Judgment:
1. The appellants are aggrieved by the order of the Collector of Central Excise (Appeals) upholding the order of the Assistant Collector of Central Excise, Udaipur whereby the classification list filed by the appellants for marble slabs was approved under Sub-heading 2504.21 and marble crazy was approved under sub-heading 2504.90 of the Schedule to the CETA, 1985 and held leviable to duty as against the claim of the appellants that the goods wee not excisable items and not chargeable to duty.
2. The brief facts of the case are that the appellants herein were holding a Central Excise L4 Licence for manufacture of marble slabs for which they had filed classification lists claiming classification of the goods under CET Sub-heading 2504.21. They were paying excise duty @ Rs.10.50 per square meter chargeable on marble slabs. On 20.11.90 they submitted a letter to the Assistant Collector stating therein that cutting of blocks into slabs was not a process of manufacture and, therefore, their product "marble slabs" was not chargeable to duty.
They cited the orders of the Tribunal in the case of Sangamermer India P.Ltd. vs. Collector of Central Excise reported in 1989 (42) ELT 725 and CCE vs. Jain Marbles reported in 1989 (42) ELT 716, wherein it was held that no duty of excise was leviable on slabs or titles as the process of cutting of blocks and slabs into tiles is not a process of manufacture. They submitted a classification list claiming that marble slabs and marble crazy are not liable to duty and they paid duty under protest in terms of Rule 233B of the Central Excise Rules, 1944. Since the Department was of the view that the case law cited by the appellants pertained to the period when marble slabs were being classified under TI 68 of the Schedule to the CESA, 1944 prior to the introduction of the new tariff, and since the definition of excisable goods had been amended so as to mean "goods specified in the Schedule to the CETA 1985 as being subject to a duty of excise" and since tiles and slabs were both specified in such Schedule, a show cause notice was issued to the appellants on 6.8.91 proposing vacating of the protest and proposing approval of classification list by classifying marble slabs and marble crazy under CET Heading 2504.21 and 2504.90 respectively, as classified in the earlier classification list submitted by them. The Assistant Collector held that conversion of marble blocks into marble slabs amounted to manufacture as both items were known in the trade under different and distinct names, covered under different Headings of the Tariff and approved the classification list by classifying the marble slabs and marble crazy as indicated above. The lower appellate authority upheld the order of the Assistant Collector holding that the "manufacture of marble slabs and tiles is an intricate process involving sawing, cutting of edges, trimming, polishing and other processes and the end product is totally different and distinct from the raw materials and characteristics, end use and marketability." Hence this appeal.
3. We have heard Shri L.P. Asthana, learned Counsel for the appellants and Shri H.K. Jain, learned SDR for the Revenue and perused the records and the various cases cited before us. There are a large number of decisions of the Tribunal dealing with the question as to whether the cutting of marble blocks into marble slabs amounts to manufacture so as to give rise to duty liability thereon. These decisions are:Kotah Stone P.Ltd. vs. CCE In the order cited at S1.No.1 above, it has been held by the Tribunal that the marble slabs which are merely sawn from marble blocks cannot be called a distinct commodity and the end product which would come into existence after the completion of the activity would still be called marble - thus the original identity continues despite undergoing several processes. This decision was followed in the cases enumerated at S1.No.2, 3, and 4 above. In the case enumerated at S1.No.5, the Hon'ble Rajasthan High Court has also taken the same view. In the case enumerated at S1.No.6, the majority view of the Tribunal was that the process of cutting, edging, trimming and polishing of marble blocks to form marble slabs and marble tiles does not amount to manufacture and the Tribunal's order at S1.No.7 follows this decision.
4. The contention of the Department is that the marble slabs are specifically included in CET Sub-heading 2504.21 and, therefore, they become excisable goods, and the concept of manufacture and marketability are not the determining factors when goods are covered by specific entry in the CETA, 1985, as held by the Tribunal in the case of Safari Industries vs. CCE reported in 1991 (54) ELT 308 and Garware Plastics and Polyesters Ltd. Vs.CCE reported in 1993 (67) ELT 670.
However, as held by the Apex Court in the case of Moti Laminates P.Ltd. vs. CCE, Ahmedabad reported in 1995 (76) ELT 241, a reference to a particular item in the Atriff Schedule is not decisive and it is always open to an assessee to prove that a particular item, even though specified in the Schedule, would not be subjected to duty either because it is not goods or it is not manufactured or it is not capable of being marketed. The amendment to the definition of 'manufacture" in Section 2(f) of the Central Excises Act, 1944 providing that the "manufacture includes any process - (i) ..... (ii) which is specified in relation to any goods in the Section or Chapter Notes of the Schedule to the CETA, 1985 as amounting to manufacture" does not alter the legal position in view of the fact that neither the relevant Section viz. nor Note to Chapter 25 specify the process of cutting of marble blocks into marble slabs as amounting to manufacture.
