Customs, Excise and Gold Tribunal - Delhi
Raymond Cement Works vs Collector Of Central Excise on 9 January, 1995
Equivalent citations: 1995ECR193(TRI.-DELHI), 1995(76)ELT340(TRI-DEL)
ORDER G.R. Sharma, Member (T)
1. M/s. Raymond Cement Works have filed this appeal against the order of Collector of Central Excise. The Collector in his order had held :-
"I, accordingly, hold that crushing of limestone constitutes manufacture and duty is payable on crushed limestone.
As regards addition of profit margin in the assessable value, I do not accept the plea of the Noticee. Element of profit has to be added to value for the purposes of computation of duty on captively consumed goods in terms of Rule 6 of Valuation Rules, 1975 which stipulates that element of profit which the assessee would have earned on sale of captively consumed goods has to be added to the assessable value.
The Noticee's request for cross-examination of the Central Excise Officers is not acceptable as it is considered necessary keeping in view the facts and evidence on record. The Noticee vide their letter RCW/Sales/Excise dated 3.-2-1991 have clearly admitted the fact of crushing of limestone inside their factory premises during the aforesaid period i.e., 20-3-1990 to 16-9-1990 which was not declared earlier.
Further, I find that the conduct of the Noticee in so far as it relates to declaration of value of the crushed limestone smacks of deceit in as much as they had deliberately mis-declared the same to be Rs. 16/- MT vide their letter dated 3-2-1991. It was only at the instance of the department that they had to revise the same to Rs. 50.07 MT clearly establishing their mala fide intentions to cheat the exchequer by prepetuating the breach of trust already committed in suppressing the overall activities relating to crushing. Giving false and misleading information invites penalty under Rule 198 of Central Excise Rules, 1944.
In view of the facts and circumstances of the case, I pass the following order :-
I confirm the demand of duty on crushed limestone amounting to Rs. 74,27,464.46 under Rule 9(2) readwith Section 11-A of the Central Excises and Salt Act, 1944, which should be paid forthwith. I also impose a penalty of Rs. 5,00,000/- upon the Noticee under Rules 9(2), 173-Q and 198 of the Central Excise Rules, 1944."
2. Briefly stated the facts of the case are that the appellants have a clinker plant inside their factory premises in which they use limestone for manufacture of clinker with the aid of power. Limestone is first crushed/ground which is further used in manufacture of clinker/cement. It was alleged that the process of grinding/crushing/powdering of limestone amounts to manufacture under Section 2(f) of CESA, 1944. It was also alleged that in terms of Chapter Note 2 of Chapter 25 of the Schedule of the CETA, 1985, such products attract duty at the appropriate rate unless specifically exempted under a notification. It was also alleged that such limestone falling under Chapter 25.05 was fully exempted under Notn. No. 448/86-C.E., dated 13-11-1986 provided the same is used within the factory of production for the manufacture of cement/clinker. It was alleged that the above notification was rescinded with effect from 20-3-1990 by Notification No. 186/90, dated 20-3-1990 and accordingly such limestone became dutiable at the appropriate rate till the exemption was reintroduced under Notification No. 143/90-C.E., dated 17-9-1990 Accordingly, the appellants were asked to pay Central Excise duty for the period 20-3-1990 to 16-9-1990. A show cause notice in the instant case was issued on 27-1-1992 invoking the Proviso to Section 11A of the Central Excises and Salt Act extending the period of demand of duty beyond six months on the ground that there was contravention of a number of rules with the intention to evade payment of duty.
