Full Judgment Text
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CASE NO.:
Appeal (civil) 3139 of 2002
PETITIONER:
M/s Continental Foundation Joint Venture Sholding, Nathpa H.P.
RESPONDENT:
Commissioner of Central Excise,Chandigarh-I
DATE OF JUDGMENT: 29/08/2007
BENCH:
Dr. ARIJIT PASAYAT & S.H. KAPADIA
JUDGMENT:
J U D G M E N T
CIVIL APPEAL NO.3139 OF 2002
[With C.A. No.3504 of 2002, C.A. No.3336 of 2002]
Dr. ARIJIT PASAYAT, J.
1. These appeals involve identical question of law and are,
therefore, disposed of by this common judgment. The
controversy relates to the financial year 1997-98. Post 1997-
98 the tariff entry provides that the rate is nil. The basic facts
are noted in the appeal filed by Continental Foundation Joint
Venture-the appellant in Civil Appeal No.3139 of 2002.
2. The appellant M/s Nathpa Jhakri Power Corporation (in
short ’NJPC’) is a Joint venture between the Government of
India and Govt. of Himachal Pradesh, set up for the purpose of
construction of a power-project between the towns of Nathpa-
Jhakri in Himachal Pradesh known an Nathpa Jhakri Power
Corporation funded by the World Bank. The civil work relating
to the project was allotted to three construction companies viz.
M/s Continental Foundation Joint Venture (in short ’CFJV’),
M/s Nathpa Jhakri Joint Venture (in short ’NJJV’) and M/s
Jai Prakash Hyundai Consortium, (in short ’JPHC’). The
agreement was entered into by M/s NJPC and the
construction companies to provide inter alia ’mix concrete’ for
execution of various items of work under the contract.
3. The Commissioner of Central Excise, Chandigarh issued
a show cause notice dated 20.1.1999 to all the above parties
alleging that the construction companies employed by M/s
NJPC were manufacturing Ready Mix Concrete (in short ’RMC’)
on which no central excise duty is being paid. Since the said
RMC falls under Chapter Heading No.3824.20 of the Schedule
to the Central Excise Tariff Act, 1985 (in short ’Tariff Act’) and
is subject to Central Excise duty under Central Excise Act,
1944 (in short the ’Act’), duty is payable. All the three parties
are adopting the same method of manufacture of RMC for
which the rock is blasted from the designated quarry of M/s
NJPC. It is transported to the crusher and crushed to the
specified sizes and specific quantity at the project site. Some
aggregate, cement and sand are also produced from the
crushing plant set up at the site. Some natura1 sand is also
used. The aggregate and sand are transported and stored in
bins adjacent to the automatic batching plant. The cement
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purchased from the market is stored in the cement silons at
the site. The batching plant is an automatic plant which
regulates and delivers the specified sizes and quantities of
aggregate, sand and cement into the mixing drums through
the built- in-conveyor. The admixture for water reduction or
air entraining is incorporated in the concrete as per the
approved mix design given by the NJPC. The whole process is
fully automatic and is electronically controlled. The concrete of
approved mix design and the specified quantity is
manufactured in the batching plant strictly in accordance with
IS: 456-1978 as stipulated in the contract with M/s NJPC. The
concrete so produced is transported by transit mixers upto the
location of placement and is placed at the specified location by
concrete pumps or placers before the setting time of concrete,
which varies depending upon the type of cement used. Noticee
companies are manufacturing RMC but with some motive,
they are naming it as mixed concrete to evade the central
excise duty. There is a difference between the process and
method of manufacture of RMC provided in the Bureau of
Indian Standards (in short ’BIS’) literature under IS:
4926/1976 and the Board’s letter No.368/l/98-CX dated
6.1.1998. In this Circular of the Board, the process of
manufacture of RMC is spelt out and it is clarified that RMC is
a dutiable product. The matter was referred to the BIS who
vide their letter dated 23.10.1998 reported that the query
raised by the department vide their letter dated 9.7.1998 was
considered by the Concrete Sub Committee and its views are
as follows:
"It is agreed that in so far as the process
of manufacturing the concrete is involved, the
process described in the letter of Central
Excise is similar to the process given in
IS;4926 specification for "Ready Mix
Concrete’".
4. Considering the reply of the notices, the Commissioner of
Central Excise, Chandigarh-I confirmed the amounts of duty
and also imposed penalty in terms of Rule 209A of the Central
Excise Rules, 1944 (in short the ’Rules’). One of the stands
taken by the appellant was that the extended period of
limitation under Section 11A of the Act was not available.
There were doubts raised and, in fact, at different points of
time, circulars have been issued. This plea was turned down
by the adjudicating authority with the following observations:
"Based on above discussions, it is evident that
Mix Concrete manufactured and used at the
site of construction is in fact Ready Mix
Concrete and M/s NJPC alongwith three
construction companies have concealed its
nomenclature with an obvious intention to
escape the duty on the said Ready Mix
Concrete. M/s NJPC have apparently abetted
the contravention of non payment of Duty,
they are therefore, liable for penal action the
said abetment."
