MANU/CM/0293/2014Equivalent Citation: 2015(315)ELT53(Tri.
- Mumbai)
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH, MUMBAI
Appeal Nos. E/88158, 89194/13, E/86253/14 (Arising Out of Order-in-Original No.
PVR/185-186/NGP/2013 dated 20.3.2013; No. 64-71/MAK(64-71)/COMMR/RGD/13/1-4
dated 30.4.2013 & 87/MAK(187)COMMR/RGD/13-14 dated 10.3.2013 Passed by The
Commissioner of Central Excise, Nagpur and Commissioner of Central Excise, Raigad)
and Order No. A/502-504/14/EB/C-II
Decided On: 18.06.2014
Appellants: Heidelberg Cement (India) Ltd.
Vs.
Respondent: Commissioner of Central Excise
Hon'ble Judges/Coram:
P.R. Chandrasekharan, Member (T) and Anil Choudhary, Member (J)
Counsels:
For Appellant/Petitioner/Plaintiff: V. Lakshmikumaran, Adv.
For Respondents/Defendant: Shobha Ram, Commissioner (AR) and Rakesh Goyal, Addl.
Commissioner (AR)
Case Note:
Excise - Entitlement for exemption - Validity of demand - Present appeal filed
for challenging order whereby, Appellants were not held entitlement for
exemption and demand of duty was confirmed against Appellants - Whether
Appellants were entitlement for exemption and demand of duty was valid -
Held, as per notification, exemption was available for manufacturers who sold
goods to consumers - Undisputed that goods were sold by Appellants directly
to builders/developers/Ready Mix Concrete (RMC) manufacturers - RMC was
excisable product and sale of cement for manufacture of RMC would definitely
come within category of sale to industrial consumers - As regards
builders/developers etc., construction activity was service activity and there
was also service tax levy on construction activity - Sale to such
builders/developers would certainly qualify as sale to institutional consumers
- Therefore, Appellants were entitled for exemption from excise duty and
demand of duty was valid - Appeal allowed. [para 5]
Facts:
Appellants were manufacturers of cement. Appellants were not held
entitlement for exemption and demand of duty was confirmed against
Appellants. Hence, present appeal.
Held:
Entitlement for exemption and validity of demand:
(i) As per notification, exemption was available for seller who sold goods to
consumers. Undisputed that goods were sold by Appellants directly to
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builders/developers/Ready Mix Concrete (RMC) manufacturers. RMC was
excisable product and sale of cement for manufacture of RMC would definitely
come within category of sale to industrial consumers. As regards
builders/developers etc., construction activity was service activity and there
was also service tax levy on construction activity. Sale to such
builders/developers would certainly qualify as sale to institutional consumers.
Therefore, Appellants were entitled for exemption from excise duty and
demand of duty was valid. [para 5]
ORDER
P.R. Chandrasekharan, Member (T)
1 . There are three appeals directed against Orders-in-Original No. PVR/185-
186/NGP/2013 dated 20.3.2013; No. 64-71/MAK(64-71)/COMMR/RGD/13/1-4 dated
30.4.2013 & 187/MAK(187)COMMR/RGD/13-14 dated 10.3.2013, passed by the
Commissioner of Central Excise, Nagpur and Commissioner of Central Excise, Raigad
respectively. Vide the impugned orders, a duty demand of Rs. 36,30,32,815/- has been
confirmed against M/s. Heidelberg Cement (India) has been confirmed against M/s.
Heidelberg Cement (India) Ltd. for the period May, 2007 to September, 2012 and duty
demand of Rs. 11,35,12,755/- has been confirmed against M/s. Heidelberg Cement
(India) Ltd. for the period May, 2007 to September, 2012 and duty demand of Rs.
11,35,12,755/- has been confirmed against M/s. Ultra Tech Cement Ltd. for the period
April, 2007 to January, 2013. As the issues involved in these appeals are common, they
are taken up together for consideration and disposal.
