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TMI Blog2013 (9) TMI 648X X X X Extracts X X X X X X X X Extracts X X X X ..... in evasion of Central Excise duty on the clearances of marble slabs by resorting to mis-declaration of the products, Central Excise officers of Vapi Commissionerate visited the premises of unit and conducted search under punchnama. On completion of search, Panchnama and after recording various statements, the authorities came to a conclusion that: i) The unit is involved in the activity of cutting of imported natural marble blocks and agglomerated marble blocks into marble slabs which they were getting done on job-work basis. The natural marble blocks are imported showing the Tariff Heading 25151220 while the agglomerated marble blocks are imported showing the tariff heading 68101990. ii) The job workers are sending back the natural marble slabs blocks which are merely cut and sawn to the unit by paying duty@ Rs.30 per sq.mtr as applicable under Notification No.04/2006, dt.01.03.2006 classifying the goods under CETSH No.25151220. iii) On receipt of these marble slabs from the job-workers, the unit is carrying out further processes of resin filling, fibre backing and polishing and in some cases resin filling and fibre backing. iv) No duty is paid by the unit on these resin fille ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itation. The adjudicating authority, after following the principles of natural justice and taking on record the additional evidences filed by the appellant during the personal hearing held that the demand of duty needs to be confirmed and accordingly confirmed the demand along with interest and imposed equal amount of penalty on the main appellant and also imposed personal penalties on other appellants. 5. Aggrieved by such order, the appellants are in appeal before Tribunal. 6. Ld.Counsel Shri V.S. Nankani appearing on behalf of the appellants would submit that the main issue in this case which needs to be addressed is as under: i) Whether the process of fibre netting, resin filling, polishing and/or edge cutting carried out by the appellant, as may be required, during the relevant period (prior to installation of Gangsaw Machines in their factory) in respect of the duty-paid natural marble slabs received from the job workers amounts to manufacture in terms of Section 2(f) of Central Excise Act, 1944 so as to attract the levy of duty ii) If the processes carried out by the appellant in respect of duty-paid natural marble slabs received from the job workers are considered as am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Rules, 1944, as the case may be. Issue at Sr. No. (i) :Leviability of duty on Natural Marble Slabs processed from the duty- paid slabs: Processes undertaken by the Appellant do not amount to manufacture:- that, the various processes like fibre netting, resin filling, polishing, edge cutting, etc. undertaken by them in respect of duty paid natural marble slabs received from the job workers during the relevant period (prior to installation of Gangsaw machines in the factory) do not amount to manufacture as envisaged under Section 2 (f) of the Act as no new product having a distinct name, character or use emerges as a consequence of the said processes; that, the said processes undertaken by them are not nor can be considered as incidental or ancillary to the completion of a manufactured product; that, as the processes undertaken by the Appellant do not amount to manufacture in terms of Section 2(d) of the Act, the levy of duty is not attracted at all in respect of processed slabs and the demand of duty raised and confirmed thereon is without authority of law and cannot be sustained. Reliance placed on Note 1 of Chapter 25 is misplaced: that, the reliance placed by the Ld. Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in as much as there was absolutely no charge in the show cause notices to the effect that the said process/es fall within the term manufacture since this process/es alone render the product viz. marble slabs fit for use and marketable. Thus, the Ld. Commissioner has made out a completely new case merely on the basis of the aforesaid judgment of the Hon'ble Supreme Court and the observations made therein have been incorporated in the finding by the Ld. Commissioner in an improper and self-serving manner and also out of context; that, It is a well settled legal position that show cause notice is the foundation of a case and an adjudicating authority cannot go beyond the show cause notice while confirming the demand. The Appellant relies upon the following judgments: 1. CCE V/s. Ballarpur Industries- 2007 (215) ELT 489 (SC); 2. CCE V/s. Toyo Engineering India Ltd.