Full Judgment
ii. Cutting machine with 7.5 H.P. and 1 H.P. motor for reverse and forward movement used for slab cutting.
iii. Cutting machine with 7.5 H.P. motor and 1 H.P. motor for reverse and forward movement used for slab cutting.
iv. Two re-edge cutting machines with 2 H.P. motor each. v. Cutting machine used for tiles cutting with 5 H.P. motors.
vi. Two cutting/slicing machines with 7.5 H.P, motors each used for slicing of the slabs to manufacture tiles of different sizes.
2. The description of the machines found and installed in the furniture section of the factory is as under: i. Two grinder machines used for the manufacture of novelty items viz., ash trays, pen stands, photo frames, table tops, table bases, paper weight, watch stand, lamp stand, pillars of various sizes, etc., of imported Italian marbles.
iv. Three lathe machines of two horsepower each for turning the corners of novelty items.
v. Computerised mill machine of 4.8 horsepower (inlay design machine) which was used for making designs as per customers requirements.
3. In addition to the above there were eight polishing machines installed in the polishing section; two of them had motors of three horse power capacity each, two of five horse power capacity each, one of 7.5 horse power capacity and the remaining three of 7.5 horse power each; with one horse power motor on top for automatic movements. They also found that there were two water pumps one having two horse power motor for pumping water from the under ground tank and other having three horse power used for lifting water to overhead recycling tank. It was observed mat the cumulative electromotive power used in the polishing machines was around 45 horsepower while the cumulative electromotive power used in the cutting/slicing machines was approximately 40 horse power. The total sanctioned load of the unit was 49 KW equal to 65.6HP.4. Since the sum total of electromotive force used for all operations exceeded 10 HP the officers seized the marble tiles and articles of marble. Statements of all concerned persons were recorded from which it was revealed that the appellants had manufactured and cleared marble slabs and tiles which were classifiable under CETA sub-heading 2504.21 covering marble slabs "in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power and where the electromotive force used exceeds ten horse power" and CETA sub-heading 2504.31 which covers marble tiles "in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power and where the electromotive force used exceeds ten horse power".
5. Show cause notice dated 22/03/1999 was issued to the appellants proposing recovery of duty of Rs. 31,03,303/- on marble slabs, tiles and novelty items under the proviso to Section 11A(1) of the Act, proposing confiscation of seized marble slabs and tiles, marble articles, and proposing recovery of interest and imposition of penalty.
The notice was adjudicated by the Commissioner who confirmed the demand along with the interest, confiscated the seized goods with option to redeem the same on payment of a fine of Rs. 2,50,000/- and imposed penalty of amount equal to duty in terms of Section 11AC/Rule 173Q holding that the processes carried out on marble slabs amounts to manufacture, that conversion of slabs into tiles amounts to manufacture and that slabs fall for classification under 2504.21 as the total electromotive power used for several processors was in excess of 10 HP and similarly tiles were classifiable under CETA sub-heading 2504.31.
Hence this appeal.
6. We have carefully considered the rival submissions and record our findings on the various issues as under: i. Excisability of marble slabs obtained by cutting, polishing and fibreglass reinforcement of marble slabs; We note that the appellants received marble slabs, carried out the above processes thereupon, and then cleared the marble slabs. No new distinct commercial commodity emerges as a result of the above processes. In the case of CCE v. Fine Marble & Minerals Pvt. Ltd. 1985 (22) ELT 128, the Tribunal held that the cutting or sizing of marble blocks is not a process of manufacture for the reason that no new and distinct commercial product comes into existence as the end product would still be called as marble and thus the original identity continues. The above decision was followed in the case of Associated Stone Industries Ltd v. CCE 1992 (6) ELT 639 wherein it was held that the process of cutting/trimming and polishing of marble blocks to form marble slabs does not amounts to manufacture.Kota Stone Pvt.
Ltd. v. CCE, Vadodara 1995 (80) ELT 145. In the light of the ratio of the above decisions, which are squarely applicable to the present case we hold that the activities above mentioned carried out by the appellants herein on the marble slabs received by them do not amounts to manufacture and that the marble slabs cleared by them do not attract fresh duty liability as they are not excisable goods.
The judgments cited above, although rendered in the context of the erstwhile Central Excise Tariff, are applicable to the present tariff for the period in dispute which is subsequent to the introduction of the CETA, 1985 and Section 2(f) of the Central Excise Act, which has been relied upon by the Commissioner in holding that the earlier judgments are not relevant for the period in dispute, makes it clear that manufacture includes any process which is not only incidental or ancillary to the completion of a manufactured product but such process is also required to be specified in relation to any goods in the section or chapter notes of the schedule to the CETA, 1985 as amounting to manufacture, and the processes carried out by the appellants have not been specified in relation to the marble slabs either under Section 5 or under chapter 25 of the CETA, 1985 as amounting to manufacture.
