2025 (6) TMI 755 - AT - Central Excise

Admissibility of exemption Notification No.05/2006-CE (Sl. No.10) dated 01.03.2006 as amended by N/N. 15/2009-CE dated 07.07.2009 and N/N. 12/2012-CE (Sl. No.186) dated 17.03.2012 - reinforced concrete girders manufactured at a factory located approximately 6 kilometers away from the actual construction site - denial of benefit of the Notifications on the ground that even though the site was with the approval of the BMRCL however it is not a part of the contract - HELD THAT - Even though the premises has not been specifically allotted by BMRCL and mentioned in the contract however the site at which appellant would be carrying out pre-casting activities has been approved by BMRCL. The objection of the learned Commissioner is that the said letter is not part of the contract therefore not eligible to the benefit of the said Notification. There are no merit in the said observation of the learned Commissioner in as much as in the certificate issued by BMRCL was in pursuance to the letter dated 04.08.2009 by the appellant forwarding the pre-casting yard plant where the pre-casting activities were to be carried out which has been subsequently approved by BMRCL in their letter dated 18.08.2009; therefore the correspondence is forming part of the contract. Besides on going through the Circular dated 18.05.1999 it is found that the meaning of site cannot be given a restricted meaning and to be given a wider meaning which has been ultimately found place in the subsequent Notification No.12/2012-CE dated 17.03.2012 by inserting an Explanation to the same. Therefore merely because the site is away by 6 km from the project site which is situated in a traffic congestion area having no place to carry out the pre-casting activities it cannot be a valid ground for denying the benefit of the said Notification. The judgment of the Larger Bench cited by the learned AR for the Revenue in the case of Asia Tech vs. CCE Pune 2005 (9) TMI 123 - CESTAT MUMBAI is not relevant to the present case in as much as the question involved therein was whether PSC girders manufactured at site by the assesse for construction project are marketable goods attracting central excise duty under Tariff Heading 6807 of Central Excise Tariff Act 1985 and also consequently exempt from Notification No.59/90-CE. Conclusion - In view of the fact that the letter dated 18.08.2009 issued by BMRCL forming part of the contract appellants are eligible to the benefit of the exemption Notifications. The impugned order set aside - appeal allowed.

Summary

The core legal questions considered in this judgment are:

1. Whether the appellant is eligible for exemption from Central Excise duty under Notification No.05/2006-CE (Sl. No.10) dated 01.03.2006 as amended by Notification No.15/2009-CE dated 07.07.2009 and Notification No.12/2012-CE (Sl. No.186) dated 17.03.2012, on reinforced concrete girders manufactured at a factory located approximately 6 kilometers away from the actual construction site.

2. Whether the premises used for manufacturing the girders can be considered as the "site" of construction within the meaning of the exemption notifications, despite not being specifically mentioned in the original contract but approved subsequently by the project authority.

3. Whether the extended period of limitation and penalty imposed on the appellant for non-payment of duty are justified.

4. The correctness of the methodology adopted by the department in computing the duty demand and whether the demand is revenue neutral.

Issue-wise Detailed Analysis:

Issue 1 & 2: Eligibility for Exemption under Notification and Definition of "Site"

The legal framework revolves around Notification No.05/2006-CE (Sl. No.10) and its amendments, which exempt goods manufactured at the site of construction for use in construction work at that site from Central Excise duty. Notification No.12/2012-CE introduced an Explanation defining "site" as any premises made available for manufacture of goods by specific mention in the contract or agreement, provided the goods are solely used for the construction work.

Precedents relied upon by the appellant include judgments from this Tribunal and High Courts that have broadly interpreted "site" to include premises approved by the principal (project authority) for manufacturing construction materials, even if physically distant from the actual construction site. Notably, the Tribunal in M/s. Simplex Concrete Piles (I) Ltd. vs. CCE held that the expression "site" should not be given a restrictive meaning and includes any premises approved by the principal for manufacture of goods used exclusively in the construction work.

The appellant's contract with the project authority (BMRCL) did not provide land for manufacturing activities, requiring the appellant to arrange their own premises. Although the factory was 6 km away from the project site, BMRCL issued a letter approving the premises for precasting activities, which the appellant contended forms part of the contract. Clause 19.1 of the contract explicitly treats segmental construction at nominated places as part of the construction work covered under the agreement.

The Commissioner denied exemption on the ground that the premises was not part of the contract and was located away from the project site, relying on Circular No.456/22/99-CX which was interpreted restrictively. The Court, however, found this reasoning untenable, emphasizing the broader interpretation endorsed by the Board's Circular dated 18.05.1999 and the subsequent insertion of the Explanation in Notification No.12/2012-CE clarifying the meaning of "site".

The Court held that the approval letter from BMRCL, though not originally part of the contract, effectively forms part of the contractual arrangement and that the physical distance of 6 km cannot be a valid ground to deny exemption, especially given the practical constraints of carrying out precasting activities in congested urban areas.

The Court distinguished the Larger Bench decision in Asian Tech vs. CCE, Pune-II, which dealt with the classification of PSC girders under Central Excise Tariff and the applicability of a different notification, noting that it did not address the definition of "site" or the exemption notifications in question.

Issue 3: Extended Period of Limitation and Penalty

The appellant argued there was no suppression of facts warranting invocation of the extended period of limitation, and hence penalties imposed were unsustainable. They contended the demand was revenue neutral and the methodology adopted by the department was incorrect. The appellant relied on Supreme Court judgments that have held penalties and extended limitation periods unjustified in the absence of suppression or fraud.

The Revenue contended that the appellant deliberately avoided registration and payment of duty despite clear legal position against exemption, justifying extended limitation and penalty. The Court, however, did not find merit in the Revenue's contention given the appellant's eligibility for exemption as per the broader interpretation of the notifications and supporting contract documents. Thus, the justification for extended limitation and penalty was undermined.

Issue 4: Correctness of Demand Computation and Revenue Neutrality

The appellant submitted that the department's demand computation was flawed and the entire exercise was revenue neutral, implying the demand should not be sustained. They supported this with apex court rulings emphasizing correct valuation and duty computation principles.

The Court did not delve deeply into the technicalities of demand computation but indicated that since the exemption claim was valid, the demand itself could not be sustained, implicitly addressing concerns about revenue neutrality.

Significant Holdings:

The Court held: "Merely because the site is away by 6 km from the project site, which is situated in a traffic congestion area having no place to carry out the pre-casting activities, it cannot be a valid ground for denying the benefit of the said Notification."

It further observed: "The expression 'site' may not be given a restrictive meaning and shall include any premises made available to the manufacture of goods... by way of a specific mention in the contract for such construction work provided that the goods manufactured at site premises are solely used in the said construction work only."

The Court rejected the Revenue's reliance on the Larger Bench decision in Asian Tech (supra) as not applicable to the issue of exemption under the relevant notifications.

Consequently, the Court set aside the impugned orders confirming duty demands, interest, and penalties, allowing the appeals and granting consequential relief as per law.