-2006 (201) ELT 513 (SC); 3. HPCL V/s. CCE -2011 (269) ELT 422 (Tribunal); that, the aforesaid finding of the Ld. Commissioner is otherwise also baseless, incorrect and improper. The Appellant say that the marble slabs (natural or agglomerated) which are not subjected to such process are also capable of being bought and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the several processes undergone. In the trade circles, marble slabs or the marble tiles that are manufactured after cutting the edges, trimming, polishing and other processes, continue to be known as marble, Unless it is proved that by virtue of the sawing process, a different or distinct commodity comes into existence, the process cannot be equated to manufacture. The aforesaid judgment of the Larger Bench in the context of Section 2 (f) of the CEA and dealing with the same process/product would prevail upon the Division Bench judgment of the Hon'ble Supreme Court in Emptee Poly Yarns case (supra) rendered in the context of the provisions of Income Tax Act, 1961. that, the Ld.Commissioner has also ignored the mandate/ caution of the Hon'ble Supreme Court in Emptee Poly Yarns case that the said judgment would be confined to the facts of that case only. The issue is no longer res integra in view of the judgment in Oriental Trimex case: that, in the case of Oriental Trimex Ltd. V/s. CCE 2010 (249) ELT 259 (Tri.-Del.), the Honble Tribunal took note of the various judgments and finally, held that the activities of sawing of marble blocks into slabs and subjecting the same to fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held by the Hon'ble Tribunal, the duty-paid natural marble slabs subjected to the said processes cannot be classified under Chapter 68; that, as the polished natural marble slabs would continue to remain classified under sub-heading 2515 12 20, no further duty liability would arise in respect thereof as the job workers have already paid the duty @Rs.30/- per Sq.Mtr. on the slabs in terms of Notification No.4/2006-CE and which is available to the Appellant by way of Cenvat Credit. Classification of polished Natural Marble Slabs under Chapter 68 : that, even if it is assumed without admitting that the said processes carried out by them in respect of duty paid natural marble slabs amount to manufacture and the resultant product i.e. polished natural marble slabs would be classifiable under Chapter 68, the same would be properly and appropriately be classifiable under sub-heading no. 6802 21 90 and not under sub-heading 6802 91 00 as wrongly and improperly held by the Ld. Commissioner; that, the Ld. Commissioner has failed to appreciate that sub-heading 6802 91 00 and the 3 sub-headings following it are a sub-classification of group of Articles described as other and which is pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not permitted in law to argue against the same. Moreover, the circular, being clarificatory in nature, the same would apply retrospectively; that, even if it is assumed without admitting that the subject goods i.e. polished natural marble slabs would merit classification under sub-heading 6802 91 00 as held by the Ld. Commissioner, the benefit of concessional rate of duty under Notification No. 4/2006-CE would be still admissible to the Appellant in view of the aforesaid clarification issued by the Board in as much as irrespective of the classification, the goods are covered by the description in the exemption entry of the Notification that, as the benefit of exemption under Notification No.4/2006-CE is, admissible to the subject goods i.e. polished natural marble slabs, whether considered as classifiable under Chapter 25 or Chapter 68, the demand of duty raised and confirmed thereon vide the impugned order cannot survive in the eyes of law and is liable to be set aside. The Appellant therefore submits that viewed from any angle, the demand of duty raised and confirmed in respect of polished natural marble slabs is not sustainable. Issue at Sr. Nos. (iii) Classification of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licability: that, Note 3 of Chapter 68 inserted w.e.f. 26.02.2010 has no relevance or applicability so far as the processes of resin filling, polishing etc. of tax-paid Agglomerated Marble Slabs is concerned. This Note declared certain specified processes including cutting or sawing of Blocks into slabs as amounting to manufacture. However, as the perusal of Note 3 would show, the process specified therein shall be for conversion of Blocks into Slabs and it cannot by any stretch of imagination, said that process of resin filling, polishing etc. undertaken on slabs would stand covered by the said Note. 3. That the Note 3 of Chapter 68 apply prospectively: that, assuming without admitting that the said Note 3 of Chapter 68 has any relevance so far as the processes of resin filling, polishing etc. carried out on the tax-paid Agglomerated Marble Slabs are concerned, the said Note is effective only prospectively i.e. w.e.f. 26.02.2010 and cannot apply respectively as is the settled law. The demand of duty raised and confirmed in respect of such processed Agglomerated Marble Slabs is therefore invalid and untenable in law. Issue at Sr. No. (v) Levy of duty on processed Agglomerated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submits that from the careful reading and perusal of sub-heading 6810 19 90, it