Custom, Excise & Service Tax Tribunal
Shapoorji Pallonji & Co. Ltd vs Commissioner Of Central Excise on 12 May, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT No. I Appeal No. E/2895 to 2897/06 (Arising out of Order-in-Original No. 456/43/V/2006/ COMMR/RH dated 28.06.2006 passed by Commissioner of Central Excise, Mumbai V) For approval and signature: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. Raju, Member (Technical) ================================================
1. Whether Press Reporters may be allowed to see : No the 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 : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
Shapoorji Pallonji & Co. Ltd.
Cyrus P. Mistry S.Y. Karkhanis Appellant Vs. Commissioner of Central Excise Mumbai Respondent Appearance:
Shri S.S. Gupta, C.A. with Shri Vinod Awtani, C.A. for appellant Shri Ajay Kumar, Jt. Commr (AR) for respondent CORAM:
Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. Raju, Member (Technical) Date of Hearing: 12.05.2016 Date of Decision: 12.05.2016 ORDER NO Per : Raju The appellants were issued notices demanding duty on Ready Mix Concrete (RMC) manufactured by them. The demand was confirmed by the Commissioner however, this Tribunal vide order dated 06.11.2006 allowed the appeals of the appellants following the decision of Larger Bench of this Tribunal in the case of Chief Engg. Ranjit Sagar Dam vs. CCE Jalandhar 2006 (198) ELT 503. Revenue agitated the matter before the Honble Apex Court and the Apex Court vide order dated 19.11.2015, as reported at 2015 (326) ELT 24 (S.C.), has observed as follows:-
The Tribunal by way of impugned judgment has allowed the appeals of the respondent/assessee holding that Ready Mix Concrete (RMC) does not amount to manufacture and, therefore, is not liable to excise duty. This Court in M/s. Larsen & Toubro Ltd. & Anr., ECC Construction Group v. Commissioner of Central Excise, Hyderabad, 2015 (10) SCALE 476 = 2015 (324) E.L.T. 646 (S.C.), otherwise holding that RMC would amount to manufacture and, therefore, liable for payment of excise duty. The Judgment of the Tribunal has to be, therefore, set aside on this ground alone.
2.?We, however, find that the respondent had taken a specific plea before the Adjudicating Authority that the produce in question is not RMC but only Mix Concrete (MC). This contention was rejected by the Adjudicating Authority in Order-in-Original passed by it. The assessee had challenged those findings before the Tribunal. However, the Tribunal did not go into this aspect as it proceeded on the basis that even if it was RMC produced at site, the same shall be entitled to exemption under the requisite Notification. In view thereof, the matter needs to be remanded back to the Tribunal to decide the aforesaid factual aspect viz. whether the produce in question is RMC manufactured at site or is it MC as contended by the assessee.
3.?We may record the submission of Mr. K. Radhakrishnan, learned senior counsel appearing for the appellant that the finding of the Adjudicating Authority that the produce in question was RMC has been arrived at on the basis of statements of the officials of assessee itself which were never retracted by them. That may be so, still we are of the opinion that the assessee is to be given a chance to contest the finding of the Adjudicating Authority, once such a stand is taken before the Tribunal and there is no finding thereon recorded by the Tribunal. However, we make it clear that it will always be open to the appellant/Department to justify the order passed by the Adjudicating Authority on the basis of material which is relied upon by the Adjudicating Authority including the statements of the officials of the assessee and effect thereof.
4.?We, thus, allow these appeals, set aside the impugned order and remit the case back to the Tribunal to look into the matter afresh keeping in view our observations.
Shri Cyrus P. Mistry and Shri S.Y. Karkhanis are also in appeal against the imposition of penalty. Consequently the appeals were taken up for hearing on 12.05.2016.
