Court in the case of Bheraghat Mineral Ind. v. Divisional Dy. CST and Ors. 1987 (20) VKN 290 holding that crushing of dolomite lumps into chips and powder does not amount to manufacture, I find that this decision delivered by a Division Bench of the High Court is not in consonance with an earlier decision of the Division Bench of the same High Court in the case of G.R. Kulkarni v. State 1957 (8) STC 294, and the inconsistency has been set at rest by the High Court (Full Bench) through its decision in the case of Kher Stone Crusher v. G.M. District Industries Centre holding that crushing of stones into gittis, ballast and metal gives rise to a new commodity and amounts to manufacture. The decision of the Tribunal in the case of CCE Vddodara v. Mahavir Mineral Store Supply 1988 (19) ECR 305, is also not relevant as it pertains to a period prior to the enactment of the Central Excise Tariff Act, 1985.
As for the amended definition of manufacture, under Section 2(f) of the Central Excises and Salt Act, 1944, I find that the amendment has in no way diluted the "inclusive" nature of the definition of manufacture and the net result thereof being to the effect that certain processes specified in the Section/Chapter Notes have been treated as amounting to manufacture in addition to the already existing definition which included by process incidental or ancillary to the completion of a manufactured product as amounting to manufacture. I, therefore, do not accept the plea of the noticee that the process of crushing has to be mandatorily specified as amounting to manufacture under the Section/Chapter notes relevant to limestone. Each case has to be viewed in isolation on merits to determine whether the processes involved therein amount to manufacture....
Chapter heading 2505 of the Central Excise Tariff Act, covering mineral substances, inter alia, includes limestone. Chapter Note 2 appended to Chapter 25 makes it amply clear that Chapter 2505 extends, exclusively, except where their context otherwise requires, to products which have been washed (even with chemical substances, laminating the impurities without changing the structure of the product), crushed, ground powdered, levigated, sifted, screened or concentrated by flotation, magnetic separation or other mechanical or physical processes (except crystallisation). The legislative intent as regards the levy of duty is thus very obvious in as much as it has been made explicitly clear that the mineral substances, such as limestone covered by the Chapter are in their crushed/powdered physical state which are dutiable and that there is no intention to tax the subject minerals in their crude conditions/forms as excavated from the mines.
It, therefore, follows that as limestone in its crushed state is dutiable and as the same can be obtained only by the process of crushing of limestone lumps, duty has to be discharged thereon notwithstanding the fact that the process involved has not been specifically mentioned as amounting to manufacture in the Section/Chapter notes.
3. Appearing on behalf of the appellants, Shri A.K. Jain, learned counsel, reiterated the same arguments which were advanced before the Collector, as aforesaid, and submitted that this Tribunal in the case of SAIL v. Collector of Central Excise, decided on 6.2.1991 has held that crushing of lime stone into lime fine does not amount to manufacture, since lime fine is not known and recognised as a distinct commodity in the market. After submitting so, he admitted that this Tribunal in the case of Ajanta Marble & Chemical Industries v. Collector of Central Excise, decided on 21.12.1990 has held that crushing, grinding and sieving of limestone amounts to manufacture and recently this Tribunal also reiterated the same view in the case of M/s. Century Cement v. Collector of Central Excise, Raipur, Final Order No. 264/92-C dated 10.8.1992. However, he submitted that since there were conflicting decisions of the Tribunal on the issue, as to whether crushing of lime stone amounts to manufacture or not, this Tribunal while passing the judgment in the case of M/s. Century Cement v. Collector of Central Excise, Raipur, supra, should have referred the matter to the Larger Bench instead of deciding the issue itself and cited the case of Union of India v. Paras Laminates (P) Ltd. . He also submitted that when two views are possible, a view which is favourable to the assessee should be adopted and cited the cases reported in 1992 (89) STC 466; 1992 (87) STC 339; 1989 (22) ECR 339; 1989 (25) ECR 486; (1993) 45 TTJ 333; and 156 ITR 11. He also cited the case of Azad Tin Factory (P) Ltd v. Collector of Central Excise, Bombay 1993 (21) ETR 141 : 1993 (46) ECR 52 (Tribunal), wherein it was held that after the introduction of CET 1985, the process of printing is not a process of manufacture unless the process of printing is included in the description and definition of the concerned tariff item. In reply, Shri Sharad Bhansali, learned SDR, while supporting the impugned Order, submitted that, the ratio of the Judgment delivered