Tiles are commercially distinct commodity from slabs. The process carried out by the appellants on marble slabs for their conversion into marble tiles therefore satisfy the definition of manufacture.
The appellants' reliance upon the Tribunal's decision in the case of Associated Stone is misplaced. Learned DR is correct in pointing out that the Associated Stone decision is based upon the earlier order in the case of Fine Marble & Minerals cited supra, which related only to the issue as to whether cutting of marble blocks to obtain marble slabs was a process of manufacture and the Tribunal was not called upon to consider the question as to whether conversion from slabs to tiles amounts to manufacture. We find that no independent reasoning has been given in the Associated Stone Industries' case as how such processes do not amounts to manufacture, and the findings in respect of marble slabs has been applied mutatis mutandis to marble tiles. Later decision in the case of Kota Stone Pvt. Ltd only follows the Fine Marble & Minerals Pvt. Ltd's decision. Therefore there is no binding precedent on the excisability or otherwise of marble tiles obtained from marble slabs. Tiles being a distinct new commercial commodity are excisable goods, attracting duty liability and the test of manufacture is satisfied in the case of conversion of marble slabs into marble tiles.
The contention of the appellants that tiles are chargeable to nil rate of duty and CETA sub-heading 2504.39 is not tenable in view of the fact that the cumulative electromotive power used in the factory exceeds 10 HP and therefore the tiles are classifiable under CETA sub-heading 2504.31 attracting duty at the appropriate rate. The plea of the appellants that the individual electromotive force of any of the machines installed in the cutting section does not exceed 10HP and this is sufficient for classification under CETA sub-heading 2504.39 cannot be accepted in the face of the language of the CETA sub-heading 2504.31 which covers "tiles in or in relation to the manufacture of which ..... and where the electromotive force used exceeds 10HP". There is nothing in the language of this sub-heading to support title interpretation sought to be placed upon it by the appellants, namely, that the electromotive force of each machine should be in excess of 10 HP in order to attract classification under this sub-heading. We therefore hold that marble tiles manufactured by the appellants herein fall for classification under CETA subheading 2504.31 attracting duty at the applicable rate.
The claim of the appellants that marble articles and novelty items are classifiable under CETA sub-heading 2504.90 cannot be accepted in view of the fact that Chapter heading 25.04 does not cover marble articles but covers marble in block form, slab form and in tile forms. Such items correctly falls for classification under heading 68.07 which covers "all other articles of stone, plaster, cement, asbestos, mica or of similar materials not elsewhere specified or included"; and this is the Chapter heading under which these goods have been classified by the adjudicating authority as seen from the fact that the entire demand raised on slabs, tiles and articles of marble (proposed to be classified under chapter heading 68.07) raised in the notice has been confirmed although there is no separate finding by the Commissioner on the classification of marble articles.
The alternative plea that SSI exemption under Notification 1/93-CE (up to 31/03/1997) Notification No. 16/97-CE (from 01/04/1997 to 02/04/1998) and Notification 8/98-CE (from 02/04/1998 to 24/09/1998) would be available to items falling under heading 6807.00 has not been considered by the adjudicating authority. This plea requires consideration and therefore this issue is remitted to the adjudicating authority for fresh decision.
The appellants' contention is that the demand is barred by limitation having been raised under show cause notice dated 22/03/1999 for the period 01/06/1996 to 29/09/1998 in view of the knowledge of the department of production of slabs and manufacture of tiles in July, 1996 and their release after due investigation and after due consideration of the appellants' representations in this regard. In this context they rely upon letters dated 04/07/1996, 23/07/1996, 24/07/1996 and 25/07/1996 written by them, the Superintendent's letter dated 26/07/1996, their letters dated 09/08/1996 and 04/10/1996 and the Assistant Commissioner's letter dated 11/10/1996. We have perused the above correspondence. The relevant correspondence is reproduced below: Sub : Request for release of Raw Marble Slabs Imported by us on payment of custom duty and C.V.D. We would like to bring to your kind notice that as declared vide our letter dt. 24/7/96, we have in stock 53595 sq. mtr. of raw marble slab which was imported by us after paying custom duty and C.V.D. We intent to clear the above stock of raw marble slab to our customer. As said stock is duty paid and modvat credit is not claimed by us there is no further duty payment involved and accordingly we may be given the consent to enable us to clear the above stock as an when required by our customer as per the order placed on us. We confirm we will not avail modvat credit on 53595 sq. mtr. Marble slab lying in Kanjurmarg godown.
