In The Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench At Ahmedabad
[Arising out of OIA-AHM-EXCUS-002-APP-220-221-17-18 dated 08.01.2018 passed by the Commissioner (A) – Ahmedabad]
M/s Larsen & Toubro Ltd. Appellant
Mukund K Bangde
For Appellant: Mr. Vikram Nankani (Advocate) For Respondent: Mr. Nitina Nagori (AR)
HON’BLE MR. RAMESH NAIR, MEMBER (JUDICIAL)
HON’BLE MR. RAJU, Member (Technical)
Date of Hearing:17.08.2018
Date of decision:10.10.2018
Final Order No. A/ 12121-12122 /2018
This appeal has been filed by M/s Larsen & Toubro Ltd. against orders confirming demand of Central Excise duty, interest and imposition of penalties. Appeal has also been filed by Sh. Mukund K Bangde (Project Manager) against imposition of personal penalty under Rule 26 of the Central Excise Rules, 2002.
2. Ld. Counsel for the appellants argued that the issue in dispute is if concrete mix manufactured by the appellant at the site of construction, to be utilized captively, is exempted from payment of excise duty under entry 144 of Notification 12/2012. He argued that the decision of Hon’ble Apex Court in the appellant’s own case reported in 2015 (324) ELT 646 is not applicable to the instant case. He pointed out that during the period April 2011 to February 2016 they have been legislative changes as well as the changes in the IS specification No. 456:1978 in the year 2000 and 2013. He argued that not only the law but also the evidence and the material relied documents by the Hon’ble Apex Court in the case of aforesaid decision has charged. He argued that in these circumstances the said decision cannot be applied to the instant case.
2.1 Ld. Counsel argued that the exemptions provided under Notification 36/94-CE dated 01.03.1994 and Notification No. 8/1996-CE dated 23.07.1996 were for all goods falling under Chapter 68.07 which were manufactured at the site of construction and use at construction site. Ld. Counsel submits that as noted by the Apex Court, there was no separate and individual exemption for either “Concrete Mix” or RMC apart from the aforesaid exemption, both of which were classifiable under Chapter 68.07. The Appellant submits that thereafter, in the Union Budget 1997, a new and specific entry for RMC was enacted under Chapter Heading 38 24.20 of the First Schedule to the Central Excise Tariff Act, 1985. The Appellant submits that simultaneously, a specific exemption was provided under entry No. 51 of Notification No. 4/97-CE dated 01.03.1997 to “Concrete Mix” manufactured at the site of construction for use in construction at that site. The Ld. Counsel submits that exemption for all other goods falling under 68.07 which are manufactured at the site of construction for use in the construction at the site continued under a separate entry No. 154 of the said notification No. 4/97-CE. The Ld. Counsel submits that in this backdrop of Ready Mix Concrete being separately classifiable under a new tariff entry, being 3824.20, separate from that of Concrete Mix, classifiable under CTH 6807, the Hon’ble Supreme Court held that entry 51 of Notification No.4/97-CE intended to cover only Concrete Mix manufactured by conventional methods and will not be available to RMC classifiable under 3824.20. Ld. Counsel submits that the Central Excise Tariff underwent a complete revamp in 2005, with the introduction of 8 digit tariff classification. With the change in tariff, a new 6 digits tariff entry, being Sub-heading 3824 50, was created under the residual Chapter Heading of 38 24. This sub-heading is preceded by a single dash and reads as under:
“Non-refractory mortars and concretes”
The said 6 digits sub-heading is followed by a further sub-heading preceded by a sub-heading 3824 50 10 which reads as under:
“Concrete ready to use also known as Ready Mix Concrete.”
This 8 digits sub-heading is actually a definition of concrete. It equates Concrete with Ready Mix Concrete (RMC). It defines any concrete which is ready to use as Ready Mix Concrete.