2. Learned Counsel for the appellants argued that they had not manufactured RMC. The learned Counsel relied on the CBEC Circular No. 368/1/98-CX dated 06.01.1998. The said Circular had clarified as follows:-
2.. The Board has examined the issue of "RMC" afresh and finds that a clear distinction needs to be made between the two types- (a) concrete mix at site and (b) Ready Mix Concrete. The Ready Mix Concrete plant consists of stone crushers, conveyors, vibrator screen to segregate different sizes of stone aggregates, and a sand mill to produce sand from stones, A central batching plant is also installed in which all aggregates are weighted, batched by electrical controls and limit switches. Cement from silo is carried to the batching plant by a screw conveyer operated with automatic weighing gauges. Water is fed through flow meters after subjecting such water to chemical analysis. The mixture of stone aggregates, sand, cement and water is mixed in a mixer. The shelf life of the mixture so obtained is increased by addition of chemicals. This mix is loaded on a transit mixer mounted on truck chassis which is transported to the site of the customers and the same is discharged at site for use in further construction of building etc. 6. The matter has been examined and concrete mix implies the conventional method of concrete production conforming to the ISI Standard 456-1978, which is produced and used at the site of construction. It is this concrete mixture, manufactured at the site of construction which is fully exempt vide Notification No. 4/97-C.E., dated 1-3-1997 (S. ,N. 51). It is thus clarified that ready mix concrete or pre-mixed concrete, by its very nature, cannot be manufactured at the site of construction and is brought from the factory of manufacturer for use in construction. 2.1 On the strength of above Circular, the learned Counsel argued that -
(a) The RMC should be manufactured in a plant and plant should consist of stone crushers, conveyors, vibrator screens, sand mill, central batching plant.
(b) The chemicals are added to RMC to increase the shelf life.
(c) The RMC is required to be loaded on a transit mixer for the purpose of transportation to the site of the customer.
(d) By its very nature, RMC cannot be manufactured at the site of construction and is brought from the factory of manufacturer for use in construction.
2.2 It was argued that in the statement of Shri S.K. Karkhanis, Project Manager of the appellants, the batching plant installed by them did not consist of stone crusher, conveyors, vibrator screen, etc. The learned Counsel argued that the appellants were manufacturing concrete using large batching mixer. He argued that since the plant installed by them was not RMC plant as described in the CBEC Circular (supra), the product manufactured by them could not be treated as RMC.
2.3 Learned Counsel argued that the appellant did not add any chemicals to increase shelf-life of the concrete. He relied on the Circular which states that the chemicals are added to the concrete mix in order to increase shelf-life of the RMC. He argued that chemicals can be plasticizers which increase the workability thereby reducing cement contents or Retarders which increase shelf-life of the concrete. He argued that even in the statement of Shri S.Y. Karkhanis there is no admission regarding addition of any chemicals to the concrete. He pointed out that Shri S.Y. Karkhanis stated that plasticizers are added only as and when required and no other chemicals are added. He further pointed out that even during cross-examination of Shri S.Y. Karkhanis no evidence regarding of any addition of any retarders (to increase shelf-life) was brought out. He further argued that as per CBEC Circular dated 06.01.1998, RMC cannot be manufactured at site and therefore the product manufactured by them at the site of Mahindra and Mahindra cannot be treated as RMC. He argued that prior to installation of bigger batching plant, concrete mix was being manufactured in small concrete mixers till 6th December 1996. He argued that the nature of manufacture of product upto 5th December 1996 and after 6th December 1996 (upto 5th December 1996, using smaller mixer and after 6th December 1996, using bigger batching plant) is one and the same.
2.4 He further argued that the concrete mix manufactured at the site of construction is eligible for exemption under Notification No. 4/97-C.E. dated 01.03.1997. He further argued that the cross examination of Shri S.Y. Karkhanis was obtained under duress and he was forced to mention the terms ready mix before the word concrete in his statement.
2.5 He further argued that the entire demand is beyond normal period of limitation. He argued that the there was doubt regarding the taxability on RMC and its eligibility to its exemption. He relied on the decision of Continental Foundation Jt. Venture 2007 (216) ELT 177 (S.C.) to assert that there was a genuine confusion in the field at the material time and therefore there could not be any intention to evade duty.
