In the usual course if the assessee knocks the doors of the Writ Court without exhausting the alternative remedy of appeal available under the Act, no exception can be found with the Writ Court in rejecting the writ petition as not maintainable, but having regard to the peculiar facts and circumstances of the case, as in the present case when the appellants have approached the Writ Court with an alternative relief of seeking permission to file an appeal before the appellate authority, any finding recorded on the merits of the case which indeed relates to facts warrants interference.
Thus, it is clear that in the absence of power vested with the appellate authority to condone the delay, in the peculiar facts and circumstances of the case, the ends of the justice would be met in permitting the appellants to file an appeal instead of adjudicating the matter on merits subject to conditions as aforesaid.
For the reasons aforesaid, Writ appeal is allowed in part subject to payment of costs of Rs.1,00,000/- (Rupees One Lakh) payable by the appellants to the Chief Minister’s Covid-19 Relief Fund within a period of two weeks from today.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
This is an intra Court appeal filed under Section 4 of the Karnataka High Court Act, 1961, assailing the order of the learned Single Judge dated 24.5.2021 passed in W.P.No.10766/2020, whereby the writ petition filed by the petitioners/appellants has been dismissed.
2. Appellant No.1 is a private limited company and appellant No.2 is its Vice President. The appellants assert that appellant No.1 – company is engaged, inter alia, in the business of execution of civil works contracts, inter alia, numerous Government undertakings, such as the Bangalore Metro Rail Corporation Ltd., Bangalore Development Authority, etc. The appellants contend that in the course of business, appellant No.1 was awarded a contract by Tata Housing Development Corporation Ltd., for construction of residential buildings in the Promont Hilltop residential project in Bengaluru. As per the terms of the contract between the parties and in the course of constructing such residential buildings, appellant No.1 was required to manufacture concrete mix at the site of the construction itself for exclusive use in such construction activity. The appellants claim that the concrete mix was duly manufactured by appellant No.1 at the site of the said residential building and was transported to the building site from the batching plant which was merely adjacent to the project site. Thus, there was also no removal of the concrete mix as it was captively used at the site of the residential project itself.
3. The manufacture of concrete mix at project site for the purpose of construction was exempt from the levy of excise duty in terms of Notification No.4/1997-CE, dated 1.3.1997. It appears, similar notifications came to be issued under the Act. The latest of such notification which is applicable to the subject tax period is Notification No.12/2012-CE, dated 17.3.2012.
4. The relevant entry reads thus;
|Description of goods||Rate||Conditions|
|144.||38||Concrete mix manufactured at the site of construction for use in construction work at
5. Further, the CBIC has issued a Circular bearing No.368/1/98, dated 6.1.1998. The relevant clauses of the Circular are quoted hereunder for ready reference;
“5. A doubt has been raised as to whether concrete mix manufactured at site using large mechanical devices is a form of ready mix concrete.
6. The matter has been examined and concrete mix implies the conventional method of concrete production conforming to the ISI Standard 4561978, which is produced and used at the site of construction. It is this concrete mixture, manufactured at the site of construction which is fully exempt vide Notification No. 4/97-CE dt. 1.3.97(S.No. 51). It is thus clarified that ready are mix concrete or pre-mixed concrete, by its very nature, cannot be manufactured at the site of construction and is brought from the factory of manufacturer for use in construction.
7. In view of the above and keeping in mind the distinction between Ready Mix Concrete and “Concrete Mix” it is clarified that Ready Mix Concrete is an excisable product classifiable under sub-heading 3824.20, chargeable to duty at the appropriate rate whereas “Concrete Mix” manufactured at the site of construction for use in construction at such site, is fully exempt vide Notification No. 4/97-CE dt. 1.3.97-(S.No. 51).
8. All Pending disputes/ assessments on the issue may be settled in the light of these guidelines.”
6. While the position stood thus, a show cause notice was issued by the adjudicating authority alleging acts of deliberate omissions and commissions committed by the appellants i.e., suppression of the fact of manufacture of RMC by it. In response to the show cause notice, a reply was submitted by appellant No.1 denying the allegations reiterating that it was solely engaged in the manufacture of controlled concrete at the project site itself and as such, the said goods manufactured by it were exempt from excise duty under the Central Excise Act, 1944 (‘Act’ for short) as per the Circular dated 6.1.1998 issued by the CBIC, opposing the invoking of extended period of limitation. Considering the said reply, respondent No.1 passed the impugned order in original dated 14.6.2019 confirming all the proposals made in the show cause notice barring the proposal to confiscate the goods in question.
7. The appellants submit that immediately after the receipt of the impugned order in original, the same was forwarded to their Tax Consultant with instructions to prepare, finalize and file appeal before the first appellate authority within the time prescribed under Section 35 of the Act. It is the contention of the appellants that they were under the bona fide belief that the appeal was filed against the order in original; On receipt of the impugned letter dated 3.9.2020 from respondent No.2 directing them to immediately pay the duty, interest and penalty levied in the impugned order in original, non filing of the appeal by their Tax Consultant is said to have come to their knowledge. By that time, the extended period for filing the appeal before the first appellate authority had already expired. In such circumstances, the appellants had approached the Writ Court seeking for a writ or direction quashing the impugned order in original passed by respondent No.1 or alternatively permit the appellants to file an appeal before the first appellate authority with a direction to consider the same on merits without raising the issue of limitation.