We, would like to add that as the duty is payable on per sq. mtr.
basis. The said duty is already paid as C.V.D. by us and if the said raw marble slab is to be cut, polished there will be wastage and only the balance finished stock will be cleared. The said quantity is bound to be lower than the total quantity imported by us and accordingly duty payable if any on the finished cut slab will be even less than total modvat credit claimed by us on raw marble slab as duty is payable at specific rate on per sq. mtr. basis.
In short there is no revenue implication and we further understand that no other company undertaking similar operation in India are under going excise formalities. The Central Excise Law being an central Enactment all companies should be subject to similar treatment under the law.
Sub: Request for release of cut to size marble tiles agreegating to 2719.30 sq. mtr.
We would like to bring to your kind notice that as declared vide our letter dt. 24/7/96, we have in stock 2719.30 sq. mtr. Of cut to size marble tiles which was made from marble slab imported by us after paying custom duty and C.V.D. on which the electro motive force used was less than 10 H.P. We intent to clear the above stock of cut to size marble tiles to our customer. As said stock is duty paid and modvat credit is not claimed by us there I is no further duty payment involved and accordingly we may be given the consent to enable us to clear the stock as an when required by our customer as per the order placed on us. We confirmed we will no avail modvat credit on 2719.30 sq. mtr.
cut to size marble tiles lying in Kanjurmarg Godown.
On examining the excise duty structure applicable to marble tiles after taking into consideration the budgetary changes made by finance bill No. (2) of 1996-97 we find that only those tiles are made dutiable which are manufactured with the aid of power where the electro motive force used exceeds 10 H.P. However, our marble tiles manufactured by us and lying in stock as well as those which are being manufactured on an on going basis are manufactured with aid of power where the electro motive force used is less than 10 H.P. Accordingly the said marble tiles get classified under chapter sub-heading No. 2504.39. Where the tariff duty itself is "NIL".
In support of the above we are enclosing here-with the list of cutting machine and other machine which are installed at Kanjurmarg Factory/Godown. Which confirm that the electro motive force used in manufacturing tiles shall be always less than 10 H.P. In view of the above factual and legal position you are requested to grant the release of above stock of marble tiles and oblige. We shall be filing shortly necessary declaration claiming exemption from registration as a manufacture in terms of Notification issue under Rule 174 of the Central Excise Rule, 1944.
Sub: REQUEST FOR RELEASE OF CUT TO SIZE MARBLE TILES AGGREGATING TO 2719.30 SQ.MTRS. This has reference to our letter dt. 9 August 1996 submitted to your office, requesting for a release note for cut to size Marble Tiles aggregating to 2719.30 sq. mtrs.
In respect of the above our representative has been constantly approaching you office and till date we have not received any favourable response from your end. The enclosed letter dt. 9^th August 1996 is self explanatory and it is only because that the undertaking was given by Mr. Ashok Chaudhary our Manager, Nitco Tiles Limited, Kanjur Marg, that he will not dispatch any marble tiles till such time he gets necessary consent letter from your concerned department. We are requesting for release note. Needless to say our goods have not been seized and nor have we violated any excise rules.
We would like to brief you that this undertaking was given by him for the only reason that the Superintendent of Central Excise (PI), Central Excise Divn. IV, Mumbai 11, alongwith oilier officials visited our Kanjur Marg Office/Godown on 23.7.96 immediately after the budget asking for the stock statement lying at Kanjur Marg Godown. The entire process of taking the stock took about one and a half days and completed on 24.7.96 subsequently, to which the entire statement was given to them. As the stocktaking could not be completed on 23.7.96 the undertaking was given by our Manager Mr.
Ashok Chaudhary. In view of the same we request you to kindly give a release note, in other words the said letter stands withdrawn if nothing is heard from you within a period of one week.
We would again state that the said stock is duty paid (C.V.D.) and modvat claim shall be made by us. The Raw Marble Slab and Cut to Size Tiles are imported and not indigenous and no other indigenous slabs.
We do not fall in the Excise purview as such request you to have the matter disposed at the earliest.
Sub: Request for clearance or cut to size marble tiles aggregating to 2719.30 sq. mtrs.
Please refer to your letter No. NTI/96-97/186/4 dtd. 04.10.1996 on the above subject matter.
In this connection, you are permitted to clear the cut to size marble tiles lying in your factory at Kanjurmarg (East), Mumbai.
