2007 (8) TMI 11 - SC - Central Excise

Whether Mix Concrete manufactured and used at the site of construction is Ready Mix Concrete ? Demand raised by the department has been quashed on the ground of adjudication beyond the normal period of limitation and non-availability of the extended period of limitation.

Summary

Issues:
1. Whether the manufacturing of Ready Mix Concrete (RMC) by construction companies for a power project constitutes evasion of central excise duty.
2. Whether the extended period of limitation under Section 11A of the Central Excise Act is applicable in this case.

Detailed Analysis:
Issue 1:
The case involves a dispute regarding the manufacturing of Ready Mix Concrete (RMC) by construction companies for a power project, with the Commissioner of Central Excise alleging that central excise duty on RMC was being evaded. The construction companies, including Continental Foundation Joint Venture, were accused of naming RMC as mixed concrete to avoid duty payment. The process of manufacturing RMC involved specific steps, including crushing rocks, producing aggregate, cement, and sand, and using an automatic batching plant to create concrete as per approved mix design. The Central Excise authorities argued that the companies concealed the true nature of RMC to evade duty, citing differences between the manufacturing process outlined by the Bureau of Indian Standards and the companies' practices. The Commissioner confirmed duty amounts and imposed penalties under the Central Excise Rules, rejecting the argument that the extended period of limitation did not apply.

Issue 2:
Regarding the applicability of the extended period of limitation under Section 11A of the Central Excise Act, the Tribunal upheld the duty demands and penalties, dismissing appeals by the construction companies. The Tribunal rejected contentions of bona fide belief by the companies that they were manufacturing mixed concrete, not RMC, based on standards and notifications. The Tribunal noted that the companies did not seek clarification from central excise authorities or obtain legal opinions regarding duty liability. The Tribunal also addressed the companies' claim for modvat credit on input materials, suggesting they establish eligibility before the original authority. However, the Supreme Court found that the extended period of limitation ground alone was sufficient for the appellants to succeed. The Court emphasized that suppression under Section 11A requires mens rea, with strict interpretation of the term 'suppression' as deliberate intent to evade duty. The Court highlighted that mere omission or incorrect statements do not constitute suppression unless done willfully to avoid duty payment. The Court concluded that the Revenue failed to prove suppression of facts, and there was scope for doubt, ruling in favor of the appellants on the limitation issue.

In summary, the Supreme Court allowed the appeals on the ground of adjudication beyond the normal period of limitation and the non-availability of the extended period of limitation, emphasizing the requirement of mens rea for suppression under Section 11A of the Central Excise Act.