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2013 (9) TMI 648 - AT - Central ExciseDeemed Manufacture - Cutting/sawing of marble blocks / slabs - process of resin filling, polishing - classification under CSH No.25151220, 68101990 and 68022190 - Held that - the activities carried out by the appellants prior to 1-3-2006, would not amount to manufacture. From 1-3-2006, the goods in question are classifiable under Chapter 25 and benefit of Notification No. 4/2006-C.E., dated 3-2-2006 are admissible. Hence, the demand of duty and penalty are not sustainable. Benefit of exemption Notification No.4/2006 - classification - held that - adjudicating authority has failed to note that sub-heading 6802 9100 and three sub-headings following it are a sub-classification of group of articles described as other which is preceded by. It would mean that sub-heading and three entries are in the nature of residual entries and can be considered only if the subject goods are not classifiable under preceding entries. In the case in hand, we find that the goods are polished marble slabs and are covered under sub heading No.6802.21 and hence merit classification under sub heading No.6802 2190. Leviability of duty on the processed agglomerated marble slabs for the period from 01.03.2006 to March 2008 - held that - The appellant received such agglomerated marble slabs, and undertook the activity of resin filling and polishing as may be required before dispatch of such agglomerated marble slabs into the market. As already held by us hereinabove that the process of resin filling, polishing etc will not amount to manufacture in view of the facts discussed above, fortified by the judgment of co-ordinate Bench in the case of Oriental Trimex Ltd (2009 (8) TMI 454 - CESTAT, NEW DELHI), we find that the activity of resin filling, polishing by the appellant on agglomerated marble slabs will not amount to manufacture. Hence, the demand of duty on such processed agglomerated marble slabs for the period prior to March 2008 is un-sustainable in law. The duty liability, if any, arises on the appellant, on the marble slabs which they received prior to March 2006 from their job workers on payment of duty, the appellant is eligible to avail the CENVAT Credit on such amount and he would have been eligible for benefit of Notification No.4/2006-CE and they would discharge of duty liability @ Rs.30 per sq.mtr as indicated in the said notification, which is revenue neutral position. With effect from 26.02.2010, vide Finance Bill 2010, as a Chapter note was inserted in Chapter 68 declaring such activities as deemed manufacture, such declaration and chapter note inserted w.e.f. 26.02.2010 will be effective from that date and cannot be applied to an activity for the earlier period. In our view, the demand of duty raised and confirmed on processed agglomerated marble slabs falling under Chapter 68 for the period March 2008 to 26.02.2010 is not sustainable under the law. Demand set aside - Decided in favor of assessee.
Issues Involved:
1. Leviability of duty on processed natural marble slabs. 2. Classification of processed natural marble slabs. 3. Classification of polished natural marble slabs obtained by cutting of blocks and further processing. 4. Levy of duty on processed agglomerated marble slabs. 5. Levy of duty on processed agglomerated marble slabs obtained by cutting of blocks and further processing. 6. Classification of processed agglomerated marble slabs. 7. Limitation period for raising demand. 8. Maintainability of penalty on the appellant and co-appellants. Detailed Analysis: Issue (i): Leviability of Duty on Processed Natural Marble Slabs - The processes undertaken by the appellant (fibre netting, resin filling, polishing, edge cutting) do not amount to manufacture as per Section 2(f) of the Central Excise Act, 1944. No new product with a distinct name, character, or use emerges from these processes. - Reliance on Note 1 of Chapter 25 by the Commissioner is misplaced; a harmonious reading of Note 1 and Note 6 indicates that the final product remains classified under Chapter 25. - The explanation to Section 2(d) inserted w.e.f. 10.05.2008 is not relevant for determining the excisability of the processes. - The definition of job work as per Rule 2(n) of CCR, 2004, and the judgment in Emptee Poly Yarn's case are not applicable. - The judgment in Associated Stone Industries (Kotah) Ltd. and the case of Oriental Trimex Ltd. supports the view that these processes do not amount to manufacture. Issue (ii): Classification of Processed Natural Marble Slabs - Even if the processes are considered as manufacture, the processed slabs would continue to be classifiable under sub-heading 2515 12 20 and eligible for concessional duty of Rs.30 per sq.mtr under Notification No. 4/2006-CE. - The processed natural marble slabs should not be classified under Chapter 68 as argued by the Commissioner. The CBEC Circular dated 16.03.2012 clarifies that polished marble slabs should be classified under heading 6802 21 90 and are eligible for concessional duty. Issue (iii): Classification of Polished Natural Marble Slabs Obtained by Cutting of Blocks and Further Processing - The natural marble slabs obtained by cutting/sawing of blocks and subjected to further processes including polishing remain classified under sub-heading 2515 12 20 and eligible for concessional duty under Notification No. 4/2006-CE. - The same rationale applies as discussed in Issue (ii). Issue (iv): Levy of Duty on Processed Agglomerated Marble Slabs - The processes of resin filling, polishing, etc., carried out on agglomerated marble slabs do not amount to manufacture as per Section 2(f) of the Act. - The job workers paid service tax on the cutting/sawing of agglomerated marble blocks, indicating that such processes were not considered as manufacture. - Note 3 of Chapter 68, inserted w.e.f. 26.02.2010, does not apply retrospectively. Issue (v): Levy of Duty on Processed Agglomerated Marble Slabs Obtained by Cutting of Blocks and Further Processing - The process of cutting/sawing of agglomerated marble blocks into slabs and further processes of resin filling, polishing, etc., did not amount to manufacture prior to the insertion of Note 3 in Chapter 68 w.e.f. 26.02.2010. - The demand of duty for the period prior to 26.02.2010 is unsustainable in law. Issue (vi): Classification of Processed Agglomerated Marble Slabs - Even if the processes are considered as manufacture, the processed agglomerated marble slabs would be classifiable under heading 6810 19 90 and not under heading 6810 99 90. - The Commissioner failed to establish that the subject goods cannot merit classification under any of the preceding entries of heading 6810. Issue (vii): Limitation - The demand of duty raised vide the show cause notice dated 08.08.2008 is partly time-barred and unsustainable in law for the period prior to July 2007. - The allegations of suppression, willful mis-statement, and mis-declaration of facts with intent to evade duty are baseless and untenable. - The appellant had a bona fide belief that the activities did not amount to manufacture, supported by judicial pronouncements and the department's acceptance of service tax payments. Issue (viii): Maintainability of Penalty on the Appellant and Co-appellants - As the demand of duty is not sustainable on merits, the penalty imposed under Section 11AC of the Act cannot be sustained. - The demand is also time-barred, rendering the penalty under Section 11AC unsustainable. - The penalties imposed on co-appellants are also not maintainable as the essential ingredients of Rule 26 of the Rules are not conclusively established. Conclusion: - The duty liability raised and confirmed against the appellant is not sustainable. - The penalties imposed are also not sustainable. - The appeals are allowed with consequential relief.
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