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M/s Larsen & Toubro Ltd. & Another, ECC Construction Group Versus Commissioner of Central Excise, Hyderabad

2015 (10) TMI 612 - SUPREME COURT

Ready Mix Concrete (RMC) and concrete mix (CM) - manufacturing at site - the basic thrust of argument is that CM and RMC are one and the same thing. - Captive consumption - Exemption under Notification No. 4/1997-CE dated March 01, 1997 - Held 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 Co .....

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ng 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 i .....

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en Ready Mix Concrete and CM which is conventionally produced.

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 01, 1997 exempts only 'Concrete Mix' and not 'Ready Made Mixed Concrete' and we have already held that RMC is not the same as CM. - Decided against the assessee.

Assessee was producing RMC and the exemption notificati .....

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am Jena, Adv. Mr. J. Samal, Adv. Mr. B. Krishna Prasad, Adv For the Respondent : Mr. B Krishna Prasad, Adv. Mr. Kuldip Singh, Adv JUDGMENT A K Sikri : In the first two appeals, i.e. Civil Appeal Nos. 6930-6931 of 2004, the assessee is M/s. Larsen & Toubro Limited (hereinafter referred to as 'L&T'). Two appeals are filed by L&T assailing the orders dated April 28, 2005 and October 24, 2005 passed by the Bangalore Bench of the Customs, Excise & Service Tax Appellate Tribuna .....

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the Punjab & Haryana High Court taking a contrary view. Here, the High Court has held that RMC manufactured at the assessee's plant would be entitled to exemption inasmuch as the Notification exempts all kinds of CM from payment of duty, which would include RMC as well 2) It is clear from the above that the issue which arises for consideration is identical in all these appeals. For this reason, they were heard analogously and are being disposed of by the present judgment. We shall, in t .....

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al excise duty on this product taking shelter under Notification No. 4/1997-CE dated Mach 01, 1997, which exempted CM from payment of excise duty. 4) The Central Excise Officers visited the site and found that the L&T are manufacturing ready mix concrete and not concrete mix. A show-cause notice dated July 22, 1998 was issued by the Commissioner of Customs and Central Excise, Hyderabad-II Commissionerate, proposing excise duty demand of ₹ 1,97,47,626 along with interest, penalty and fi .....

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est, penalty and fine. In the Order-in-original, the Commissioner has stated that ready mix concrete refers to a concrete specially made with precision and of high standard and as per particular needs of a customer and delivered to the customer at his site. According to him, the conventional site mixed concrete lacks consistency in quality. He also noted that there are advantages of having ready mix concrete over conventional site mixed concrete, the way it is produced and delivered. On this rea .....

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L&T preferred appeal before the CESTAT with the plea that aforesaid reasoning of the Commissioner was faulty. It was sought to be explained that having regard to the high quality of the cement plant that was required, CM was prepared at site with the application of sophisticated technique in order to achieve high standards of quality. It was submitted that use of additives to increase the time period over which the concrete can be used is not a decisive factor. Since the L&T needed large .....

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ceedings by pointing out that the CBEC had issued a Circular No.315/31/97-CX dated May 23, 1997, in which it was clarified that RMC, even though it is manufactured at the site of construction, is chargeable to excise duty under sub-heading No.3824.20 of the Central Excise Tariff Act, 1985. The exemption for CM manufactured at the site of construction for use in construction work at such site available under Notification No.4/97-CE dated March 01, 1997 is not applicable to RMC manufactured at the .....

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e dismissing the appeal, the CESTAT distinguished between RMC and CM explaining that the same were understood differently in trade and commerce. It accepted the finding of the Commissioner that the manner in which the product was manufactured by L&T, it was clearly RMC. It was pointed out that the facility put up by L&T involved various machines coupled with sophisticated process which was indicative of the fact that it was for the manufacture of RMC and the only reason for manufacture t .....

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e Rules imposed on the Construction Manager is concerned, the same is altogether set aside. Likewise, fine in lieu of confiscation of the plant and machinery is also reduced to ₹ 10 lakhs. Levy of excise duty, however, is maintained. 8) Before we advert to the submissions made by Mr. Sahu attacking the aforesaid approach of the Tribunal, we deem it proper to refer to the legal provisions: Prior to March 01, 1997 'Concrete Mix' was classified under Chapter 68 -sub-heading 68.07 of t .....

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otification, under the previous applicable notification also i.e. Notification No.36/94-C.E. dated March 01, 1994 'Concrete Mix' manufactured at the site for use in construction work was exempted from excise duty, i.e. all along the excise duty for 'concrete mix' manufactured at the site remained 'NIL' Prior to March 01, 1997 there was some doubt expressed as to the excisability and classification of the product 'Ready Mix Concrete'. The Trade was claiming classif .....

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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 02, 1996 to February 28, 1997 and from March 01, .....