would be evident that the subject goods are appropriately classifiable thereunder which covers the articles/goods not covered by either sub-heading 6810 19 90 or the sub-headings under the heading 6810 11. Issue at Sr. No. (vii) Limitation: Submissions: that, the demand of duty raised vide the show cause notice dated 08.08.2008 and upheld vide the impugned order is partly time-barred and unsustainable in law in so far as the same relates to the period prior to July, 2007; that, the allegations of suppression, willful mis-statement, and mis-declaration of facts with intent to evade duty made and upheld against them are absolutely baseless and invalid and untenable in law and consequently, the invocation of extended period of limitation and confirmation of the demand of duty thereunder is absolutely unjustified, without authority of law and therefore unsustainable in law; that, the Appellant was also under bonafide belief, in view of the various judicial pronouncements, that such activities of fibre filling/resin backing/polishing carried out by them in respect of Natural Marble Slabs or Agglomerated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, in any case, were within the full knowledge of the department since 01.03.2006, and therefore, the belated issue of show cause notice dated 08.08.2008 nearly after one year of receipt of such letter, rendered the demand of duty for the extended period time-barred and untenable in law. 12.2 The demand of duty raised vide show cause notice dated 08.08.2008 and confirmed vide the impugned order dated 30.04.2010 is thus time-barred to the extent the same relates to the period prior to July, 2007. Issue at Sr. No. (viii) Maintainability of penalty on the Appellant and the co-appellants: Submissions: that, as the demand of duty raised and confirmed against them on various counts is not sustainable in law on merits itself, the penalty imposed on them under Section 11AC of the Act cannot be sustained in law; that, the demand of duty raised vide the show cause notice dated 08.08.2008 is also time-barred as discussed above and therefore, the penalty under Section 11AC of the Act is not maintainable; that, moreover, the demand of duty raised vide the subsequent show cause notices dated 08.10.2008 and 10.02.2009 (upheld vide Order-in-Original dated 30.04.2010) and show cause notices d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in the case of CIT Vs Emptee Poly Yarn Pvt.Ltd. 2010 (250) ELT 321 (SC), also specifically states that if an operation/process renders a commodity or article fit for use for which it is otherwise not fit, the operation/process falls within the meaning of the word manufacture. He would also submit that the statement of the production and technical incharge of the main appellant specifically indicate that the activity of resin filling etc and after completion of these processes only, the marble slabs are dispatched to their customers. It is submission that unless fibre backing/netting and resin filling is done, the marble slabs during transportation may get cracked or broken and hence these processes undertaken by the appellant should be equated and compared with packing and manufacturing activity. He would also rely upon the decision of the Hon'ble Supreme Court in the case of Shyam Oil Cake Ltd. 2004 (174) ELT 145 (SC), holding that once there is definition of deemed manufacture, brought into chapter note as regards product being processed and manufactured, the same will override all other propositions given by the ld. Counsel. It is his submission that the decision r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after being subjected to processes such as cutting or sawing into slabs, fibre backing, resin filling, polishing and further edging etc are classifiable under CSH No.25151220, 68101990 and 68022190 of Customs Excise Tariff Act, 1985 as contended by assessee or would merit same classification under CSH No.68021900, 68109990 and 68029100 of Customs Excise Tariff Act, 1985 as contended by the Revenue. 11. We find that the facts in issue are not in dispute from both sides. Both sides agree that the appellants herein are importing marble blocks both natural as well as agglomerated. From their factory, the same are sent to different job workers for processes of sawing/cutting i.e. the process of cutting the said blocks into slabs as the appellant did not have the facility of sawing in the factory. It is also undisputed that the natural blocks, after being cut into natural marble slabs, are received in the factory of the assessee under the cover of Central Excise invoices from the job worker on discharge of Central Excise duty @ Rs.30 per sq.mtr, after availing the benefit of Notification No.4/2006-CE, dt.01.03.2006. There is also no dispute that the agglomerated marble blocks, after be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he processes undertaken by the appellant on duty-paid natural marble slabs would not amount to manufacture in terms of Section 2(f) of Central Excise Act, 1944 as no new, distinct separately identifiable and marketable product emerges as a result of such processes. We find that principle of law, in respect of identical product i.e. marble slabs, the judgment of Hon'ble Supreme Court in the case of Aman Marble Industries Pvt. Ltd. 2003 (157) ELT 393 (SC) and the judgment in the case of Associated Stone Industries Ltd 2003 (10) STC 771 (SC) would apply. 