3. Shri I.C. Upadhyay, Id. Advocate appearing for the appellant submitted that the deptt. had issued show cause notices on 25-8-1986, 2-12-1986 and 29/30-1-1986 on the same issue which were withdrawn by Asstt. Collector under his order No. 41/88 holding that:
"The Central Govt. issued Notification No. 271/88-C.E., dated 24-10-1988 under Section 11-C of the CESA, 1944 wherein the full exemption of Central Excise duty on such limestone, slurry and raw feed has been provided for the relevant period, i.e., 28-2-1986 to 12-11-1986 and hence no duty is now recoverable on the said product manufactured and used within the factory of production for manufacture of cement clinkers and cement. In view of the facts stated above, I order for the withdrawal of the said demands as shown in Annexure A."
and that with the issue of this order by the Asstt. Collector, the appellant was convinced that there was no duty payable on powdered limestone; that the department cannot issue the present show cause notice on 27-1-1992 for the period 20-3-1990 to 16-9-1990 without adducing any further evidence; that no new fact has been brought out in the show cause notice dated 27-1-1992; that though Proviso to Section 11A for extending the period of the demand beyond six months has been invoked, no suppression of fact, mis-statement thereof to extend the demand for duty beyond six months has been brought out; that after hearing the case on 30-3-1990, a corrigendum to the Show Cause Notice was issued enhancing the demand to Rs. 74,27,564.46 from Rs. 21,57,579; that the demand is time-barred. The Id. Advocate argued that the process of manufacture of cement including crushing of limestone into powder was submitted to the department; that in the allegations, it has been mentioned in the Show Cause Notice that the appellant was procuring limestone, the Id. counsel submitted that the appellant had not purchased/taken/procured limestone from anybody but that they had their own quarries near the cement plant from where they get limestone; that Notn. No. 217/86-C.E., dated 2-4-1986 as amended clearly provides that if an intermediate product is manufactured in the factory which is used for manufacture of final product on which Central Excise duty is leviable then the intermediate product will not be liable to pay duty; that the exemption under Notification No. 488/86, dated 13-11-1986 and withdrawal of the same would be applicable to those units we clear limestone as their final product; that the benefit of Notn. No. 217/86 cannot be denied to the appellants. The appellant cited and relied upon a number of judgments. On manufacture, he cited and relied upon the case law reports as under:-
1. 1989 (40) E.L.T. 280 (S.C.)
2. 1989 (40) E.L.T. 287 (S.C.)
3. 1990 (49) E.L.T. 544 (Trib.)
4. 1991 (54) E.L.T. 414 (Trib.)
5. 1988 (38) E.L.T. 171 (Trib.)
6. 1992 (61) E.L.T. 560 (M.P.)
7. 1987 (32) E.L.T. 15 (Del.)
8. 1994 (70) E.L.T 501 (S.C.)
9. 1992 (70) E.L.T. 130 (Trib.) On Notification No. 217/86, the Id. Counsel cited and relied upon the following case law reports in support of his contention:
(1) 1993 (68) E.L.T. 450 (2) 1991 (55) E.L.T. 342 (3) 1992 (58) E.L.T. 300 (4) 1992 (61) E.L.T. 93 (5) 1993 (63) E.L.T. 3 (Mad.) (6) 1992 (62) E.L.T. 753 (Trib.) On the question of limitation, the Id. Counsel cited and relied upon the case law reported in : (1) 1989 (40) E.L.T. 276 (S.C.) (2) 1989 (43) E.L.T. 195 (S.C.) (3) 1993 (68) E.L.T. 560 (4) 1993 (68) E.L.T. 469 (5) 1993 (68) E.L.T. 28 (6) 1989 (44) E.L.T. 552 (7) 1992 (60) E.L.T. 659 (8) 1991 (52) E.L.T. 15 (Del.) (9) 1993 68) E.L.T. 34 (Trib.) (10) 1993 (68) E.L.T. 911 (Trib.) (11) 1993 (65) E.L.T. 552 (Trib.) On the question that exemption notification does not determine duty liability, the Id. Counsel cited and relied upon the reports reproduced in the following: (1) 1987 (32) E.L.T. 35 (2) 1986 (24) E.L.T. 98 (3) 1984 (16) E.L.T. 356 (4) 1986 (24) E.L.T. 169 (S.C.)
4. Summing up his arguments, the Id. Counsel submitted that the Deptt. has not been able to make out a case either on merits or on limitation and therefore on both the issues the case was in their favour. The Id. Counsel, therefore, prayed that the impugned order should be quashed and consequential relief should be granted to them.