11. Factual? position goes to show the Revenue relied on the circular dated 23-5-1997 and dated 19-12-1997. The circular dated 6-1-1998 is the one on which appellant places reliance. Undisputedly, CEGAT in Continental Foundation Joint Venture case (supra) was held to be not correct in a subsequent larger Bench judgment. It is, therefore, clear that there was scope for entertaining doubt about the view to be taken. The Tribunal apparently has not considered these aspects correctly. Contrary to the factual position, the CEGAT has held that no plea was taken about there being no intention to evade payment of duty as the same was to be reimbursed by the buyer. In fact such a plea was clearly taken. The factual scenario clearly goes to show that there was scope for entertaining doubt, and taking a particular stand which rules out application of Section 11A of the Act.
12. As far as fraud and collusion are concerned, it is evident that the intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word wilful, preceding the words mis-statement or suppression of facts which means with intent to evade duty. The next set of words contravention of any of the provisions of this Act or Rules are again qualified by the immediately following words with intent to evade payment of duty. Therefore, there cannot be suppression or mis-statement of fact, which is not wilful and yet constitute a permissible ground for the purpose of the proviso to Section 11A. Mis-statement of fact must be wilful.
3. Learned A.R. relied on the CBEC Circular No. 315/31/97-CX dated 23.05.1997 to assert that ready mix concrete even if manufactured at the site of construction is liable to duty. He particularly relied on para 4 of the said clarification. Learned A.R. also relied on the decision of the Honble Supreme Court in the case of Larsen & Toubro Ltd. 2015 (324) ELT 646 (S.C.). He particularly relied at para 9, 19, 20 and 21. He argued that the Honble Supreme Court has clearly held that the benefit of Notification No. 4/97-C.E. dated 01.03.1997 is not applicable for ready mix concrete but only to concrete mix.
4. We have gone through the rival submissions. We find the issues that need to be decided are
(a) is the product manufactured by the appellant is RMC (Ready mix concrete) or concrete mix,
(b) whether benefit of Notification No. 4/97 dated 01.03.1997 is available to the appellant in respect of the product manufactured by them,
(c) whether extended period of limitation can be invoked in the instant case.
4.1 The product manufactured by the appellant is concrete and is manufactured at the site. The product contains plasticizers but does not contain retarders. While the Project Manager Shri S.Y. Karkhanis has admitted in his statement that the product manufactured by them is ready mix concrete but he has backed out during cross-examination.
4.2 Honble Supreme Court in the case of Larson & Toubro (supra) has clearly held as follows:-
9.?It is clearly discernible from the above that the Legislature has treated RMC and CM as two different products. Whereas CM has generally been covered by the exemption notification, such an exemption is not extended to RMC. Even when doubts were raised from time to time about the two products, Government has always been clarifying and emphasizing that the two products are different and RMC attracts excise duty and is not covered by the exemption notification. The classification entries have also been enacted accordingly. We may also mention at this stage itself that the duty which was demanded from L&T by issuing show-cause notices cover the period from May 2, 1996 to February 28, 1997 and from March 1, 1997 to March 19, 1998.
18.?We may point out at the outset that the case which is now sought to be set up by the assessee, namely, CM and RMC are one and the same product, was never the case of the assessee. On the contrary, in reply dated June 12, 1998 to the letter dated May 18, 1998 issued by the Assistant Commissioner of Central Excise, Anantpur, the explanation given by the assessee was that the product produced at the site is only concrete mix, which is different from RMC; and that RMC cannot be manufactured at the site of construction; that chemicals/retarders are not used in site mix concrete. Further, we also find from Order-in-original as well as order passed by the Tribunal that the assessee always accepted that what was being produced was RMC and claimed exemption only on the ground that it was manufactured at the site of construction and captively used.
