2016 (12) TMI 81 - AT - Central Excise

Benefit of the exemption Notification No. 10/2002-CE - manufacture of Solid/Hollow Cement Concrete Blocks falling under Chapter Heading No. 6807.90 of Central Excise Tariff Act, 1985 - density of the solid/hollow concrete blocks - product classified as lightweight or not - whether the appellant is entitled for the exemption notification no. 10/2002-CE dated 1-3-2002? - Held that - the goods entitle for the exemption is lightweight (solid and hollow) concrete building blocks. However, no specification either as per the Indian standard or otherwise was provided alongwith aforesaid entry in the notification. Considering the submission of the Ld. Counsel on perusal of the sample notification, we find IS specifications are mentioned in the exemption entry - reliance placed on the decision of the case of Cannaught Plaza Restaurant 2012 (12) TMI 149 - SUPREME COURT , where it was held that irrespective of any ingredient the classification of the goods has to be preferred as per the name of product known in the market. in the present case irrespective of the specification of the product, it is marketed under the description of lightweight concrete building blocks and buyer is also purchasing the product knowing consciously that it is lightweight concrete building blocks - product represent to description used for the marketing of the goods should be accepted and need not to go to the IS specification particularly for the reason that the entry provided in the exemption notification does not carry any IS specifications. Therefore we hold that appellant is entitle for the exemption notification no. 10/2002-CE dated 1-3-2002(sr. No. 23) Period of limitation - Held that - The issue is of strict interpretation of the entry given in the notification. In such a case it is settled law that in case of issue involved is of interpretation of law, malafide intention or suppression of fact cannot be alleged therefore the extended period of demand cannot be invoked as provided under proviso to Section 11A of Central Excise Act, 1944. In the present case, the period involved is August, 2002 to February, 2003 whereas show cause notice for the demand during such period was issued on 15-12-2004 i.e. after lapse of almost one year and ten months. Moreover, corrigendum to show cause notice was also issued on 11-8-2005. In this fact, we are of the considered view that the demand is clearly time bar as extended period could not have been invoked. The appellant has rightly claimed the exemption notification no. 10/2002-CE, hence the demand is not sustainable - appeal allowed - decided in favor of assessee.

Issues Involved:

1. Eligibility for exemption under Notification No. 10/2002-CE.
2. Interpretation of the term "lightweight concrete building blocks."
3. Invocation of the extended period for demand.
4. Imposition of penalties on the partnership firm and its partner.
5. Entitlement to refund of the amount deposited during the investigation.

Detailed Analysis:

1. Eligibility for Exemption under Notification No. 10/2002-CE:

The appellant, engaged in manufacturing Solid/Hollow Cement Concrete Blocks, claimed a concessional excise duty rate of 4% under Notification No. 10/2002-CE. The Revenue contended that the appellant’s product did not qualify as "lightweight concrete building blocks" as per the Indian Standard (IS) specification IS:2185(Part-II) 1983, which specifies that the bulk density should not exceed 1600 kg/cubic meter. Since the appellant's solid concrete blocks exceeded this density, the Revenue denied the exemption and demanded differential duty of ?21,86,284 along with penalties.

2. Interpretation of the Term "Lightweight Concrete Building Blocks":

The appellant argued that the notification did not specify any IS standard, and thus, the product should be classified based on its commercial understanding. They provided evidence that their product was marketed and recognized by buyers as "lightweight concrete building blocks." The Tribunal agreed, noting that in the absence of an IS specification in the notification, the commercial parlance test should be applied. The Tribunal cited precedents, including the Supreme Court's decisions, which support classification based on common commercial understanding rather than technical specifications.

3. Invocation of the Extended Period for Demand:

The Tribunal examined whether the extended period for issuing the show cause notice was justified. The appellant had consistently described their product as "lightweight concrete blocks" in their invoices and ER-1 returns, which were regularly submitted to the department. The Tribunal found no suppression of facts or malafide intention on the appellant's part. The issue at hand was purely interpretative, and thus, the invocation of the extended period was deemed inappropriate. Consequently, the demand was held to be time-barred.

4. Imposition of Penalties on the Partnership Firm and Its Partner:

Given that the main demand was not sustainable on both merit and limitation grounds, the Tribunal ruled that the penalties imposed on the partnership firm and its partner under Section 11AC and Rule 26 were not warranted. The Tribunal noted that penalties cannot be imposed on both the firm and its partner simultaneously, referencing the decision in Sai Metal Industries Ltd. vs. Commissioner of C. Ex. Hyderabad.

5. Entitlement to Refund of the Amount Deposited During the Investigation:

The appellant had deposited ?19,12,486 during the investigation and filed a refund claim, which was initially rejected as premature due to ongoing demand proceedings. Since the Tribunal found the demand unsustainable, the appellant became entitled to a refund of the deposited amount. The Tribunal directed that the refund be processed in accordance with the law.

Conclusion:

The Tribunal allowed all three appeals, granting the appellant the benefit of the exemption under Notification No. 10/2002-CE. The demand for differential duty was annulled on both merit and limitation grounds. Consequently, the penalties on the partnership firm and its partner were set aside, and the appellant was entitled to a refund of the amount deposited during the investigation. The Tribunal emphasized the importance of commercial parlance in classification when specific standards are not mentioned in the notification.

(Order pronounced in court on 31/10/2016)

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