5. Sh. Sharad Bhansali, the Id. SDR appearing for the Revenue submitted that there are three issues which need determination in the instant case.
(a) Issue No. 1 is whether crushing, grinding and powdering is a process of manufacture.
(b) Whether the appellant was liable to pay duty during the period 20-3-1990 to 16-9-1990; and
(c) Whether extended period under proviso to Section 11-A of the CESA, 1944 can be invoked in the circumstances of the instant case.
6. On the question of manufacturing, the Id. SDR referred to Note 2 of Chapter 25 wherein it has been clearly provided that crushed, ground, powdered etc. limestone shall be classifiable under Chapter Heading 25.05 and shall be excisable. Distinguishing the case law cited and relied upon by the appellants, the Id. SDR submitted that in view of this clear provision in the Tariff itself, no case law or assistance is required, and that the case law can be easily distinguished.
7. On the question whether duty during the period 20-3-1990 to 16-9-1990 was demandable, the Id. SDR submitted that during this period exemption available under Notn. No. 217/86 was withdrawn and, therefore duty had been rightly demanded for this period.
8. On the question of limitation, the Id. SDR submitted that there is no doubt that crushed, ground, powdered etc. limestone was liable to excise duty and, therefore it was incumbent on them to submit classification list, price-list, RT-12 returns etc. in respect of these items. As these formalities were not complied with by the appellant, therefore contravention of the rules set out in the Show Cause Notice with the intention to evade payment of duty is established and, therefore the invokation of the longer period beyond six months is valid and rightly done.
9. Heard the submissions of both sides. On careful consideration of all the arguments and pleas submitted by both side before us, we agree with the Id. SDR that there are broadly three issues for determination before us. As rightly pointed out by the Id. SDR, the issues are :
(a) Whether crushed/ground/powdered etc. limestone is excisable. The Hon'ble Supreme Court in the case of Bhor Industries Ltd. v. CCE had observed that marketability is an essential ingredient to durability.
10. In the case of CCE v. Jayant Oil Mills, the Hon'ble Supreme Court had observed that every process is not manufacture. Process which transforms the old article to goods alone amounts to manufacture under Section 2(f) of the Central Excises and Salt Act, 1944.
11. From the above two rulings of the Supreme Court we find that for dutiability the article must be known as goods and should be marketable. Examining Note 2 of Chapter 25 we find that crushed/powdered limestone is goods and marketable.
12. We also find that the Hon'ble MR High Court in the case of Kher Stone Crusher v. G.M. Distt. Industries Centre, reported in 1992 (61) E.L.T. 586 (MP) while dealing with the particular issue of crushed/powdered limestone in para 11 had held :-
"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."
In this decision, the Hon'ble, M.P. High Court had also discussed its earlier decision in the case of Bheraghat Mineral Industries v. Divisional Dy. Commissioner of Sales Tax, reported in 1992 (61) E.L.T. 560.
13. Though this decision was in respect of Sales Tax matters, however, the two Acts being similar, this view can be applied to the present case before us as the facts in the two cases are similar.
14. In the case of Ajanta Marbles and Chemical Industries, reported in 1991 (53) E.L.T. 457, this Tribunal had held :-
* * * * * This decision of the Tribunal is directly on the goods classifiable under 25.05 of the Central Excise Tariff and supports the view that grinding of limestone into powder will amount to manufacture.
15. Again in the case of SAIL v. CCE, reported in 1991 (54) E.L.T. 414 this Tribunal had held :-
"In the instant case, the department has not produced any evidence to the effect that lime fine is known and recognised as commercially a distinct commodity in the market and has merely relied on description of process and chemical terminology which by itself is not sufficient. Therefore, no process of manufacture was involved in crushing limestone into lime fine and lime fine was not an excisable product."
16. Having regard to all the above rulings as also the rulings cited and relied upon by the appellant, we hold that powdered, crushed and ground limestone shall be classifiable under Chapter Heading 25.05 of the Central Excise Tariff Schedule.