Even in the writ petition filed by the assessee in the High Court of Madras [2006 (198) E.L.T. 177 (Mad.)], the assessee itself proceeded on the basis that what was manufactured was RMC inasmuch as in Para 3 of this writ, it was mentioned : the writ petitioner had set up a Unit for manufacture of Ready Mix Concrete at Manapakkam. Paras 3 and 4 reads as under :
3.?The writ petitioner had set up an Unit for manufacture of Ready Mix Concrete at Manapakkam and has registered itself with the Central Excise. According to the respondents, the Ready Mix Concrete manufactured by the petitioner is not meant to be used at the site itself and they have to be cleared and sold to various other construction companies. The product is transported through the vehicle fitted with mixing drum specifically designed to carry Ready Mix Concrete from the petitioners unit to various concrete sites. The product is marketable, transportable and eventually available for sale.
4.?The product concrete mix was not specified anywhere in Chapter 28 of the Central Excise Tariff Act, 1995. It was classified under Chapter sub-heading 38.23. However, as both the concrete mix and Ready Mix Concrete were closely related products, confusion arose in respect of classification and levy of duty.
19.?We are also inclined to agree with the stand taken by the Revenue that it is the process of mixing the concrete that differentiates between CM and RMC. In the instant case, as it is found, the assessee installed two batching plants and one stone crusher at site in their cement plant to produce RMC. The batching plants were of fully automatic version. Concrete mix obtained from these batching plants was delivered into a transit mixer mounted on a self propelled chassis for delivery at the site of construction is in a plastic condition requiring no further treatment before being placed in the position in which it is to set and harden. The prepared chassis which was mounted was to ensure that when the concrete mix is taken to the actual place of construction, it keeps rotating. It is also significant to mention that for producing the concrete mix, material used was cement, aggregates, chemically analysed water and admixtures, namely, retarders and plasticizers. As the L&T was constructing cement plant of a very high quality, it needed concrete also of a superior quality and to produce that aforesaid sophisticated and modernised process was adopted. The adjudicating authority in its order explained the peculiar feature of RMC and the following extracts from the said discussion needs to be reproduced :
32.?Central Excise Tariff does not define Ready Mix Concrete. Therefore, as per the established case-laws on the subject it is necessary to look for the meaning of this expression as understood in the market viz., as understood by the people who buy and sell this commodity. In this connection it would be relevant to refer to the following excerpts from an article - what is ready mix concrete, appearing in internet website of National Ready Mix Concrete Association, USA :-
(i)?Concrete, in its freshly mixed state, is a plastic workable mixture that can be cast into virtually any desired shape. It starts to stiffen shortly after mixing, but remains plastic and workable for several hours. This is enough time for it to be placed and finished. Concrete normally sets or hardens within two to 12 hours after mixing and continue to gain strength within months or even years.
(ii)?Ready Mix Concrete refers to concrete that is delivered to the customer in a freshly mixed and non-hardened state. Due to its durability, low cost and its ability to be customized for different applications, Ready Mix Concrete is one of the worlds most versatile and popular building materials.
(iii)?Admixtures are generally products used in relatively small quantities to improve the properties of fresh and hardened concrete. They are used to modify the rate of setting and strength, especially during solid and cold weather. The most common, is an air-entraining agent that develops millions of tiny holes in the concrete, which imparts the durability to concrete in freeing and thawing exposure. Water reducing Admixtures enable concrete to be placed at the required consistency while minimizing water used in the mixture, thereby increasing the strength and improving durability. A variety of fibers are incorporated in the concrete to control or improve aberration and impact resistance. 20.?After referring to some text as well, the adjudicating authority brought out the differences between Ready Mix Concrete and CM which is conventionally produced. The position which was summed up showing that the two products are different reads as under :
From the literature quoted above it is clear that Ready Mix Concrete is an expression now well understood in the market and used to refer to a commodity bought and sold with clearly distinguishable features and characteristics as regards the plant and machinery required to be set-up for its manufacture and the manufacturing processes involved, as well as its own properties and the manner of delivery. RMC refers to a concrete specially made with precision and of a high standard and as per the particular needs of a customer and delivered to the customer at his site. Apparently due to the large demand resulting from rapid urbanization and pressure of completing projects on time, consumption of RMC has steadily grown replacing the conventional/manual concreting works. Today leading cement companies have entered the field by setting-up RMC plants in which L&T ECC is one. RMC is slowly replacing site or hand mixed concrete because of the distinct advantages due to technology, speed and convenience. Furthermore, absence of the need to deal with multiple agencies for procuring and storing cement, sand, blue metal and water as well as the absence of the need to handle unorganized labour force are factors influencing customers to go in for RMC in preference to CM.