2.2 Ld. Counsel argued that by a Parliamentary amendment, the distinction between Concrete and RMC is removed so long as the Concrete is ready to use. Ld. Counsel argued that so long as the Concrete is ready to use, and is made/prepared at site, the benefit of the Exemption Notification would be available. In other words, the benefit of the Notification cannot be denied on the basis that Ready Mix Concrete and Concrete mix are two different and distinct products based on the different manufacturing process when the Legislature had equated the two based on the criteria of “ready to use”. The Appellant, therefore, submits that that test laid down by Hon’ble the Supreme Court for the earlier period will no longer be applicable with the specific tariff changes and introduction of definition of RMC and the legislative intent with respect to Entry 144 of the Impugned Notification has to be determined in this backdrop. The distinction between RMC and Concrete Mix with regards to eligibility of the exemption has been rendered redundant with these tariff amendments and this entry of the Impugned Notification has to be given an interpretation based on prevalent tariff entries.
2.3 The Indian Standards governing production of Plain or Reinforced Concrete has been subsequently amended. The Counsel argued that the Department has already taken a stand vide Circular No.368/1/98-CX, dated 6-1-1998, which was put forward even before the Hon’ble Supreme Court that if concrete is mixed in terms of IS 456:1978, then it would be treated as ‘Concrete Mix’ and if it was by IS 4926:1976 it would by RMC. The captioned Supreme Court judgment is based upon the Indian Standard IS456:1978 and IS 4926:1976, which were the applicable standards during the impugned period in that case, viz. 1996 to 1998. The Appellant submits that specifically IS 456:1978 talks of manual batching and mixing of concrete under paragraph 9.2 whereas there was a separate standard for manufacture of RMC, viz. IS 4926:1976. The Appellant submits that it is in that context the Apex Court opined that only concrete mix manufactured by conventional method, as discussed in IS 456:1978, will be exempted vide the Notification 4/1997-CE. The Appellant submits that the said Indian Standard, which governs plain and reinforced concrete, was revamped vide IS 456:2000, which now specifically mentioned that for large and medium projects, concrete could be manufactured in captive automated batching and mixing plants. The Appellant submits that the said IS 456:2000 was further amended in 2013 to provide as follows:
“10.2 [ ] For large and medium project sites, the concrete shall be sourced from ready-mixed concrete plants or from captive on-site or off-site automatic batching and mixing plants. The concrete produced and supplied by ready-mixed concrete plants shall be in accordance with IS 4926. In case of concrete from captive on-site or off-site automatic batching and mixing plants, similar quality control shall be followed [ ]”
2.4 The Appellant submits that even if concrete is manufactured by use of on-site automatic batching plants it will be still be considered to be ‘Concrete Mix’ manufactured in accordance with IS 456:2000. Accordingly, the judgment of the Apex Court could not be relied upon, as it was rendered in the context of older standards i.e. IS 456:1978. The distinction drawn by the Apex Court based on the method or manner of manufacture of concrete is no longer relevant as the standard itself states that even concrete produced in an automated plant can also qualify as Plain or Reinforce Concrete as contemplated under IS 456:2000. The Appellant, therefore, submits that the only test which will be applicable during the impugned period of dispute is whether the concrete has been manufactured at site or otherwise, and the test laid down by the Hon’ble Supreme Court will no longer be applicable in the facts of the present case. He submits that submits that with the 2013 amendments to IS 456, the distinction is clearly brought out as the standard itself creates two distinct categories of concrete manufacturing plants, namely a RMC plant or an on-site off-site automated batching and mixing plant. The Appellant submits that this distinction is further brought out clearly under paragraph 4.3 of the Indian Standard IS 4925:2004 (Standard dealing with Automatic Batching and Mixing Plants) which stipulates that all batching and mixing plants are not RMC plants, the latter having certain additional features which are not available in all batching and mixing plants. The Appellant submits the entry 144 mentions that the exemption will be available to goods falling under Chapter 38 and does not specifically mention any particular sub heading including that of RMC, viz. 3824 50 10, which it has mentioned for various other entries in the said Notification. The Appellant, therefore, submits that the legislature clearly intended to extend the benefit to all types of concrete mixes manufactured at the site of construction for use in the construction activityas has been held in the recent decision of the Hon’ble Tribunal at Delhi in the case of CCE, Delhi-II vs. Consolidated Construction Consortium Ltd [Final Order No. 54623-54624 of 2016 decided on 18.10.2016]