17. The question of limitation, we would like to take first before taking up issue at (b) above. There are, three decisions of the Hon'ble Supreme Court on this issue. In the case of Chempher Drugs and Liniment, reported in 1989 (40) E.L.T. 276 (S.C.) the Hon'ble Supreme Court had held :-
"Aggrieved thereby, the revenue has come up in appeal to this Court. In our opinion, the order of the Tribunal must be sustained. In order to make the demand for duty sustainable beyond a period of six months and up to a period of 5 years in view of the proviso to Sub-section 11-A of the Act, it has to be established that the duty of excise has not been levied or paid or short levied or short paid, or erroneously refunded by reasons of either fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise is required before it is saddled with any liability, before the period of six months. Whether in a particular set of facts and circumstances there was any fraud or collusion or wilful mis-statement or suppression or contravention of any provision of any Act, is a question of fact depending upon the facts and circumstances of a particular case."
18. In the case of Padmini Products, reported in 1989 (43) E.L.T. 195, [Para 8] the Hon'ble Supreme Court held :-
* * * * * * For arriving at this decision the, Hon'ble Supreme Court had relied on its earlier decision in the case of Chempher Drugs and Liniment. In the case of Jaishree Engineering Co. (P) Ltd. v. Collector of Central Excise, reported in 1989 (40) E.L.T. 214, [Paras 9 & 10] the Hon'ble Supreme Court had held :-
* * * * * *
19. On examining the facts of the case before us, we find that allegation against the appellant is that he contravened various provisions of the Central Excise Rules and Central Excise Act with the intention to evade payment of duty. However, for proving this we do not find any evidence on record to show that the appellant had purposely and intentionally withheld or kept back any information from the Deptt. Simply because the appellant did not comply with the Central Excise formalities in the bona fide belief that the goods were not liable to duty or duty was not payable as the earlier show cause notices were discharged by the Asstt. Collector, we find that the Revenue has not been able to make out a case for extension of the period for demand of duty beyond six months and therefore on this ground alone the demand beyond six months is barred. We, therefore, hold that the appellants cannot be asked to pay duty during the period 20-3-1990 to 16-9-1990. As the entire demand in this case is beyond six months therefore, this is time barred.
20. Without going into the question whether demand was justified or not, we hold that the demand is time barred. On the question of imposition of penalty, we find that in the circumstances of the case penalty is on the higher side. Having regard to all the facts and circumstances of the case, we reduce the penalty to Rs. 25,000/-.
Sd/-
(G.R. Sharma)
Dated : 24-11-1994 Member (T)
S.K. Bhatnagar, Vice President
21. With due respect to Hon'ble Member (T) my views and orders are as follows :-
22. As regards the issue as to whether crushing, grinding and powdering of limestone is a process of manufacture under Chapter 25 of Central Excises & Salt Act, I find that this has already been discussed thread-bear in a detailed order in the case of S.A.I.L. v. Collector of Central Excise, reported in 1991 (54) E.L.T. 414 holding that such processes do not amount to manufacture for the reasons mentioned therein. The sum and substance of this judgment was the Section 2(f) has to be read with Section notes and Chapter notes and one has to distinguish between the situation where a process has been declared to be or deemed to be a process of manufacture for the purpose(s) of that chapter and where it has not been so declared; and it was observed therein that the process(es) in question have not been declared as process(es) of manufacture or as amounting to manufacture in this chapter. Further there was no evidence to show that the powdered limestone was recognised commercially as a distinct commodity in the market. In the circumstances, Chapter Note 2 of Chapter 25 was of no avail for the purpose.
23. As far as Tribunal's order in Ajanta Marbles case (supra) and Doon Fertilizers & Minerals (supra) are concerned it is observed that they did not notice the aforesaid statutory provisions and the distinction pointed out above. As regards the Madhya Pradesh High Court judgment in the case of M/s. Kher Stone Crusher (supra) the order is with reference to Sales Tax Act in which the position is different and the provisions are not pari materia. The Madhya Pradesh High Court had therefore, no occasion to consider the Central Excise statutory provisions and the distinction noted above.