15. We also find that the decision of the Tribunal in the case of Nitco Tiles Ltd 2004 (155) ELT 50 (Tri-Mum) and in the case of Oriental Trimex Ltd 2010 (249) ELT 259 (Tri-Del) is on the self same issue. We find that the reliance placed by the adjudicating authority on the Chapter Note 6 of Chapter 25 is inserted w.e.f. 1.3.2006 would not have any applicability inasmuch as the said note would apply only when processes specified therein are undertaken for conversion of blocks into slabs or tiles. In order to appreciate correct position, we produce said chapter Note 6 as under: In relation to products of heading 2515 and 2516, the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of Notification No.4/2006-CE. It is the case of the Revenue that post March 2008, the appellant's activity of processing natural marble slabs into processed natural marble slabs would be classifiable under CSH 6802 9100 and chargeable to duty at ad-valerom basis is incorrect as the word polishing which is mentioned in Note 6 of Chapter 25 is to be read in respect of product which is falling under Heading No.2515, 2516 and cannot be taken out and read independently in isolation, so as to read that the appellant is manufacturing polished natural marble slabs and would get covered under Chapter 68 of Customs Excise Tariff Act, 1985. In our view, the activity undertaken by the appellant from cutting of the marble blocks till the polishing of the same would remain classifiable under Chapter 25 and would fall under Heading 2515 1220 and is eligible for benefit of Notification No.4/2006. Our view is fortified by the decision of the Tribunal in the case of Oriental Trimex Ltd (supra). We find in that judgment, the co-ordinate Bench of the Tribunal was considering an identical issue for the period prior to 01.03.2006 and also post 01.03.2006. In that case also, Revenue was canvassing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nite Tiles are classifiable under sub-heading no. 6802 23 10 and 6802 93 00 of the Tariff respectively. 4. Ld. Advocate on behalf of the appellants submits that the entire period of demand of duty may be divided in two parts, as under: (A) From April, 2005 To February, 2006 (i.e. Prior to 1-3-2006) (a) The processes are cut-to-size rough marble slabs cut-to-size marble slabs (basically rectangular pieces of slabs) and polished marble tiles. (b) It is well settled by the various decisions that the processes do not amount to manufacture prior to 1-3-2006 :- (i) Associated Stone Industires (Kotah) Ltd. v. CCE, 1992 (60) E.L.T. 639, affirmed as reported at (2003) 10 SCC 771 (cutting into marble slabs and tiles). (ii) Rajasthan SEB v. Associated Stone Industries - (2000) 6 SCC 141 (cutting and polishing of stones into slabs). (iii) Aman Marbles Industries v. CCE - 2003 (157) E.L.T. 393 (S.C.) (Cutting into marble slabs). (iv) Bell Granito Ceramica Ltd. v. CCE, 2006 (198) E.L.T. 161 (S.C.) (Polishing of tiles). (v) Anmol Granites v. Union of India, 2006 (199) E.L.T. 769 (Raj.) cutting and polishing of granites into slabs. (vi) Calcutta High Court in the case of Oriental Tiles L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion out of Chapter 25. (g) It is stated that all the marble slab processors are availing concessional rate of duty under the said notification and the appellants should not be treated separately. (h) Without prejudice to the above contention, it is submitted that the demand of duty was not properly quantified and cum-duty benefit was not extended. 5. Ld. DR on behalf of the Revenue reiterates the findings of the Commissioner. He submits that the Commissioner classified the goods under Chapter 68 for the entire period. He submits that the process undertaken by the appellants is not merely cutting by saw. He submits that besides cutting a number of processes were being undertaken by them on the raw materials received by them. The process undertaken by them are sizing, surfacing, applying fibre paste, filling of resin, cutting in sizes, edge trimming, polishing, etc., and such processes are cleary beyond the process of cutting of crude or roughly trimmed marble. He also submits that Shri S.C. Anand, DGM (Operation) in his statement dated 6-7-2006 stated that the stone blocks are subjected to the processes like sizing and surfacing of the faces before being cut into slabs of unifor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal before the Hon'ble Supreme Court against the order of the Tribunal in the above case of Associated Stone Industries (Kotah) Ltd. (supra). The Hon'ble Supreme Court dismissed the appeal filed by the Revenue as reported in (2003) 10 SCC 771 (Collector of Central Excise, Jaipur v. Associated