2. The appellants are manufacturers of cement. There is a statutory requirement to affix
MRP on packages sold to dealers for further sale to consumers in retail under the Legal
Metrology (Packaged Commodities) Rules, 2011 (PC Rules in short). The appellants
have complied the provisions of these Rules. The appellants have also cleared cement in
50kg bags to various bulk consumers like, builders/developers/industrial users, who
use the cement for construction purpose or as raw material. Such buyers are covered by
the definition of 'industrial consumer' or 'institutional consumer' under explanation to
Rule 2A of PC Rules, 1977 and Rule 3(ii) of PC Rules, 2011. As per these provisions,
commodity meant for industrial consumer or institutional consumers are not required to
be affixed with MRP. Accordingly, the appellants have not declared the MRP on the
cement bags and specifically have declared on the packages as "Not for Retail Sale -
meant for industrial consumer/institutional consumer/RMC consumption". They have
discharged excise duty liability on such cement bags availing the benefit of Sr. No. 1C
of Notification No. 4/2006 : MANU/EXCT/0008/2006 dated 1.3.2006 as amended from
time to time during the period May, 2007 to 16.3.2012 and under Sr. No. 52 of
Notification No. 12/2012-CE : MANU/EXCT/0023/2012 dated 17.9.2012 for the period
from 17.3.2012 onwards. As per these entries in the notifications, cement bags of 50 kg
cleared to industrial or institutional consumers, which is not subject to fixation of MRP,
is eligible for concessional rate of duty as provided therein. However, the department
was of the view that the appellants are not eligible for the aforesaid exemption benefit
inasmuch as the sale to buyers like, builders/developers etc. cannot be considered as
sale to 'industrial/institutional consumer' and, therefore, the appellants are liable to
discharge excise duty at the tariff rate. Consequently, differential duty liability has
arisen and the duty demands were confirmed along with interest and also by imposing
penalties.
3. The learned Counsel for the appellants submits that the appellants have sold cement
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in 50 kg bags to buyers who are builders/developers/industrial consumers. Such buyers
satisfy the definition provided for under Rule 2A(b) of the PC Rules, 1977 or Rule 3(ii)
of the PC Rules, 2011. Therefore, declaration of RSP is not required in respect of such
sales. Since construction activity is a service, the supply made to them ought to be
construed as supplies made to service industry. Similarly, when cement is sold for
manufacture of ready mix concrete, such buyers have to be construed as industrial
consumer. Since in respect of these supplies, declaration of MRP is not envisaged under
the law, the appellants are eligible for the benefit of concessional rate of duty
prescribed under Sr. No. 1C of Notification No. 4/2006 : MANU/EXCT/0008/2006 or Sr.
No. 2 of Notification No. 12/2012-CE : MANU/EXCT/0023/2012.
3 .1 The learned Counsel submits that an identical issue came up for consideration
before this Tribunal in the case of Grasim Industries Ltd. vs. Commissioner of Central
Excise, Trichi-2009 (238) ELT 655 and this Tribunal held that the appellant would be
eligible for the benefit of concessional duty under Sr. No. 1C of Notification No. 4/2006-
CE : MANU/EXCT/0008/2006. The Hon'ble High Court of Karnataka also had considered
an identical issue in the case of Mysore Cements Ltd.-2010 MANU/KA/1017/2010 :
(259) ELT 30 (Kar.), wherein also it was held that the concessional rate of duty under
Sr. No. 1C of Notification No. 4/2006 : MANU/EXCT/0008/2006 was available in respect
of cement cleared in 50kg bags to Govt. companies, construction companies,
industrial/institutional consumers. It is further submitted that in other Central Excise
Commissionerates such as Bhavnagar, Jaipur and Belgaum, in respect of the present
appellants as also in respect of other similarly placed manufacturers such as Shree
Cement Ltd., Beawar, M/s. J.K. Cement Ltd., Mangrol, M/s. Rajashree Cement, Kalkhed,
M/s. Vasavdatta Cement, Selam and Aditya Cement (a unit of Grasim Industries Ltd.),
Shambhurpura, the jurisdictional Commissioners have decided the matter in favour of
the appellant and dropped the duty demands by extending the benefit of Notification
No. 4/2006 : MANU/EXCT/0008/2006. These orders have also been accepted in review
by the Committee of Chief Commissioners. In these circumstances, it is prayed that the
appeals be allowed.
