Gem Granites Vs Commissioner of Central Excise (CESTAT Bangalore)
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Bangalore allowed the appeal filed against an Order-in-Original dated 26 March 2013, which had confirmed customs and central excise duty demands on a 100% Export Oriented Unit (EOU) engaged in the manufacture of granite products. The Revenue alleged that duty-free imported and indigenously procured capital goods were used for quarrying granite blocks at the appellant’s quarry in Balakundi, Karnataka, instead of being used for manufacturing operations in the bonded manufacturing premises, thereby violating the conditions of Notification No. 13/81-Cus. and Notification No. 123/81-C.E. Duty demands of Rs. 6.86 crore under the Customs Act, 1962 and Rs. 1.22 crore under the Central Excise Act, 1944 were consequently confirmed.
The appellant submitted that its original EOU manufacturing unit was located in Tamil Nadu and that Balakundi Village was subsequently included as an additional manufacturing location under its Letter of Permission (LOP). The quarry site was declared a warehousing station, a private bonded warehouse licence and an in-bond manufacturing licence were granted, and the Department had been informed about the transfer and use of capital goods at the quarry. The appellant also stated that duty-free capital goods were transferred under bond with departmental permission, granite blocks excavated at the quarry were processed into slabs and transferred under bond to the Tamil Nadu unit for manufacture of export products, while some polished slabs were exported directly from Karnataka. Regular statutory returns, including ER-2 and CT-3 documentation, were filed throughout the relevant period. The appellant argued that quarrying formed part of “manufacture” under the applicable EXIM Policy, that mining was specifically included within the definition of manufacture, and that quarrying was an integral activity for producing exportable granite products. It further contended that the expression “for the purpose of manufacture” in the exemption notifications covered activities necessary for manufacture and was not confined to machinery directly used in the manufacturing process. The appellant also challenged the duty demands on the ground of limitation, submitting that the Department had been fully informed of all activities and permissions.