Stone Industries (Kotah) Ltd. held as under:- 2. We have gone through the judgment and order passed by the CEGAT. It cannot be held that cutting, edging, trimming, polishing and other processes on the marble slabs amount to a process of manufacture as it does not bring in a distinct product. Hence, this appeal is dismissed. There shall be no order as to costs. (c) The Hon'ble Supreme Court in the case of Aman Marble Industries Pvt. Lid. v. Collector of Central Excise, Jaipur reported in 2003 (157) E.L.T. 393 (S.C.) held that the cutting of blocks into marble slabs involves only sawing of the marble blocks and thereby does not bring into existence as distinct commodity so as to state that when such activity is completed a new substance has come into existence and marble will remain marble and, therefore, this activity does not amount to manufacture. (d) The Hon'ble Rajasthan High Court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... classifiable under Chapter 68 of the Tariff. We find that this issue came before the Tribunal in the case of Nitco Tiles Ltd. (supra), whereas the Tribunal held that the process of polishing, Resin coating and fibre glass reinforcement of marble slabs does not amount to manufacture. In the present case, the appellants are undertaking the similar processes. Therefore, the ratio of above decision is applicable, in the facts of the present case. In view of the above decision, the impugned order is set aside. The appeal is allowed. 8. The Commissioner observed that the case of Associated Stone Industries (Kotah) Ltd. (supra) and Aman Marbles Ltd. (supra) 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, of natural stone (including slate) 6802 21 10 Marble blocks tiles 11. It is clear that Note 1 of Chapter 68 specifically excluded the goods of Chapter 25. It is revealed from HSN Explanatory Notes, that Heading 6802 covers natural monumental of building stone (except slate), which has been worked beyond the stage of normal quarry products of Chapter 25. In the present case, Commissioner observed that the activity carried out by the appellants are worked beyond the stage of normal quarry products of Chapter 25. We are unable to accept the finding of Commissioner in view of the HSN Explanatory Notes of Heading 6802 as under:- The heading therefore covers stone which has been further processed than mere shaping into blocks, sheets or slabs by splitting, roughly cutting or squaring, or squaring by sawing (square or rectangular faces). The heading thus covers stone in the forms produced by the stone-mason, sculptor, etc. 12. It is not the case of department that the goods in question are monumental or building stone or the stone in the form produced by stone-mason, sculptor, etc. So, the classification of goods under Chapter 68 and demand of duty after 1-3-2006 are not justified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd are covered under sub heading No.6802.21 and hence merit classification under sub heading No.6802 2190. We find that the position seems to have been clarified by the Board vide Budgetory Circular dt.16.03.2012, wherein CBEC has specifically stated that the appropriate heading of polished marble slab shall be 6802 2190 only and the benefit of exemption Notification No.4/2006-CE would be admissible. The clarification issued by the Board would indicate that the appellant is eligible for the benefit of exemption Notification No.4/2006-CE extending the analogy of the said circular of CBEC, 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. 19. As regards leviability of duty on the processed agglomerated marble slabs for the period from 01.03.2006 to March 2008, we find that it is undisputed that job worker u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med on processed agglomerated marble slabs falling under Chapter 68 for the period March 2008 to 26.02.2010 is not sustainable under the law. As a matter of fact, post 26.02.2010, it is submitted by the ld. Counsel that the appellant has been discharging duty liability under the relevant Chapter 68. 20. As regards leviability of duty on the processed imported slabs, we find that the appellant is importing the marble slabs and does the process of fibre netting, resin filling, grinding, cutting and polishing as may be required. As already held by us hereinabove, by relying on the judgment of co-ordinate Bench of the Tribunal in the case of Oriental Trimex Ltd (supra), this activity would not amount to manufacture during the relevant period on the imported marble slabs. 21. In view of the foregoing, we are of the considered view that the duty liability raised and confirmed against the appellant in both appeals E/1328-1331/2010 and E/70/2012 is not sustainable and consequently the penalties imposed are also not sustainable. 22. As we have decided the entire issue on the merits of the case and relying upon the judicial pronouncements on identical issue, we have not recorded any findi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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