21.?In this backdrop, the only question is as to whether RMC manufactured and used at site would be covered by notification. Answer has to be in the negative inasmuch as Notification No. 4, dated March 1, 1997 exempts only Concrete Mix and not Ready Made Mixed Concrete and we have already held that RMC is not the same as CM.
4.3 In view of the above, the Honble Supreme Court has answered a few questions and has clearly held that RMC and concrete mix are two different product. Exemption under Notification 4/97 dated 01.03.1997 is available only to concrete mix and not to RMC. Honble Supreme Court has discarded the proposition as RMC cannot be manufactured at site. In para 20 of the order the Honble Supreme Court differentiates between RMC and concrete mix in the following terms.
It clearly states that RMC refers to concrete specially made with precision and of a high standard and as per the particular needs of a customer and delivered to the customer at his site. In the instant case the mix manufactured by the appellant is specially made for Mahindra & Mahindra and is manufactured with precision of a high standard and is delivered to the customer at his site. Thus prima facie it fulfills the criteria identified by the Honble Supreme Court in its decision. In the instant case the appellants are also adding plasticizers to improve the quality of the concrete. In view of above it is held that the product manufactured by the appellants is RMC and the appellants are not entitled under Notification No. 4/97 dated 01.03.1997.
4.4 In so far as the issue of limitation is concerned the decision of the Honble Supreme Court in the case of Continental Foundation Jt. Venture (supra) is squarely on this issue. In the said decision the Honble Apex Court has observed as follows:-
11. Factual? position goes to show the Revenue relied on the circular dated 23-5-1997 and dated 19-12-1997. The circular dated 6-1-1998 is the one on which appellant places reliance. Undisputedly, CEGAT in Continental Foundation Joint Venture case (supra) was held to be not correct in a subsequent larger Bench judgment. It is, therefore, clear that there was scope for entertaining doubt about the view to be taken. The Tribunal apparently has not considered these aspects correctly. Contrary to the factual position, the CEGAT has held that no plea was taken about there being no intention to evade payment of duty as the same was to be reimbursed by the buyer. In fact such a plea was clearly taken. The factual scenario clearly goes to show that there was scope for entertaining doubt, and taking a particular stand which rules out application of Section 11A of the Act.
? 12. As far as fraud and collusion are concerned, it is evident that the intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word wilful, preceding the words mis-statement or suppression of facts which means with intent to evade duty. The next set of words contravention of any of the provisions of this Act or Rules are again qualified by the immediately following words with intent to evade payment of duty. Therefore, there cannot be suppression or mis-statement of fact, which is not wilful and yet constitute a permissible ground for the purpose of the proviso to Section 11A. Mis-statement of fact must be wilful.
4.5 In fact, the period as well as the issue involved is roughly the same. Relying upon the above said decision of the Honble Supreme Court we hold that the extended period of limitation cannot be invoked in this case.
5. This appeal is accordingly allowed and the demand and penalty against the appellants are set aside. Since the demand against the main appeal is set aside, the penalty against Shri Cyrrus P. Mistry and Shri S.Y. Karkhanis is also set aside.
(Pronounced in Court on) (M.V. Ravindran) Member (Judicial) (Raju) Member (Technical) nsk 1 16 Appeal No. E/2895 to 2897/06