Therefore, it follows that the legislature has not utilised Clause (ii) of Section 2(f) of the Central Excises Act, 1944 by specifying that this particular process amounts to manufacture. Hence the decisions rendered in the context of the Schedule to the erstwhile Central Excise Tariff would continue to be relevant even in the context of the present Tariff. These decisions have consistently held that the process of cutting of marble slabs from marble blocks does not amount to manufacture. Therefore, one of the relevant tests for determining excisability has not been satisfied. No doubt, the goods are marketable; however, this is not sufficient for the purpose of holding that they are excisable, in view of the clear finding of the Hon'ble Supreme Court in para 9 of the Moti Laminates judgment (supra) holding that duty is attracted not because an article is covered in any of the items or it falls in the residuary category but it must further have been produced or manufactured and it is capable of being bought and sold (emphasis supplied). The judgment of the Hon'ble Calcutta High Court in the case of Union of India vs. Bata India Ltd. reported in 1993 (68) ELT 756 holding that the goods specified liln the Tariff are excisable unless shown to be non-marketable, does not, therefore, advance the case of the Department. It is also pertinent to note that the High Court has held that the manufacture or production of goods is the taxable event and the sheets produced by the respondents before the High Court constitute goods - in other words, the High Court held that the goods satisfied the test of manufacture.
5. We note that the factual position as to whether the appellants undertook only sawing or cutting of blocks into slabs, or whether any further processes such as trimming, polishing, etc. were carried out, is disputed - on the one hand, the lower appellate authority has held that the manufacture of marble blocks is an intricate process involving sawing, edge cutting, trimming, polishing and other processes while on the other hand, the appellants categorically asserted in the appeal memorandum that the only process carried out by them was cutting/sawing of blocks into slabs. This factual dispute will not affect the legal position, in view of the Tribunal's order in the case of Kotah Stone Pvt.Ltd and Tirupati Granites Ltd. (supra) holding that the process of cutting, edging, trimming and polishing of marble blocks to form marble slabs does not amount to manufacture.
6. In the light of the above discussion, and following the ratio of the judgments of the Tribunal listed at S1.No. 1 to 7 in para 3 of the order (page 3-4) and the judgment of the Hon'ble Supreme Court in the case of Moti Laminates (supra), we hold that the goods in question are not excisable. Accordingly, we set aside the impugned order and allow the appeal with consequential relief, if any, due to the appellants in accordance with law.
7. With due respects to the Hon'ble Member (Judicial), my views and orders are as follows: 8. I observe that in this case admittedly, the appellants were holding a Central Excise licence for manufacture of marble slabs falling u/s.h.
2504.21 and submitted a C/List which was approved accordingly. However, subsequently, they submitted a letter dated 28.11.90 claiming that no process of manufacture was involved in producing marble slabs and their product was not excisable. This contention was not accepted by the Asstt.Collector on the ground that the case-law cited by the appellants related to the period of old tariff and the situation has changed since introduction of the new tariff. I consider that the there is a lot of substance in the Department's contention in this regard as after amendment of Section 2(f) and introduction of new tariff, the legal position has changed. I find that the tariff as it stood during the relevant period included tariff heading 2504 which reads as follows:Heading Sub-Heading Description of goods25.04 Marble 9. In the present case, the declaration recorded and filed by the appellants in the classification list shows the factory operated with power/D.G. Set and the sub-heading 2504.21 specifically covers slabs in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power where Electromotive Force (EMF) used exceeds ten horse power. The horse power has not been indicated in the C/List but the very fact that they were earlier classifying their product and paying duty accordingly and no dispute has arisen in this particular aspect, shows that this criteria as mentioned in the tariff sub-heading stands duly fulfilled. There is however is, a controversy as to the condition in which the goods were ultimately cleared at the factory gate; That is whether they were regular or irregular size of unpolished and unglazed as claimed. Whereas the Collector (Appeals) has observed that the process of manufacture involves a series of processes with sophisticated machines and the end-product is not the same as the raw material but a different commodity the appellants have vehemently denied the contention of the ld. Collr. (Appeals). These are a factual aspect and could be ascertained by further verification if necessary.
(SIC) In this respect, Chapter Note (4) of Chapter 25 is important which reads as follows: 4. In relation to marble slabs of heading No.25.04, if a manufacturer clears irregularly shaped marbles, he shall have the option to discharge the duty on the slabs by treating one cubic metre of marble blocks as equivalent to 30 square metres of marble slabs, the volume of the blocks being determined with reference to the maximum length, width and height of the block.