5. In appeal, apart from the other challenges the plea
relating to non-applicability of the extended period of
limitation was also urged. The Tribunal did not accept the
contention with the following observations:
"16. Another argument is about the time bar
of demands. It is contended that, in view of
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the Board Circular dated 6.1.1998, since they
were making the concrete at site and as per
the standards prescribed in IS: 456-1978,
they were under a bonafide belief that what
they were manufacturing was mix concrete
and not the RMC. The contention of bonafide
belief is also advanced on their eligibility to
the exemption under Notification No.4/97-CE
dated 1.3.97. We find little force in this
submission. A specific entry was made in the
Central Excise Tariff for RMC under Heading
3824.20 with effect from 1.3.1997. The
exemption under the notification was
provided to mix concrete made at site and not
to the RMC. None of the appellants sought
any clarification from their jurisdictional
central excise authorities or obtained any lea1
opinion as to the exigibility of their product,
or its eligibility to the exemption under this
notification. The Board Circular dated
6.1.1998 was issued much after the RMC was
brought under the excise net. In the face of
these facts, the plea of bonafide belief by the
appellants is not supported by the evidence
on record. Another contention raised is that
the appellants could not have had any
intention to evade payment of duty, since the
contract between the applicants and the
Power Corporation specifically provided that
any additional cost that was incurred as a
result of any change in legislature or States
statutes, regulations or by laws would be paid
by the Power Corporation. It is contended
that, where the excise duty is reimbursed by
the buyer, there could not be any intention to
evade payment of duty. It is observed that no
such plea is raised before the adjudicating
authority. The Power Corporation is also an
appellant in this case and there is no plea of
any such commitment on their behalf in their
appeal. There is no evidence that the stated
clause in the contract would bind the Power
Corporation to reimburse the appellants even
for the duty liability fastened on to the
appellants on the ground of suppression and
misrepresentation etc. and not on account of
any change in legislation, regulation or by
laws. The plea of bonafide belief is, therefore,
rejected. The appellants are also claiming the
benefit of modvat credit on the input material
but this plea is also not raised before the
original authority. However, in the interest of
justice, they could be given an opportunity to
establish their case before the original
authority for eligibility to the modvat credit in
respect of the duty paid on the input material
used in the manufacture of RMC with the
documentary proof."
6. Similar view was expressed by the CEGAT in other
appeals which is the subject-matter in the other appeals.
7. Mr. Joseph Vellapally, learned senior counsel for the
appellant submitted that there were various circulars
operating at different points of time. There was no clarity or
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unanimity in the views expressed by the authorities
themselves. In fact, correctness of the judgment by CEGAT in
Continental Foundation Joint Venture’s case (supra) was
doubted and the matter was referred to larger bench. In Chief
Engineer Ranjt Sagar Dam v. Commissioner of C.Ex.,
Jalandhar (2006 (198) E.L.T. 503 (Tri.-LB) larger bench of the
Tribunal has held that the view expressed in Continental
Foundation Joint Venture’s case (supra) was not the correct
view.
8. In response, learned counsel for the respondents
submitted that the circulars dated 1.2.1996, 23.6.1997 and
6.1.1998 have no relevance and the judgment in Chief
Engineer Ranjt’s case (supra) does not reflect the correct
position.
9. We are not really concerned with the other issues as
according to us on the challenge to the extended period of
limitation ground alone the appellants are bound to succeed.
Section 11A of the Act postulates suppression and, therefore,
involves in essence mens rea.
10. The expression ’suppression" has been used in the
proviso to Section 11A of the Act accompanied by very strong
words as ’fraud’ or "collusion" and, therefore, has to be
construed strictly. Mere omission to give correct information
is not suppression of facts unless it was deliberate to stop the
payment of duty. Suppression means failure to disclose full
information with the intent to evade payment of duty. When
the facts are known to both the parties, omission by one party
to do what he might have done would not render it
suppression. When the Revenue invokes the extended period
of limitation under Section 11-A the burden is cast upon it to
prove suppression of fact. An incorrect statement cannot be
equated with a willful misstatement. The latter implies making
of an incorrect statement with the knowledge that the
statement was not correct.
11. Factual position goes to show the Revenue relied on the
circular dated 23.5.1997 and dated 19.12.1997. The circular
dated 6.1.1998 is the one on which appellant places reliance.
Undisputedly, CEGAT in Continental Foundation Joint
Venture case (supra) was held to be not correct in a
subsequent larger Bench judgment. It is, therefore, clear that
there was scope for entertaining doubt about the view to be
taken. The Tribunal apparently has not considered these
aspects correctly. Contrary to the factual position, the CEGAT
has held that no plea was taken about there being no
intention to evade payment of duty as the same was to be
reimbursed by the buyer. In fact such a plea was clearly
taken. The factual scenario clearly goes to show that there
was scope for entertaining doubt, and taking a particular
stand which rules out application of Section 11A of the Act.
12. As far as fraud and collusion are concerned, it is evident
that the intent to evade duty is built into these very words. So
far as mis-statement or suppression of facts are concerned,
they are clearly qualified by the word ’wilful’, preceding the
words "mis-statement or suppression of facts" which means
with intent to evade duty. The next set of words ’contravention
of any of the provisions of this Act or Rules’ are again qualified
by the immediately following words ’with intent to evade
payment of duty.’ Therefore, there cannot be suppression or
mis-statement of fact, which is not wilful and yet constitute a
permissible ground for the purpose of the proviso to Section
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11A. Mis-statement of fact must be wilful.
13. That being so, the adjudicating authorities were not
justified in raising the demand and CEGAT was not justified in
dismissing the appeals.
14. On the ground of adjudication beyond the normal period
of limitation and non-availability of the extended period of
limitation, the appeals are allowed. No costs.