2019 (2) TMI 1095 - AT - Central Excise

Clearance of Cement to dealers/retail agencies - N/N. 04/2006-CE dated 01.03.2006 as amended from time to time - benefit denied on the ground that the clearances made directly to various industries like contractors/ builders/ construction companies are not eligible for assessment under Sl.No.1C of the N/N. 04/2006-CE and therefore proposed to demand duty under Sl.No.1A of the notification. Whether the assessee is entitled to the benefit of N/N. 04/2006-CE (Sl.No.1C) in respect of the cement cleared by them in 50 Kg bags marked as meant for industrial use and not for retail sale and sold to institutional/ bulk buyers? - Held that - The issue is no longer res integra and it has been settled by the Tribunal in the case of Mysore Cements Ltd 2009 (5) TMI 445 - CESTAT BANGALORE and affirmed by the Hon ble High Court of Karnataka. Respectfully following the ratio it can be held that assessee is entitled to the benefit of exemption notification for the cement cleared by them in 50 Kg bags to institutional buyers - benefit of exemption notification 04/2006-CE as amended from time to time is available to the assessee in respect of all the clearances to institutional buyers whether or not the cement is sold in individual bags - The demand on this ground along with interest if any is set aside. Whether the same exemption notification is also available to sales if any are made to individual consumers by the assessee? - Held that - As far as sales to individuals are concerned sale to individual customers does not appear to be covered by the exemption notification - It has been held by the Hon ble Apex Court in its five member constitutional bench in the case of Dilip Kumar & Co. and others 2018 (7) TMI 1826 - SUPREME COURT OF INDIA any exemption notification must be strictly interpreted against the person claiming the exemption - The sales to individuals for personal use are not covered by the exemption notification - demand and interest if any on account of sales to individuals by the appellant are upheld. Penalties also set aside. The appeals are disposed of by way of remand to the original authority for the limited purpose of determining the duty if any payable and interest thereon.

Issues Involved:
1. Eligibility for concessional rate of duty under Sl.No.1C of Notification 04/2006-CE for cement supplied to institutional consumers.
2. Applicability of the same exemption for sales to individual consumers.
3. Imposition of penalty under Rule 25(1) of the Central Excise Rules read with Sec.11AC of the Central Excise Act.

Detailed Analysis:

1. Eligibility for Concessional Rate of Duty under Sl.No.1C:
The appellant manufactures cement and supplies it in 50 Kg bags either to dealers/retail agencies or to various industries like contractors/builders/construction companies. When sold to dealers, the bags are marked with MRP/RSP, and duty is paid as per Sl.No.1A of Notification 04/2006-CE. For supplies to bulk users, the bags are marked “specially packed for exclusive industrial use” and “not for retail sale,” with duty paid under Sl.No.1C of the notification. The Commissioner issued show cause notices alleging that clearances to industries should be assessed under Sl.No.1A, not Sl.No.1C, and proposed penalties.

The appellant argued that the issue was settled by the Tribunal-Bangalore in the case of Mysore Cements Ltd, which held that the benefit of concessional duty under Sl.No.1C is available to supplies made to institutional consumers, irrespective of packaging. The Tribunal-Bangalore's decision was upheld by the Hon’ble High Court of Karnataka, thus reaching finality. Consequently, the impugned orders demanding duty under Sl.No.1A for supplies to institutional consumers were set aside, granting the benefit of Sl.No.1C for such clearances.

2. Applicability of Exemption for Sales to Individual Consumers:
The learned departmental representative acknowledged that the issue was covered by the Mysore Cements Ltd case for institutional buyers. However, it was contended that sales to individual buyers for personal construction were not eligible for the exemption under Sl.No.1C. The appellant cited the Tribunal-Delhi's decision in Diamond Cements, which allowed concessional duty for sales to individual buyers without intermediaries. The appellant asserted that they sold cement only to industrial consumers and dealers, not to individuals for personal use.

The Tribunal examined whether the exemption under Sl.No.1C applied to sales to individual consumers. It concluded that sales to individuals for personal use were not covered by the exemption notification. The Hon’ble Apex Court's ruling in Dilip Kumar & Co. emphasized strict interpretation of exemption notifications against the claimant. Therefore, sales to individuals were not eligible for the exemption, and the duty for such sales was upheld. The case was remanded to the original authority to determine if any sales were made to individuals and to calculate the duty accordingly.

3. Imposition of Penalty:
The Tribunal set aside all penalties imposed under Rule 25(1) of the Central Excise Rules read with Sec.11AC of the Central Excise Act. The penalties were deemed unnecessary as the primary issue of duty on institutional sales was resolved in favor of the appellant, and the matter of individual sales required further verification.

Conclusion:
The appeals were disposed of by remanding the cases to the original authority to determine the duty payable on sales to individual consumers, if any. The benefit of exemption under Sl.No.1C was confirmed for institutional sales, and all penalties were set aside. The original authority was directed to reassess the duty based on the findings regarding individual sales.

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