Therefore, it is immaterial whether the item cleared was of a regular or irregular shape.
10. From our point of view what is to noted is that sub-heading 2504.21 itself talks of manufacture and use the words 'in or in relation to the manufacture' and again Chapter Note 4 specifically refers to manufacture of marbles. therefore, they the new tariff itself recognised that a process of manufacture involved in product of marble blocks slabs, tiles and other such products which were required to be considered as excisable goods unless and until it could be shown that in a particular case, the material had not yet reached a marketable stage. Insofar as marketably of blocks, slabs and tiles is concerned, these are very wellknown commodities and it is common knowledge that there are large markets in various cities in which marble slabs and tiles etc. are regularly traded and it can hardly be said that such slabs and tiles are not marketable commodity known to the market.
Therefore, if the appellant contention was that his products were not classifiable under heading 25.04 it was required to be shown that they had not reached the marketable stage. This has however, not been done.
It also appears that the words 'blocks, slabs, tiles etc.' have been rather loosely used in the proceedings. They are apparently distinct and distinguishable in accordance with the tariff sub-headings and are also considered as distinct commodities in the trade. Therefore, one has to be careful in the use of the terms but unfortunately the words 'slabs, tiles and crazy' have been used by both the side without realising that these three will constitute three distinct categories from excise as well as commercial point of view. In my opinion, the Department's interpretation of Tariff is correct and the case-law pertaining to the earlier period when the legal position was different and the judgements and the orders were passed in a different context do not advance the cause of the appellants. However, regarding factual position in the (SIC) (appellants) case is not very clear and the orders have been passed ex parte by the Lower Authorities both at the Asstt. Collector and Collector (Appeals) stage (apparently due to the appellants failure to appear before them); therefore, I consider that it will be better in the interest of both the sides and The justice, that the impugned orders are set aside and the matter is remanded for de novo consideration in accordance with law with the direction that factual aspect may be re-examined and the orders may be passed after giving and he opportunity to the appellants to be heard in the matter.
It is ordered accordingly.
In view of the difference opinion between Hon Member (Judicial) and the Vice President, the matter is submitted to the Hon'ble President for reference to a Third Member on the following point: "Whether in view of the findings of the Hon'ble Member(J), the appeal is required to be accepted or in view of the observations of the Vice President, the matter is required to be remanded." "Whether in view of the findings of the Hon'ble Member(J), the appeal is required to be accepted or in view of the observation of the Vice President, the matter is required to be remanded." 2. The factual backdrop of the reference need not be repeated since it is dealt in extenso by the Hon'ble Member(J) and Hon'ble Vice-President in their respective decisions recorded above.
3. Shri L.P. Asthana, learned counsel for the appellants has placed strong reliance on the decisions cited in para 3 of the order recorded by the learned Member(J) in which it is held that marble slabs which are merely sawn from marble blocks cannot be called distinct commodity and such process does not amount to manufacture. The learned counsel for the appellants placed further reliance on the Supreme Court judgment in Rajasthan State Electricity Board Vs Associated Stone Industries and Another - J.T. 2000(6) SC 522. He has also relied upon the following decisions:- 1. B.P.L. Pharmaceutical Ltd. Vs. CCE., Vadodara. 1995(77) ELT-485 (SC).
Similarly Shri S.P.Rao,JDR appearing for the respondents/Revenue has relied upon a number of decisions in which the subject as to what would constitute 'manufacture' under Section 2(f) of the Central Excise Act, 1944 in relation to the activities undertaken in particular processes, has been discussed in details. However, the ratio of the decisions cited by both the sides, in my opinion, would have no application to the proposition under consideration since the appellants themselves have classified their product - marble slabs - under Tariff Heading 2504.21, which reads as follows:Heading Sub-heading Description of goods25.04 Marble 2504.21 -In or in relation to the manufacture of which any process is ordinarily 4. It is further observed from the referral order of the learned Vice-President that the declaration recorded and filed by the appellants in their classification list shows that their factory is operated with power/D.G. set. Therefore, if it is held as a general proposition of law that conversion of marble blocks into slabs would not amount to manufacture even when such conversion is undertaken with the aid of power as specified in the above tariff description, then such view would render this entry a complete nullity, which is not permissible in law. In my view, the process of manufacture is inherent in the tariff entries itself read with Chapter Note(4) of Chapter 25, extracts of which are appended in para 9 of the order recorded by learned Vice-President. In this view of the matter, I would support the observations of the learned Vice-President that the matter is required to be remanded.
The impugned orders are set aside and case is remanded for de novo consideration in accordance with (SIC) law with the direction that the factual aspect may be re-examined and fresh orders passed after giving another opportunity to the appellants to be heard in the matter.