2.5 Ld. Counsel argued that extended period of limitation has been wrongly invoked and penalty has been wrongly imposed in the present case. Ld. Counsel relied on the recent decision of the Hon’ble Tribunal in the case of Shapoorji & Pallonji Co. Ltd vs. CCE, Mumbai [2016 (344) E.L.T. 1132 (Tri. - Mumbai)] wherein in exact same factual background, post the 2015 decision of the Apex Court in Larsen & Toubro (supra), the Hon’ble Tribunal has held that demand of Excise Duty invoking the extended period of limitation is not sustainable. The Appellant submits that during the impugned period, covered by the present proceedings, there was a favourable decision given by the Madras High Court in the Appellant’s own case in Larsen & Toubro vs. Union of India [2006 (198) E.L.T. 177 (Mad.)] as well the decision of the Larger Bench of the Hon’ble Tribunal in the case of Chief Engr. Ranjit Sagar Dam vs. CCE, Jalandhar [2006 (198) E.L.T. 503 (Tri. - LB)] which was affirmed by the Hon’ble High Court of Punjab & Haryana in CCE, Jalandhar vs. Chief Engr. RanjitSagar Dam [2007 (217) E.L.T. 345 (P & H)]. The Appellant submits that in same factual background, the Hon’ble Supreme Court in the case of Continental Foundation Jt. Venture vs. CCE, Chandigarh-I [2007 (216) E.L.T. 177 (S.C.) had already taken a view in 2007 that there existed enough doubts in the minds of the assesses on account of divergent views expressed by the Tribunal coupled with the decision of the Punjab and High Court in the case of RanjitSagar Dam (supra) and consequently, extended period of limitation cannot be invoked as the claim of the assesses for benefit from payment of Excise Duty by treating the goods as “concrete mix” does not amount to “suppression” of facts.
2.6 The Ld. Counsel also submits that penalty levied on the Project Manager, Sir Keshan Bangde, under Appeal No. E/10492/2018 should also be set aside.
3. Ld. AR relies on the impugned order. She particularly relies on the decision of Hon’ble Apex Court appellant’s own case. Ld. AR produced catalogue of compact batching plant of SCHWING Stetter. He pointing out that such plants are designed fully to meet the requirements as a mixing plant for remix concrete or as a plant at building site. The said catalogue also clarifies that the other areas of use include the precast factories and concrete product industries. Ld. AR also pointed out that the books and invoices also describe the product as ready-mix concrete. He further relied on the CBEC Circular which were considered by the Hon’ble Apex Court while passing the aforesaid order in appellant’s own case. He argued that the appellant had also not produced the contract/ agreement between M/s Godrej and the appellant before the Commissioner (Appeals).
4. We have gone through the rival submissions. The issue before us is if the product manufactured by the appellant, described by the revenue as ‘ready-mix concrete’, eligible for exemption under Central Excise Notification 12/2012 dated 17.03.2012 as ‘concrete mix’ manufactured at the site of construction for use and construction work at such site under Chapter 38 of the Central Excise Tariff. Similar issue was examined by Hon’ble Apex Court in appellant’s own case reported in 2015 (324) ELT 646 (SC) in the context of Notification 4/1997-CE dated 01.03.1997. Notification 4/1997 exempted following:
From the above, it is apparent that there is no change in the Central Excise Tariff Heading in so far as the ‘ready mix concrete’ is concerned. The description ready mix concrete has been replaced by the description “concrete ready to use known as “ready mix concrete (RMC)”.
5. It can be seen that the description and the chapter under the exemption notification remain identical. There is no change description under the Notification examined by the Hon’ble Apex Court earlier when compared to the description and heading in the Notification is dispute in the present proceedings. From the above it is apparent that there is no change in tariff description or in the Notification as far as ready mix concrete is concerned.
