2003 (10) TMI 467 - AT - Central Excise

Excisability - Manufacture - Marble articles and novelty items - Penalty - Composite penalty - Demand - Limitation - Suppression of facts - Demand - Revenue neutrality

Issues Involved:
1. Excisability of marble slabs obtained by cutting, polishing, and fibreglass reinforcement.
2. Excisability of marble tiles.
3. Rate of duty applicable to marble tiles.
4. Classification of articles of marble.
5. Whether the demand is barred by limitation.
6. Applicability of Section 11AB.
7. Sustainability of composite penalty.

Issue-wise Detailed Analysis:

1. Excisability of Marble Slabs:
The appellants received marble slabs, processed them by cutting, polishing, and reinforcing with fibreglass and resin coating, and then cleared them. The Tribunal noted that no new distinct commercial commodity emerged from these processes. Citing precedents like CCE v. Fine Marble & Minerals Pvt. Ltd. and Associated Stone Industries Ltd. v. CCE, it was held that such processes do not amount to manufacture as the end product remains marble. Therefore, the marble slabs cleared by the appellants do not attract fresh duty liability as they are not excisable goods.

2. Excisability of Marble Tiles:
Marble tiles, being commercially distinct from slabs, satisfy the definition of manufacture. The Tribunal found that the processes carried out by the appellants on marble slabs to convert them into tiles amount to manufacture. It was clarified that the reliance on the Tribunal's decision in Associated Stone Industries was misplaced as it did not address the conversion from slabs to tiles. Hence, marble tiles are excisable goods.

3. Rate of Duty Applicable to Marble Tiles:
The cumulative electromotive power used in the factory exceeded 10 HP, classifying the tiles under CETA sub-heading 2504.31, attracting duty. The appellants' argument that individual machines did not exceed 10 HP was rejected, as the sub-heading language covered the total electromotive force used. Thus, marble tiles manufactured by the appellants fall under CETA sub-heading 2504.31, attracting duty at the applicable rate.

4. Classification of Articles of Marble:
Marble articles and novelty items were claimed to be classifiable under CETA sub-heading 2504.90. However, Chapter Heading 25.04 covers marble in block, slab, and tile forms but not articles. Therefore, such items fall under Heading 68.07, which covers all other articles of stone, plaster, cement, asbestos, mica, or similar materials. The adjudicating authority is to examine the plea regarding SSI exemption under relevant notifications.

5. Whether the Demand is Barred by Limitation:
The appellants contended that the demand was barred by limitation since the department had knowledge of their activities as early as July 1996. The Tribunal reviewed the correspondence between the appellants and the department, showing the department's awareness of the manufacturing activities and machinery used. It was held that the demand on marble tiles from 9th August 1996 onwards is barred by limitation, but the demand for the period from June 1996 to 9th August 1996 is sustainable, subject to verification of eligibility for Modvat credit.

6. Applicability of Section 11AB:
This issue pertains to the interest on duty payable on novelty items for the period after 28-9-1996. The Tribunal remanded this issue to the Commissioner to decide based on the remaining duty liability after considering SSI benefit, revenue neutrality, and recalculating duty liability by considering the sale value as cum-duty price.

7. Sustainability of Composite Penalty:
The composite penalty imposed under Section 11AC and Rule 173Q was set aside as it was not sustainable. The Tribunal cited decisions like Agarwal Pharmaceuticals v. CCE and Alagappa Cements (P) Ltd. v. CCE, which held that combined penalties are not permissible. The issue of penalty was remanded to the Commissioner for re-determination.

Majority Order:
The process of cutting, polishing, resin coating, and fibreglass reinforcement of marble slabs does not amount to manufacture, and the slabs do not attract duty liability. The liability to penalty and the issue of whether the demand on marble tiles from 9th August 1996 is barred by limitation were remanded to the Commissioner for re-examination. The appeal was disposed of accordingly.

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