2014 (8) TMI 251 - AT - Central Excise

Exemption from affixing MRP on cement bags - rate of duty - Tariff rate or ad-valorum rate - concessional rate of duty - cement bags cleared after specifically declaring on the packages as Not for Retail Sale- meant for industrial consumer/institutional consumer/RMC consumption - benefit of Sr. No. 1C of Notification NO. 4/2006-CE dated 1.3.2006 - Held 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. 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. 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 also. In the case of Mysore Cement Ltd. - 2009 (5) TMI 445 - CESTAT, BANGALORE , 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 (2010 (8) TMI 246 - KARNATAKA HIGH COURT ). cement cleared to industrial/institutional consumers in 50 kg bags are eligible for the benefit of Notification No. 4/2006 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 and Notification No. 12/2012 - Decided in favour of assessee.

Summary

Issues Involved:
1. Eligibility for concessional rate of duty under Notification No. 4/2006-CE and Notification No. 12/2012-CE for cement sold to builders/developers/industrial consumers.
2. Applicability of the Legal Metrology (Packaged Commodities) Rules to cement sold in 50kg bags to industrial/institutional consumers.
3. Interpretation of the definitions of 'industrial consumer' and 'institutional consumer' under the PC Rules, 1977 and 2011.
4. Validity of the duty demands confirmed by the Commissioner of Central Excise.

Issue-wise Detailed Analysis:

1. Eligibility for Concessional Rate of Duty:
The appellants, manufacturers of cement, claimed concessional duty rates under Sr. No. 1C of Notification No. 4/2006-CE and Sr. No. 52 of Notification No. 12/2012-CE for cement sold in 50kg bags to builders, developers, and industrial users. They argued that these buyers qualify as 'industrial consumers' or 'institutional consumers,' exempting them from the requirement to affix MRP on the packages. The Tribunal agreed, referencing previous rulings such as Grasim Industries Ltd. vs. Commissioner of Central Excise and Mysore Cements Ltd., which supported the appellants' stance that cement sold to these consumers is eligible for the concessional rate. The Tribunal also noted that similar cases in other Commissionerates had been decided in favor of the appellants, reinforcing the consistency of this interpretation.

2. Applicability of the PC Rules:
The Tribunal examined Rule 2A of the PC Rules, 1977, and Rule 3 of the PC Rules, 2011, which exclude packaged commodities meant for industrial or institutional consumers from the requirement to declare MRP. The Tribunal clarified that the rules exclude two categories: packages containing more than 25kg (excluding cement and fertilizer sold in bags up to 50kg) and packaged commodities meant for industrial or institutional consumers, without any quantity restriction for the latter. This interpretation was crucial in establishing that the appellants' sales were not subject to MRP declaration, thereby qualifying for the concessional duty rate.

3. Definitions of 'Industrial Consumer' and 'Institutional Consumer':
The Tribunal emphasized that 'institutional consumer' includes service industries like transportation, hotels, and hospitals, while 'industrial consumer' refers to those using the product in their industry. The Tribunal found no dispute that the appellants sold cement directly to builders/developers and RMC manufacturers. It was determined that RMC manufacturers qualify as industrial consumers, and builders/developers, engaged in construction (a service activity subject to Service Tax), qualify as institutional consumers. The Tribunal dismissed the Revenue's argument that the specific mention of certain service providers excludes others, noting that the term 'like' in the definitions indicates inclusivity of similar service institutions.

4. Validity of Duty Demands:
The Tribunal concluded that the duty demands confirmed by the Commissioner of Central Excise were unsustainable. The appellants' compliance with the PC Rules and eligibility for the concessional duty rates under the relevant notifications were upheld. The Tribunal set aside the duty demands, allowing the appeals with consequential relief in accordance with the law.

Conclusion:
The Tribunal's judgment comprehensively addressed the issues of eligibility for concessional duty rates, applicability of the PC Rules, interpretation of consumer definitions, and the validity of duty demands. The appeals were allowed, providing relief to the appellants by affirming their entitlement to the concessional rates and setting aside the confirmed duty demands.