4 . The learned Commissioner (AR) and Addl. Commissioner (AR) appearing for the
Revenue, on the other hand, submits that the decision of the Tribunal in the case of
Grasim Industries Ltd. has been taken up in appeal before the Hon'ble Supreme Court
and the appeals have been admitted. Since the appeals have been admitted, the
decision is in jeopardy and, therefore, No. reliance can be placed on the said decision.
It is his further argument that the Tribunal had not decided the applicability of Rule 2A
of the PC Rules, 1977 to the Cement sold in 50kg bags to industrial/institutional
consumers especially in the context of clause (b) of Rule 2A has to be read together and
not in isolation. If they are read together, then it can be seen that the cement sold in
50kg bags to industrial/institutional consumers are not exempted from declaration of
RSP. Accordingly, it is prayed that the impugned demands are sustainable in law and,
therefore, the appeals be dismissed.
5. We have carefully considered the submissions made by both the sides.
5.1 Rule 2A of the PC Rules, 1977 reads as follows:-
"2A. Applicability of the Chapter-
The provisions of this chapter shall not apply to,-
(a) packages of commodities containing quantity of more than
25 kg or 25 litre excluding cement and fertilizer sold in bags
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up to 50 kg; and
(b) packaged commodities meant for industrial consumers or
institutional consumers.
Explanation:-For the purpose of this rule,-
a) Institutional consumer.-Means those consumers who buy
packaged commodities directly from the manufacturers/packers
for service industry like transportation [including airways,
railways], hotel or any other similar service industry.
b) Industrial Consumer-Means those consumers who buy
packaged commodities directly from the manufacturers/packers
for using the product in their industry for production, etc."
Rule 3 of the PC Rules, 2011 reads as follows:-
"3. Applicability of the Chapter-The provisions of this Chapter shall not apply
to,-
(a) packages of commodities containing quantity of more than 25 kg or
25 litre excluding cement and fertilizer sold in bags up to 50 kg; and
(b) packaged commodities meant for industrial consumers or
institutional consumers.
Explanation:-For the purpose of this rule,-
i) "Institutional consumer" means the institutional consumer like
transportation, Airways, Railways, Hotels, Hospitals or any other
service institutions who buy packaged commodities directly from the
manufacturer for use by that institution.
ii) "Industrial Consumer" means the industrial consumer who buys
packaged commodities directly from the manufacturer for use by that
industry."
5.2 From the above, it can be seen that packages of commodities containing a quantity
of more than 25 kg or 25 litre excluding cement and fertilizers sold in bags upto 50 kg
and packaged commodity meant the industrial or institutional consumer are excluded
from the provisions of the said Rules. In other words, the Rules exclude two categories-
the first category is packaged commodity containing a quantity of more than 25 kg or
25 litre and cement and fertilizer bags containing more than 50 kg. The second category
is packaged commodity meant for industrial or institutional consumer. As regards the
second category there is No. restriction with respect to the quantity of the goods
contained in the package. There is a 'semi colon' between the two clauses. This would
clearly indicate that the word 'and' between the two clauses have to be read
disjunctively and not conjunctively. In other words, in respect of both the above
categories, the provisions of PC Rules would not apply.
5.3 Further, 'institutional consumer' is defined to mean consumers like transportation,
Airways, Railways, Hotels, Hospitals or any other service institutions who buy packaged
commodity directly from the manufacturer and 'industrial consumer' means those who
purchase the packaged commodity for use by that industry.