by this Tribunal in the case of SAIL v. Collector of Central Excise, supra, (the only judgment said to be in favour of the assessee and also said to be in direct conflict with the other judgment of the Tribunal) is not applicable to the present case, as in the case of SAIL v. Collector of Central Excise, supra, the question was, as to whether the crushing of lime stone into lime fine amounts to manufacture, whereas in the present case the issue involved is, as to whether the crushing of lime stone amounts to manufacture or not, and therefore, the judgment of the Tribunal rendered in the case of Ajanta Marble & Chemical Industries v. Collector of Central Excise, supra, applies on all fours (sic) to the present case. It was stressed by him that this distinction itself was pointed out to the Tribunal in the case of M/s. Century Cement v. Collector of Central Excise, supra, and the Tribunal after noticing the said two decisions, that is to say, judgment of the Tribunal rendered in the case of SAIL v. Collector of Central Excise, supra, and Ajanta Marble & Chemical Industries supra, ultimately concluded that the crushing of the lime stone and consumed by the assessee themselves in their factory in the manufacture of cement amounts to manufacture within the definition of Section 2(f) of the Central Excises and Salt Act, 1944. In this premises, it was stressed by him that there were no conflicting decisions of the Tribunal on the issue, and therefore, there was no necessity to refer the matter to the Larger Bench while deciding the case of M/s. Century Cement v. Collector of Central Excise, Raipur, supra, and for the same reasons, the case law cited at the Bar that when two views are possible, the view which is favourable to the assessee is to be adopted is not relevant to the present case. As regards the submission of the earned Counsel that the process of crushing has not been specified as a process amounting to manufacture in the Section/Chapter Notes applicable to lime-stone, it was submitted by him that goods emerging out of various processes, by what ever name may be called, are dutiable, notwithstanding the fact that the process involved has not been specifically mentioned as amounting to manufacture in the Section/Chapter Notes.
4. We have considered the submissions. On a close reading of the judgment rendered by this Tribunal in the case of SAIL v. Collector of Central Excise, supra, it is clear that, there the issue was as to whether crushing of lime stone into lime fine amounts to manufacture or not and this Tribunal after considering the relevant definition of the term 'manufacture' and the Chapter Notes and the evidence on the record concluded that since lime fine is not known and recognised as a distinct commodity in the market, crushing of lime stone into lime fine does not amount to manufacture. In the instant case, as aforesaid, the issue is quite different, that is to say, in the instant case the issue is, as to whether the crushing of lime stone amounts to manufacture or not In the case of Ajanta Marble & Chemical Industries v. Collector of Central Excise, supra, the same issue was the bone of contention and it was held that crushing of lime stone amounts to manufacture in terms of the new definition of the term 'manufacture' in the Act In this case, the impact of Section/Chapter Note was also considered and after considering so, it was held that from Note 2 of Chapter 25, it is clear that, crushing grinding and sieving of lime stone to obtain lime stone chips and powder amounts to manufacturing process. This Tribunal again considered the same issue in the case of M/s. Century Cement v. Collector of Central Excise, Raipur, supra, and after noticing the said two cases, namely, SAIL v. Collector of Central Excise, supra, and Ajanta Marble & Chemical Industries v. Collector of Central Excise, supra, concluded that crushing of lime stone amounts to manufacture. In this view of the matter, we are of the view that there were no conflicting decisions of this Tribunal on the issue. That apart, recently a Full Bench of the Madhya Pradesh High Court in the case of Kher Stone Crusher v. G.M. District Industries Centre , has held that process of conversion of stone into gtttis, ballast and metal in crushers amounts to manufacture. For ready reference, the observations of the Court may be extracted herein with advantage which runs thus:
11. Applying the above test laid down by the Supreme Court to the case in hand we have no difficulty in holding that when bigger stones and boulders are cut and shaped into sizes in crusher for manufacture of ballast, metal or "gitti", there is transformation of the stone and a new different commercial article is produced as a result of treatment, labour and manipulation in the crusher. The process, therefore, clearly falls within the definition of "manufacture" under the Act and there was no justification for the respondent No. 1 to hold that the petitioner is not involved in any manufacturing activity and could not claim the eligibility certificate for sales tax exemption.
