The Hon’ble Supreme Court in the case of M/s Larsen & Toubro Limited v CCE held that the particular product which has been manufactured by the assessee for captive consumption will only be considered for any kind of exemption if covered by any exemption notification. The assessee, on the manufacture of any other product which is very similar to that particular product will not be able to claim exemption as the exemption notification should be given strict interpretation.
Facts of the Case
The Assessee was constructing its own cement plant for which they required Concrete Mix, which was prepared with the help of machinery installed there and the said Concrete Mix was captively consumed in the construction of the said cement plant by the Assessee. They did not pay any central excise duty on this product due to Notification No. 4/1997-CE dated March 01, 1997, which exempted Concrete Mix from payment of excise duty.
The Central Excise Officers visited the site and found that the L&T are manufacturing ready mix concrete and not concrete mix. According to the Assessee concrete was prepared at the site and was consumed captively, it had to be treated as Concrete Mix and, therefore, was eligible for exemption under the said Notification.
Order of Commissioner
According to the Ld. Commissioner the product was ready mix concrete and not concrete mix. He reasoned that what distinguishes ready mix concrete from concrete mix is the manner in which it is manufactured, the high degree of precision and stringent quality control over the mix of ingredients.
Judgment of the Hon’ble Tribunal
The Hon’ble CESTAT while delivering its Judgment distinguished between Ready Mix Concrete and Concrete Mix explaining that the same were understood differently in trade and commerce. The manner in which the product was manufactured by the Assessee, was clearly Ready Mix Concrete. It was pointed out that the facility put up by the Assessee involved various machines coupled with sophisticated process which was indicative of the fact that it was for the manufacture of Ready Mix Concrete and the only reason for manufacture thereof at site was that the larger quantities of Ready Mix Concrete which was required by the Assessee. It is the high degree of precision and stringent quality control observed in the selection and processing of ingredients, namely, aggregates, cement, sand, additives and water, which made the product as Ready Mix Concrete in contra-distinction with Concrete Mix. Levy of excise duty, was maintained.
Contentions of the Assessee
The ld. Counsel for the Assessee submitted that product-wise, there is no difference between ready mix concrete and concrete mix. Since the Assessee was manufacturing concrete mix at the site for self-use in construction of cement plant, it was not manufacturing ready mix concrete. For this reason, CBEC in Circular dated January 06, 1998, has explained that by its very nature, ready mix concrete cannot be manufactured at site. Traditionally, articles manufactured at the site of construction have been exempted from excise duty with respect to goods manufactured at the site of construction. For this reason, and also the fact that the product-wise there is no difference between ready mix concrete and concrete mix. The Reliance was made on CCE, Belapur v. Simplex Infrastructure Ltd where it was held that ready mix concrete produced at the site of construction is entitled to exemption.
Contentions of the Revenue
The ld. Counsel for the Revenue contended that Concrete Mix and Ready Mix Concrete were two different products which was clear from the Chapter Note entries itself. He further submitted that it is the process by which concrete is mixed that determines as to whether it is Concrete Mix or Ready Mix Concrete and consumption of the material at site was irrelevant. According to him, the process of Concrete Mix was somewhat crude in contra-distinction to the sophisticated process by which Ready Mix Concrete of a comparatively very high quality is produced. Referring to the order of the Tribunal, he pointed out that since in the instant case, high quality Ready Mix Concrete was required for the construction of the highly advanced quality cement plant, that too in large quantity.
Held by the Hon’ble Supreme Court
The Hon’ble Supreme Court observed that the case which is sought to be set up by the assessee, namely, Concrete Mix and Ready Mix Concrete are one and the same product, was never the case of the assessee. On the contrary, in reply dated June 12, 1998 to the letter dated May 18, 1998 issued by the Assistant Commissioner of Central Excise, Anantpur, the explanation given by the assessee was that the product produced at the site is only concrete mix, which is different from RMC; and that RMC cannot be manufactured at the site of construction; that chemicals/retarders are not used in site mix concrete. Further, from Order-in-original as well as order passed by the Tribunal, it was observed that the assessee always accepted that what was being produced was Ready Mix Concrete and claimed exemption only on the ground that it was manufactured at the site of construction and captively used.
Further it was observed that it is the process of mixing the concrete that differentiates between Concrete Mix and Ready Mix Concrete as it is found, that the assessee installed two batching plants and one stone crusher at site in their cement plant to produce Ready Mix Concrete. The batching plants were of fully automatic version.
The question is as to be considered that whether Ready Mix Concrete manufactured and used at site would be covered by notification. The Answer was given in the negative as Notification No. 4 dated March 01, 1997 exempts only ‘Concrete Mix’ and not ‘Ready Made Mixed Concrete’ and both are not the same.
Therefore, the assessee was producing Ready Mix Concrete and the exemption notification exempts only Concrete Mix and the two products are different. Also, the exemption notification should be given strict interpretation and in case of doubt, benefit has to be given to the Revenue.