6. Ld. Counsel has argued that Hon’ble Apex Court has relied on the IS Specifications, IS 456:1978 and IS 4926: 1976 to come to its conclusion. Ld. Counsel argued that there have been substantial changes in these IS Specifications. He argued that IS 456:1978 has been replaced by IS 456:2000 wherein it has been specifically mentioned that for large and medium product concrete could be manufacture using captive automated batching and mixing plants. He pointed out that earlier
456:1976 prescribed manual mixing of concrete. He argued that since IS 456:1978 (for concrete mix) and IS 4926:1976 (ready mix concrete) was distinguished on the basis of man power vs use of machines in manufacture. The Apex Court came to the conclusion that since machines are used to manufacture ready mix concrete (IS 4926 : 1976) the product manufactured by the appellant by machines would qualify as ready mix concrete. Ld. Counsel argued that IS 456: 2000 now prescribes that for large and medium products concrete can be manufactured in captive automated matching and mixing plants. On the basis of above Ld. Counsel has tried to argue that the distinction drawn by Hon’ble Apex Court. While arriving at its decision on the basis of the manner of manufacture on the basis of IS Specification no longer exists as both IS Specification 1926:1976 and 456:2000 envision manufacture of concrete by automatic plants. In para 19 Hon’ble Apex Court agreed with stand taken by Revenue that it is the process of mixing the concrete for differentiating between concrete mix and RMC. In para 20 of the decision of Hon’ble Apex Court has agreed with the observation of the adjudicating authority regarding the distinction between RMC and concrete mix in following Notes.
“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.”
7. From the above it is apparent that the sole distinction recognized by Hon’ble Apex Court between the RMC and CM is the manner of manufacture, whether conventional (manual) or automated. It is seen that in the entire findings of the Hon’ble Apex Court from para 18 onwards there is no mention of any IS Specification anywhere. In fact Hon’ble Apex Court has not relied at all on the IS Specifications. In these circumstances any changes in the IS Specifications cannot be used to distinguish the decision of Hon’ble Apex Court. Hon’ble Apex Court has observed as follows:
“23. On these facts, as far as appeal of the L&T is concerned that warrants to be dismissed when we find that the assessee was producing RMC and the exemption notification exempts only CM and the two products are different. Even if there is a doubt, which was even accepted by the assessee, since we are dealing with the exemption notification it has to be strict interpretation and in case of doubt, benefit has to be given to the Revenue. Appeals of L&T, therefore, fails and are dismissed.”
8. Coming to the issue of limitation, it is seen that Ld. Counsel has relied on the decision of Tribunal in the case of Shapoorji & Pallonji Co. Ltd. vs CCE, Mumbai 2016 (344) ELT 1132 (Tri. Mum) wherein para 4.4 following has been observed:
“4.4 Insofar as the issue of limitation is concerned the decision of the Hon’ble Supreme Court in the case of Continental Foundation Jt. Venture (supra) is squarely on this issue. In the said decision the Hon’ble 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’s 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 misstatement or suppression of facts are concerned, they are clearly qualified by the word ‘wilful’, preceding the words “misstatement 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 misstatement of fact, which is not wilful and yet constitute a permissible ground for the purpose of the proviso to Section 11A. Misstatement of fact must be wilful”
9. Ld. Counsel pointed out that Larger Bench of Tribunal in the case of Chief Engr. Ranjit Sagar Dam Vs CCE 2006 (198) ELT 503 (Tri. LB) which was affirmed by the Hon’ble High Court of Punjab & Haryana as reported in 2007 (217) ELT 345 (P&H) wherein it was held that concrete mix prepared at site would be entitled to exemption under Notification 4/97. In these circumstances, the benefit of limitation has to be extended to the appellant.
10. Since the issue was of interpretation no penalty can be imposed on Sh. Mukund K. Bangde. The appeal of Sh. Mukund K. Bangde is, therefore, allowed. The demand against M/s Larson & Toubro for the period beyond the normal period of limitation is set aside. The penalties imposed on M/s Larson & Toubro are also set aside. Appeal is partly allowed in above terms.
(Pronounced in the open court on 10.10.2018)
(Raju) (Ramesh Nair)
Member (Technical) Member (Judicial)