5. In the light of the above discussion, we hold that the appellants have no prima fa tie case on merits and it also cannot be said, at this stage, that the impugned Order is perverse or contrary to law.
6. Next, it was argued that the demand in the instant case was time-barred. Elaborating, it was contended that Show Cause Notice dated 22/25.5.1992 was issued demanding duty for the period from November 1988 to 6.12.1991 invoking the larger period of limitation of five years under Proviso to Section 11-A of the Central Excises and Salt Act, 1944, and since the factory of the applicants' was visited regularly by the Officers they should have been aware of the fact that the applicants are crushing the lime stone and utilising the same for their civil construction works, the applicants cannot be held guilty for making wilful mis-statement or suppressing the facts with intent to evade payment of duty. To support his contention, the case of Gwalior Rayon Silk Mfg. (WVG) Co. Ltd. v. Collector of Central Excise , was cited. In reply, Shri Sharad Bhansali, learned SDR, submitted that the applicants at the relevant time were working under the 'Self Removal Procedure' and, therefore, they were statutorily required to declare the manufacturing activity of crushing of lime stone to the Department and discharge duty liability thereon. Since they failed to comply with the statutory requirement, they obviously indulged in the active suppression of facts. It was stressed that mere visit of the factory of the applicants by the Officer of the Department in such a situation cannot brand the Department with the knowledge of the manufacturing activity of crushing of lime stone by the applicants.
7. After considering the facts and circumstances of the case, we are of the view that the demand was prima facie not time-barred. Admittedly, the applicants during the relevant time were working under the Self Removal Procedure' and it was their legal duty to declare their manufacturing activity of crushing of lime stone to the Department, which they failed. In the case of Jaishri Engineering Co. (P) Ltd. v. Collector of Central Excise , it was held by the Apex Court that "The fact that the Department visited the factory of the appellant and they should have been aware of the production of the goods in question, were no reason for the appellants not to truly and properly describe these goods." Here it may be added that under the 'Self Removal Procedure', the excisable goods are permitted to be removed by the assessee by merely posting the necessary credit entries in the statutory books showing the excise duty payable to the Government This scheme depernds for its operation on the honesty of the manufacturer, and therefore, Mure on the part of the appellants to declare the manufacturing activity of crushing of lime stone to the Department cannot be ignored merety because the Department vistted the factory of the appel lants and they should have been aware of the production of the goods in question. (See Nizam Sugar Factory Ltd. v. Collector of Central Excise , wherein the Andhra Pradesh High Court has held that the Rules relating to the 'Self Removal Procedure' must be interpreted in such a way as to ensure their usefulness and enforcement. In the case of Mahendra Radio & TV (P) Limited v. Collector of Central Excise , it was held that, There can be no fault in the findings of the learned Additional Collector, however, that the assessee was working under the 'Self Removal Procedure' where a trust was reposed that they would abide by the Central Excises law and procedure. Failure strictly to comply with the rules, therefore, cannot be dismissed as mere technical violation of rules.
8. No other point was argued, though the Bench asked the learned counsel, as to whether the applicants arc pleading any financial hardship, to which he replied in the negative.
9. Thus, taking all the facts and circumstances of the case, as aforesaid, we direct the applicants to deposit the entire amount of duty demanded within eight weeks from the date of the receipt of the Order and report compliance to the Registry. On compliance, the requirement to pre-deposit the amount of penalty shall be deemed to have been waived and recovery proceedings, if started, shall remain stayed. Registry to fix the date for passing suitable Orders after ascertaining the compliance of this Order after ten weeks.