24. The position in the old Central Excise Tariff and the New Central Excise Tariff is entirely different and the various chapter notes mentioned above were earlier just not there, therefore, citations of case law relating to old tariff do not help the department. The Hon'ble Supreme Court has itself held, in effect, that every process is not a process of manufacture and only that process which results in transformation into a new commodity amounts to manufacture. It has also been held that a mere mention in Tariff is not sufficient and therefore, the fact of manufacture is required to be established and where apart from the Section (2f) the chapter-wise position is also required to be taken into account the aspects noted in the case of SAIL (supra) assume critical importance.
25. I see no reason to differ from the view held by the Tribunal in that order, I may only add and clarify that Chapter Note 2 would come into play, if and only if, it was shown in the first instance that the process(es) resulted in production of a distinct commodity known to the market as such and not otherwise.
26. It is significant in this connection that the processes mentioned in Chapter Note 2 are the well known processes used for purification/concentration of ores and extraction of minerals or metals therefrom. Normally ores are subjected to a series of such processes before a final product in the form of a commodity known to the market emerges or comes into existence; And the idea behind mentioning the processes under chapter note apparently is that irrespective of which of these processes is/are involved and the form in which the final product is obtained, it would become subject to excise at the stage it acquires distinct or commercial identity. Therefore, reading Section 2(f) on one hand and noting the distinction between Note 2 of Chapter 25 and chapter notes and other chapters where specified processes have been declared as manufacturing processes, the only conclusion that can be drawn is that simple crushing of limestone into powder form would not amount to manufacture unless it resulted in production of a distinct commodity known to the market; And no evidence has been advanced to that effect.
27. The judgments relating to other Acts and definitions given therein cannot be utilised for the purpose of Central Excise Tariff as they were distinguishable in view of the specific definition clauses under Section 2(f) read with Section Notes and Chapter Notes; and could not be considered pari materia. Again the situation after adoption of new Tariff is very different from the previous Tariff for the same reasons.
28. In view of the above position, there was no question of liability to pay duty or penalty.
29. I, therefore, accept the appeal.
Sd/-
(S.K. Bhatnagar)
Dated : 3-1-1995 Vice Preident
S.L. Feeran, Member (J)
28. I have carefully gone through the separate orders prepared by Id. Member (T) and Hon'ble Vice President. I agree with the reasoning given by Id. Member (T) for the following additional reasons:
(i) The question of the goods being marketable and dutiable and having arisen out of a process of manufacture has been upheld by the judgments of the Hon'ble M.P. High Court as well as by the order of the Tribunal in the case of M. Ajanta Marbles & Chemicals Industries as cited by Id. Member (T) in his order. The Tribunal has further followed these judgments in another appeals of like nature as in the case of CCE, Merrut v. Doon Fertilizers & Minerals, Dehra Dun and Anr. by its order No. 145-146/91-C, dt. 15-2-1991 as reported in 1991 (17) E.T.R. 505 by a Bench comprising of three members The Ajanta Marble case was decided by order No. 1454/90-C, dt. 21-12-1990 while the SAIL v. CCE was decided by order No. 125/91-C, dt. 6-2-1991 Therefore, it is seen that in the case of SAIL's case, the Bench had not taken into consideration the earlier order passed in the case of Ajanta Marble's case. Later the three member Bench in the case of Doon Fertilisers has followed the case o Ajanta Marble's case. In view of these facts, I am inclined to follow the ratio o the citations referred by Id. Member (T) in his order.
Sd/-
(S.L. Peeran)
Dated : 5-1-1995 Member (J)
FINAL ORDER
In view of the majority opinion it is held that the demand was tint barred and the penalty is on the higher side. Having regard to all the facts an the circumstances of the case the penalty is reduced to Rs. 25,000/- only.
The impugned order is modified to the above extent.