8. The Writ Court on examining the explanation offered by the appellants for not filing the statutory appeal held that the reasons for delay caused explained must be construed as unreasonable. Thereafter, proceeded to examine the challenge made to the order in original said to have been passed without jurisdiction. Placing reliance on the decision of the Hon’ble Apex Court in the case of Larsen and Toubro Ltd. and another v. Commissioner of Central Excise, Hyderabad, reported in (2015) 15 SCC 455, observed that the appellants have set up a batching plant comprising of separate silos and concrete mixer with necessary pumps, piping system and control panel to manufacture concrete mix of required grades and quality as per the contractual terms and the said manufacturing process adopted by them is not different from the process involved for manufacturing RMC. Accordingly, upheld the classification of concrete mix manufactured by the appellants at the project site as RMC, rejecting the writ petition. Being aggrieved by the same, the appellants have filed this appeal.
9. Learned counsel appearing for the appellants would submit that the intention of the Union Government has always been to grant exemption from payment of duty on the concrete mix manufactured at the construction site for use in the construction which could be evidenced from the exemption notifications issued under the Act. Referring to CBIC Circular dated 6.1.1998 submitted that the concrete mix manufactured at the site of construction for using construction of such site is fully exempted. Thus, the aforesaid instructions issued by the CBIC is binding on the respondents – authorities, passing of the order in original directly contrary to the said circular suffers from infirmity and being without authority of law.
10. It was further submitted that the test propounded by the Hon’ble Apex Court in the case of Larsen and Toubro, supra, would indicate that the concrete mix manufactured at the site can be classified as RMC subject to considering the following characteristics; (1) the plant and machinery set-up for its manufacture, (2) the manufacturing processes involved, (3) the properties of the concrete mix and (4) the manner of delivery. The adjudicating authority has not examined the matter on all these aspects while arriving at the decision that the concrete mix manufactured at the site by appellant No.1 is RMC exigible to service tax. The appellants had prayed to remand the matter to the assessing officer setting aside the impugned order. Accordingly, seeks for setting aside the order passed by the Writ Court and to remand the matter to the adjudicating authority for fresh consideration to examine the process of manufacture of concrete mix in the light of the test propounded by the Hon’ble Apex Court in Larsen and Toubro, supra, vis-à-vis Circular dated 6.1.1998.
11. Learned counsel Sri.Jeevan J Neeralgi, appearing for the Revenue supporting the impugned order would submit that no writ petition is maintainable against the order in original filed beyond the limitation period prescribed under the statute having regard to the law enunciated by the Hon’ble Supreme Court in the case of Oil and Natural Gas Corporation Limited v. Gujarat Energy Transmission Corporation Ltd., and others, reported in (2017) 5 SCC 42 and Assistant Commissioner (CT) LTU, Kakinada and others v. M/s Glaxo Smith Kline Consumer Healthcare Ltd., reported in 2020 SCC Online SC 440. It was further argued that the learned Single Judge has rightly analyzed the material on record in the light of the judgment of the Hon’ble Apex Court in the case of Larsen and Toubro, supra, and rejected the writ petition, the same deserves to be confirmed by this Court.
12. We have carefully considered the rival submissions of the learned counsel appearing for the parties and perused the record.
13. It is not in dispute that the order in original was passed by the adjudicating authority on 14.6.2019 and the writ petition was filed by the appellants before this Court in the month of September 2020. The statute prescribes the limitation period of 60 days with the next 30 days as per the proviso i.e., totally 90 days in filing the appeal before the Commissioner of Central Excise (Appeals) against the order in original under Section 35 of the Act. The appellants having not availed the said statutory remedy, challenged the order in original impugned contending that they have manufactured the concrete mix at the project site which is exempt under Circular dated 6.1.1998 and no RMC was manufactured.
14. It is true that the appellants have not availed the alternative remedy of statutory appeal available under the Act and have filed the writ petition challenging the order in original, but the Writ Court not merely dismissed the writ petition as not maintainable but further proceeded to decide the matter on the merits of the case, thereby concluded that the concrete mix manufactured by the appellants at the project site classified by the adjudicating authority as RMC is justifiable. Ordinarily, we would not have interfered with the order of the Writ Court, in rejecting the writ petition as not maintainable, but in the facts and circumstances the finding given by the Writ Court on the merits would warrant interference since the factual aspects which are required to be analyzed by the first appellate authority and the CESTAT – the statutory authorities, cannot be adjudicated under the Writ jurisdiction.
