2009 (8) TMI 454 - AT - Central Excise

Sizing of marble blocks/slabs- The appellants were purchasing marble blocks and marble slabs for processing thereon. The blocks were subjected to processing of sizing to make it rectangular and cut into slabs of uniform thickness by using Gangsaw machines. The slabs got cracks and pin holes in some cases and pasted fibre glass sheets on one side and resin is applied to fill-in holes the cracks on the other side of the slabs for smooth transportation. Show cause notice issued and make a demand of penalty. Held that- the commissioner observed that the case of Associated Stone Industries (Kotah) Ltd. and Aman Marbles Ltd. are not applicable in the present case as the said cases pertain to the period prior to 1-3-2005 (i.e. date of introduction of 8 digit Tariff). We are unable to accept the finding of the Commissioner. We find that ratio of the above decisions are squarely applicable in this case. The activities carried out by the appellants on the marble blocks and slabs do not amount to manufacture even after introduction of 8 digit classification code in the Tariff on 1-3-2005, unless by Section Note or Chapter Note of the Tariff or by wording of the relevant heading or sub-heading, the said process has been specified as manufacture . Hence the demand of duty and penalty are not sustainable.

Issues Involved:
1. Classification of marble products prior to 1-3-2006.
2. Classification of marble products post 1-3-2006.
3. Applicability of the Supreme Court's decision in Aman Marble Industries Pvt. Ltd. v. CCE.
4. Impact of the 8-digit classification code introduced on 1-3-2005.
5. Interpretation and applicability of Chapter Note 6 to Chapter 25 of CETA, 1985.
6. Applicability of CBEC Circular No. 808/5/2005-CX., dated 25-2-2005 and Circular F.No. 134/2/06-CX., 4 dated 3-9-2008.
7. Demand of duty and imposition of penalties for the period from April 2005 to September 2007.

Detailed Analysis:

1. Classification of Marble Products Prior to 1-3-2006:
The appellants contended that the processes undertaken on marble blocks and slabs did not amount to manufacture prior to 1-3-2006, relying on several judicial precedents. The Tribunal referred to the decisions in Associated Stone Industries (Kotah) Ltd. v. CCE, Aman Marble Industries Pvt. Ltd. v. CCE, and others, which held that cutting, edging, trimming, and polishing of marble slabs did not constitute manufacture as no new distinct commodity emerged. The Tribunal concluded that the activities carried out by the appellants on marble blocks and slabs did not amount to manufacture before 1-3-2006.

2. Classification of Marble Products Post 1-3-2006:
With the insertion of Note 6 to Chapter 25 of CETA, 1985, effective from 1-3-2006, the process of cutting, sawing, sizing, or polishing of stone blocks into slabs or tiles was deemed to amount to manufacture. The Tribunal noted that the marble slabs processed by the appellants were classifiable under sub-heading No. 2515 12 20 and eligible for concessional duty under Notification No. 4/2006-C.E., dated 1-3-2006. The Tribunal also emphasized that there was no Chapter Note in Chapter 68 deeming the process of sizing/trimming or polishing as manufacture.

3. Applicability of the Supreme Court's Decision in Aman Marble Industries Pvt. Ltd. v. CCE:
The Tribunal rejected the Revenue's argument that the Supreme Court's decision in Aman Marble Industries Pvt. Ltd. v. CCE was not applicable post 1-3-2005 due to the introduction of the 8-digit classification code. The Tribunal held that the ratio of the Supreme Court's decision remained applicable, as the processes undertaken did not amount to manufacture unless specified by a Section Note or Chapter Note.

4. Impact of the 8-digit Classification Code Introduced on 1-3-2005:
The Tribunal disagreed with the Commissioner's view that the introduction of the 8-digit classification code on 1-3-2005 rendered the previous judicial decisions inapplicable. The Tribunal referred to CBEC Circular No. 808/5/2005-CX., dated 25-2-2005, which clarified that the transition from 6-digit to 8-digit classification was not intended to alter the duty structure.

5. Interpretation and Applicability of Chapter Note 6 to Chapter 25 of CETA, 1985:
The Tribunal held that Note 6 to Chapter 25, inserted on 1-3-2006, was not merely clarificatory but introduced a substantive change, specifying that certain processes amounted to manufacture. Therefore, the processes undertaken by the appellants prior to 1-3-2006 did not amount to manufacture.

6. Applicability of CBEC Circulars:
The Tribunal relied on CBEC Circular F.No. 134/2/06-CX., 4 dated 3-9-2008, which clarified that marble slabs with resin and hardener applied on one side and fiber net on the other side would remain classified under Chapter 25 and be eligible for concessional duty under Notification No. 4/2006-C.E. The Tribunal found this circular applicable to the appellants' case.

7. Demand of Duty and Imposition of Penalties:
The Tribunal held that the demand of duty and penalties imposed by the Commissioner for the period from April 2005 to September 2007 were not sustainable. The Tribunal set aside the impugned orders and allowed the appeals with consequential relief, concluding that the activities carried out by the appellants prior to 1-3-2006 did not amount to manufacture and that post 1-3-2006, the goods were classifiable under Chapter 25 with the benefit of Notification No. 4/2006-C.E.

Conclusion:
The Tribunal's judgment comprehensively addressed the classification of marble products both before and after 1-3-2006, the applicability of judicial precedents, the impact of the 8-digit classification code, and the interpretation of relevant Chapter Notes and CBEC Circulars. The Tribunal ultimately ruled in favor of the appellants, setting aside the demand of duty and penalties.

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