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d by the Board, it is explained that 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 weighed, batched by electrical controls and limit switches. Cement from site is carried to the batching plant by a screw conveyer operated with automatic weighing gauges. Water is fed through flow meters after sub .....

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stic, wet process state and not a finished product like blocks or precast tiles or beams. 12) This Circular further clarifies that RMC falls within the ambit of the meaning of the word 'manufacture' as envisaged under Section 2(f) of the Central Excise and Salt Act, 1944 as the product RMC is marketable, though within the time frame of its short shelf life and it also satisfies the test of being 'goods'. 13) We now proceed to take note of the arguments that were addressed at the .....

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refers to IS 456 for specifications on product ingredients and manufacturing process. IS 4926 defines ready mix concrete as a concrete mixed in a batching plant and delivered at the site of the purchaser for use. This standard deals with management aspects of maintaining plant, delivery process, interaction with customer, sampling and testing for quality control, order processing and records. Thus, IS 4926 is concerned with commercial aspects of industry practices of ready mix concrete, which by .....

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;ble Madras High Court (Larsen & Toubro Ltd. v. Union of India 2006 (198) ELT 177 (Mad.) that ready mix concrete manufactured at site is not taxable. (iii) Traditionally, articles manufactured at the site of construction have been exempted from excise duty with respect to goods manufactured at the site of construction. A list of notifications showing such uninterrupted exemption for articles of cement falling under CH 68, articles of iron and steel falling CH 73 and concrete mix falling unde .....

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ELT 911) upheld by this Court in CCE, Mumbai v. Associated Cement Co. Ltd. 2001 (132) ELT A106 (SC). All goods manufactured under this heading at the site for use in the construction at such site was all along exempt from duty. From March 01, 1997, ready mix concrete has been inserted in CH 38.2420. If ready mix concrete and concrete mix are two different things only ready mix concrete was not taken to CH 38. Therefore, concrete mix (manufactured at the site of construction) remained in CH 68.07 .....

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ant for delivery at home is like ready mix concrete. Both are foods ready for consumption, but the former get beneficial tax treatment. (vi) Before the Commissioner, L&T had taken the following arguments, which were not considered. (a) CBEC in circular dated January 06, 1998 has classified that ready mix concrete could not be manufactured at the site. (b) Ready mix concrete is a type of concrete mix, which is manufactured at one place and transported for delivery at the site of construction. .....

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der CH 38, site mixed concrete was also exempt under this notification. 14) From the aforesaid submissions of Mr. Sahu, it becomes apparent that basic thrust of his argument is that CM and RMC are one and the same thing. According to him, when Mixed Concrete is prepared at one place from where it is packed and transported to some other place where the same is to be used, that is known as RMC. On the other hand, if CM is prepared at the site and is used there only, it remains CM. His argument was .....

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Notification. We may state that the word 'site' has not been defined in the Notification though it so defined in the later Circular. We may also state that with the advancement of technology, there could exist batching plants which are mobile. Ultimately, the question which would arise for determination would depend upon the facts of each case. In the present case, the Commissioner, as an adjudicating authority, has held that cement concrete obtained at Pen and Padghe sites conforms to .....

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ments submitted that CM and RMC were two different products which was clear from the Chapter Note entries itself. He further submitted that it is the process by which concrete is mixed that determines as to whether it is CM or RMC and consumption of the material at site was irrelevant. According to him, the process of CM was somewhat crude in contra-distinction to the sophisticated process by which RMC of a comparatively very high quality is produced. Referring to the order of the Tribunal, he p .....

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these are: (i) Stone Crushers, Conveyors, Vibrator Screens to segregate different sizes of stone aggregates. (ii) Sand mill to produce sand from stones. (iii) Two batching plants in which all aggregates were weighed and batched by electrical controls and limit switches. (iv) Cement silo where cement is stored and carried to the batching plant by a screw conveyor operated with automatic weighing gauges. (v) Flow-meters to feed water after subjecting into chemical analysis. (vi) Mixer to mix stone .....

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or the parties. 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 m .....

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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 ha .....

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he 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. Conc .....

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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 doe .....

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c 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 .....

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he 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 c .....

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nd 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 .....

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ould be covered by notification. Answer has to be in the negative inasmuch as Notification No. 4 dated March 01, 1997 exempts only 'Concrete Mix' and not 'Ready Made Mixed Concrete' and we have already held that RMC is not the same as CM. 22) In Simplex Infrastructures Limited case, this Court had not delved into the issue at hand at all except stating that, "if RMC is produced at site then alone the assessee is entitled to exemption under the requisite notification." T .....

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uld disclose that after setting aside the order of the Tribunal and in an appeal filed by the Revenue, matter was remitted back to the Tribunal without expressing any opinion on the merits of the case. Para 5 reads as under: "5. In the above circumstances, we set aside the impugned order of the Tribunal and we remit the matter to the Tribunal to decide, in accordance with law, the dichotomy which arises in the present case between the existence of the batching plant, its location, its mobil .....

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