15. A machinery is provided under the Act and the hierarchy of officers/authorities to analyze the factual aspects where the scientific analysis could be made with the assistance of the experts in the field which would finally come to the aid of the Court in deciding the matter on merits in appeal. Circumventing the same, if the assessee has approached a Writ Court, except in certain circumstances as enunciated in M/s Practice Strategic Communications India Private Limited v. The Commissioner of Service Tax, Bangalore, reported in ILR 2016 Kant. 4493, ordinarily no writ could be entertained. The relevant paragraphs 11, 13, 14, 15 reads thus;
“11. In view of the above referred decision of this Court, if this Court finds that the authority has passed the order without jurisdiction or has exercised the power in excess of the jurisdiction or by overstepping or crossing the limit of jurisdiction or that there is failure of justice, or it has resulted in gross injustice, it would be a case falling under the exceptional category for exercising the power under Article 226 of the Constitution and to interfere with the order of the original authority or the Appellate Authority, as the case may be. In order to find out as to whether the case is fit for exercising of the power under Article 226 of the Constitution, we may record that as per the decision of the Delhi High Court, Rule 5, on the basis of which the original authority has passed the order for levying of tax is held to be ultra vires to Section 67 of the Act. Further, the matter may fall in the realm of correct interpretation of Section 67 as to whether the expenses reimbursed by the consumer to the service provider, can be included for the purpose of computation of the service tax or not. We do not propose to express any further view on the said aspects in view of the order which we may pass hereinafter, but suffice it to observe that in view of the decision of the Delhi High Court, there was a strong case on merits on the part of the petitioner to be considered by the taxing authority. Unfortunately the decision of the Delhi High Court though was specifically brought to the notice of the original authority in the reply to the show cause notice, in the impugned order of the original authority, there is no reference whatsoever. Under these circumstances, we find that the case may fall in the exceptional category for exercise of the power under Article 226 of the Constitution.
13. In view of the aforesaid, we find that directions issued hereunder shall meet the ends of justice.
14. The impugned order of the First Appellate Authority as well as the order of the Tribunal are set-aside, on condition that the petitioner deposits the amount of 7.5% of the duty demanded and further pays cost of Rs.25,000/- to the respondent, within a period of one month from the date of receipt of certified copy of the order.
15. After the aforesaid condition is complied with, the matter shall stand restored on the file of the Commissioner (Appeals) with a further direction that he shall consider the appeal on merits in the light of the observations made by this Court in the above judgment and after giving opportunity of hearing to all concerned.”
16. Given the circumstances, in our considered view, it would be appropriate in the interest of justice and equity to permit the appellants to prefer an appeal before the first appellate authority i.e., Commissioner of Central Excise (Appeals) to consider the matter on merits without going into the issue of limitation subject to imposing costs and the petitioner depositing the amount as required, for preferring an appeal. We have arrived at this conclusion since the process of manufacture of concrete mix and RMC has to be investigated minutely keeping in mind the Circular dated 6.1.1998 issued by the CBIC. A line has to be drawn between the manufacturing process of these two, viz. concrete mix and RMC, merely for not utilizing the stone crushers and sand mill machine, no decision can be taken inasmuch as the manufacture of the product whether is concrete mix or RMC. There is no cavil on the proposition that RMC and concrete mix are two different commodities involving distinct process of manufacturing and that only concrete mix is eligible for the benefit of exemption notification. But what is the distinct process of manufacture has to be clearly discussed and reasons are to be assigned for such distinct process. Further, the manner of delivery also assumes significance. The adjudicating authority appears to have proceeded to analyze on the plant and machinery set up for its manufacture in detail, but not in the light of the notification issued by the CBIC/Union Government vis-à-vis the dictum laid down by the Hon’ble Apex Court in Larsen and Toubro, supra, in its entirety.
17. In the usual course if the assessee knocks the doors of the Writ Court without exhausting the alternative remedy of appeal available under the Act, no exception can be found with the Writ Court in rejecting the writ petition as not maintainable, but having regard to the peculiar facts and circumstances of the case, as in the present case when the appellants have approached the Writ Court with an alternative relief of seeking permission to file an appeal before the appellate authority, any finding recorded on the merits of the case which indeed relates to facts warrants interference.
18. Thus, it is clear that in the absence of power vested with the appellate authority to condone the delay, in the peculiar facts and circumstances of the case, the ends of the justice would be met in permitting the appellants to file an appeal instead of adjudicating the matter on merits subject to conditions as aforesaid.
19. For the reasons aforesaid, we pass the following:
i) Writ appeal is allowed in part subject to payment of costs of Rs.1,00,000/- (Rupees One Lakh) payable by the appellants to the Chief Minister’s Covid-19 Relief Fund within a period of two weeks from today.
ii) The order dated 24.5.2021 passed by the learned Single Judge in W.P.No.10766/2020 is set aside.
iii) Liberty is granted to the appellants to file an appeal before the Commissioner of Central Excise (Appeals) – first appellate authority within a period of four weeks from the date of receipt of certified copy of the order.
iv) In the event of filing such an appeal, subject to pre-deposit as required under law, the appellate authority shall consider the matter on merits without raising objections on the issue of limitation and decide the same on merits in accordance with law in an expedite manner.
v) All the rights and contentions of the parties are left open.
vi) This order being rendered in the peculiar facts and circumstances of the case, the same shall not be treated as a precedent.