Abhishek Exporters Vs Commissioner of Central Excise & CGST (CESTAT Delhi)
No demand of excise duty on cutting marble blocks as it do not amount to ‘Manufacture’: CESTAT Delhi
Conclusion: Entire central excise duty demand was set aside, permitted adjustment of excise duty already paid against the customs duty liability, quashed the confiscation of marble blocks and redemption fine, and set aside all penalties, holding that the Department had full knowledge of the assessee’s activities and that the conditions for invoking extended limitation or penal provisions were not satisfied.
Held: Assessee-100% Export Oriented Unit (EOU), had imported white marble blocks duty-free under Notifications No. 53/97-Cus. and 52/2003-Cus. and also procured indigenous serpentine stone. While serpentine blocks/slabs/tiles were predominantly exported, marble slabs and tiles manufactured from imported marble blocks were cleared into the Domestic Tariff Area (DTA). Department alleged that exports of serpentine products could not satisfy the export obligation relating to duty-free imported marble blocks, denied the customs exemption, demanded customs duty by invoking the extended limitation period, confirmed central excise duty on DTA clearances, ordered confiscation of marble blocks with redemption fine, and imposed penalties. Assessee contended that the Department was fully aware of its activities through statutory returns, export supervision, and DTA permissions, that cutting marble blocks into slabs did not amount to manufacture during the relevant period, and that excise duty already paid on DTA clearances should be adjusted against any customs liability. Assessee argued that no suppression of facts existed since imports, exports and DTA clearances were regularly disclosed through ER returns, export documents certified by Central Excise officers and permissions obtained from the Development Commissioner. It submitted that the process of cutting or sizing marble blocks into slabs or tiles did not constitute manufacture under section 2(f) of the Central Excise Act during the relevant period and, therefore, no excise duty was leviable. It further contended that even if customs duty became payable for non-fulfilment of export obligations, recovery could be made only within the normal limitation period, the B-17 bond could not enlarge the statutory limitation, excise duty already paid on DTA clearances should be adjusted against customs duty, and confiscation and penalties were unsustainable as there was neither suppression nor physical availability of the goods. Revenue contended that exported serpentine products were not similar to marble products manufactured from imported marble blocks and, therefore, the export obligation under the EOU scheme remained unfulfilled. It argued that customs duty was recoverable on the imported marble blocks, the extended period of limitation was invocable, excise duty was payable on DTA clearances, adjustment of duties was impermissible, and confiscation and penalties were justified. Tribunal held that serpentine stone and marble were commercially distinct products and exports of serpentine products could not fulfil the export obligation attached to duty-free imports of marble blocks. Consequently, assessee was liable to customs duty on imported marble blocks as the exemption conditions under Notifications No. 53/97-Cus. and 52/2003-Cus. stood violated. However, Department was fully aware of the assessee’s imports, exports and DTA clearances through statutory records, export supervision and permissions; therefore, suppression of facts was absent and the extended period of limitation could not be invoked. The B-17 bond could not be relied upon to bypass the statutory limitation provisions. Tribunal further held that, during the relevant period, cutting or sawing marble blocks into slabs or tiles did not amount to manufacture under section 2(f) of the Central Excise Act. Accordingly, no central excise duty was leviable on DTA clearances. Since assessee had already paid excise duty on such clearances, the amount was directed to be adjusted against the customs duty payable for the normal limitation period. It was also held that confiscation of marble blocks was unsustainable because the imported goods had already been consumed and were no longer available for confiscation, besides there being no prohibited import or violation attracting sections 111(d) or 111(o) of the Customs Act. In the absence of suppression or intent to evade duty, redemption fine and all penalties were also liable to be deleted.
1. Customs Appeal Nos. 51199 of 2025, 51057 of 2025, 51124 of 2025, 51060 of 2025, 51062 of 2025 and 51063 of 2025 have been filed against the impugned Order-in-Original no. UDZ-EXCUS-0000-COM-47&48-2024-25 dated 28.01.2025.