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5 .4 There is No. dispute that the goods were sold by the appellant directly to the
builders/developers/Ready Mix Concrete (RMC) manufacturers. RMC is an excisable
product and therefore, the sale of cement for manufacture of RMC would definitely come
within the category of sale to industrial consumers. As regards builders/developers etc.,
construction activity is a service activity as is well understood and there is also a
Service Tax levy on construction activity. Therefore, sale to such builders/developers
would certainly qualify as sale to institutional consumers. The argument of the Revenue
that since the sale is not to consumers like transportation, airways, railways, hotels,
hospitals and any other service institution and since the builders/developers have not
been specifically included and, therefore, such sale would not qualify as sale to
institutional consumer is bereft of logic because only certain service providers have
been specifically mentioned therein; others are covered by the expression 'like' and 'any
other service institution' similar to those specifically mentioned. The institutional
consumers mentioned are transportation, hotels and hospitals which do not form any
particular class. Therefore, the principle of ejusdem generis will not apply. Any service
institution would qualify as institutional consumers.
5 . 5 It will be relevant at this juncture to peruse Notification No. 4/2006 :
MANU/EXCT/0008/2006 as also Notification No. 12/2012-CE : MANU/EXCT/0023/2012.
The relevant portions of said Notifications are reproduced below:-
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Notification No. 12/2012-CE : MANU/EXCT/0023/2012 dated 17.9.2012
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From a reading of the Notifications, especially the third proviso to entry at Sl. No. IC, it
is clear that if the declaration of retail price is not required to be made in terms of PC
Rules, then such goods are deemed as cleared in 'other than packaged form' and the
rate of duty prescribed under Sl. No. IC would apply. The position is the same in
respect of Notification No. 12/2012-CE : MANU/EXCT/0023/2012 also.
5.6 In the Grasim Industries case (supra), this issue was specifically examined by this
Tribunal and it was held as follows:-
"As rightly pointed out by the learned Counsel, as the benefit offered under the
Notification pertains to goods cleared to industrial/institutional consumers and
as this aspect was overlooked by the Legal Metrology expert as also by the
learned Commissioner, the impugned order is liable to be set aside. The Board's
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clarification on the relevant question was wrongly by-passed by the
adjudicating authority. We have found favour with the assessee's case in view
of the clarification issued by the CBEC, which is to the effect that No. RSP
requires to be printed on the goods sold to 'industrial/institutional consumers
as defined under the rules framed under the Standards of Weights and
Measures Act and that such goods would be covered under Sl. No. 1B or 1C of
Notification No. 4/2006-C.E. : MANU/EXCT/0008/2006 by virtue of the Second
Proviso to the Explanation to Sl. No. 1C of the Notification as amended. The
Board's clarification squarely covers the case in favour of the assessee."
Further, in the case of Mysore Cement Ltd.-2010 (249) ELT 398, this Tribunal held that
construction industry is a service industry and benefit claimed by the appellants under
the aforesaid Notifications shall be admissible. The said decision was upheld by the
Hon'ble High Court of Karnataka (supra). Again in the case of India Cement Ltd., it was
held that cement cleared to industrial/institutional consumers in 50 kg bags are eligible
for the benefit of Notification No. 4/2006 : MANU/EXCT/0008/2006 under Sr. No. 1C.
Thus it can be seen that this Tribunal as also the High Court have been consistently
holding that institutional/industrial consumers are eligible for the benefit of Notification
No. 4/2006 : MANU/EXCT/0008/2006 and Notification No. 12/2012-CE :
MANU/EXCT/0023/2012.
6. In this view of the matter, we are of the considered view that the impugned demands
are not sustainable in law. Accordingly, we set aside the same and allow the appeals
with consequential relief, if any, in accordance with law.
(Operative portion of the order pronounced in Court)
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