The above would show that the appellants were manufacturing marble tiles with the aid of power. They had also furnished a list of machinery installed in their factory showing EMF of each machine, therefore, although in their letter dated 09/08/1996 they had stated that the tiles were manufactured with the aid of power where the EMF used is less than 10HP, the list of machinery would clearly show that EMF exceeding 10HP was used for manufacture of marble tiles. In this connection it is pertinent to note that the Commissioner holds the appellant guilty of suppression only on the ground of non filing of classification declarations/price declarations as required under Rule 173B and 173C of the Central Excise Rules and has not controverted the contention of the appellants that the correspondence exchanged between them and the department would clearly establish knowledge of the department of the appellants' activity of manufacture of marble tiles and the extent of power used. The non filing of classification declaration does not per se lead to suppression of facts as held by the Tribunal in a series of decisions. In the case of Johnson & Johnson Ltd. v. CCE, Mumbai 1998 (29) RLT 58 it was held that the extended period of limitation could not be invoked in view of the fact of exchange of detailed correspondence between the department and the appellants, although classification list was not filed.
The same view was expressed in the case of Electronic Service v. CCE, Mumbai 2000 (120) ELT 468 and Triveni Engineering Industries Ltd. v. CCE, AllahabadAwdhoot Industries v. CCE, Nagpur 2002 (146) ELT 650 the Tribunal again took the view that letters to the department on the subject of manufacture of the items in dispute have a significant bearing on the aspect of limitation and the matter was remanded for consideration of the same; In the absence of any finding of the Commissioner on such letters the ratio of the above decisions is squarely applicable for the period subsequent to July/August, 1996 when the department gained knowledge of manufacture of marble tiles. Hence we hold that the demand on marble tiles for the period from 9^th August, 1996 is barred by limitation and set aside the same. The demand on marble tiles for the period from June, 1996 to 9^th August, 1996 is sustainable.
The plea of the appellants that suppression with intent to evade payment of duty cannot be attributed to them since modvat/cenvat credit of Rs. 34,89,833/- as against the demand of Rs. 31,03,303/- was admissible to them has been raised for the first time before the Tribunal and cannot be verified at this stage/The larger bench decision in the case of Jay Yuhshin Ltd v. CCE, New Delhi 2000 (119) ELT 718 holds that if revenue neutrality results by way of availability of credit to the assessees themselves, extended period of limitation is not applicable. Therefore the factual position as to whether the applicants were eligible to credit equal to or in excess of the amount of duty confirmed is to be ascertained by the jurisdictional Commissioner to whom this issue stands remitted. If it is found on verification that revenue neutrality is brought, out then the demand is required to be set aside in the light of the larger bench decision. If the appellants fail on the plea of revenue neutrality the alternative plea that modvat credit is available is required to be considered by the Commissioner, who shall also recalculate the duty liability, if any surviving, by taking the sale value as cum-duty price on the basis of the apex Court decision in the case of CCE, Delhi v. Maruti Udyog Ltd. 2002 (141) ELT 3 (SC) upholding the Tribunal's decision in the case of Srichakra Tyres Ltd. 1999 (108) ELT 361.
This issue becomes relevant only in the case of duty demand on novelty items, as we have already held that the demand on slabs is not sustainable and that the demand on marble tiles can be sustained only for the period June to August, 1996 which is prior to the introduction of the above provisions (which was introduced on 29/09/1996) subject to the examination of the claim on SSI notification benefit and examination of the plea of revenue neutrality. We therefore hold that if any duty liability remains on novelty items after considering the claim for SSI benefit, revenue neutrality and recalculation of duty liability by considering the sale value as cum-duty price, the Commissioner shall decide the question of interest on duty payable, if any, on novelty items for the period subsequent to 28/09/1996.
In the impugned order combined/composite penalty under Section 11AC and/or Rule 173Q has been imposed which is not sustainable in the light of the Tribunal's decisions in the case of Agarwal Pharmaceuticals v. CCE, Delhi-1Alagappa Cements (P). Ltd. v. CCE, Tricky 2002 (53) RLT 324. We accordingly set aside the penalty.
i. The activities of cutting, polishing, resin coating and fibreglass reinforcement of marble slabs does not amount to manufacture and the marble slabs cleared by the appellants do not attract duty liability as they are not fresh excisable goods.
ii. Marble tiles are excisable goods attracting duty liability applicable under CETA sub-heading 2504.31 as they have been manufactured by using EMF exceeding 10 HP. iii. Articles of marble manufactured by the appellants herein fall for classification under heading 68.07. The adjudicating authority is to examine the plea regarding availability of SSI Notification No. 1/93-CE (up to 31/03/1997) Notification No. 16/97-CE (from 01/04/1997 to 02/04/1998) and Notification 8/98-CE (from 02/04/1998 to 24/09/1998) to these items.
iv. The demand on marble tiles for the period from 9^th August, 1996 onwards is barred by limitation.
v. The demand on marble tiles for the period from June, 1996 to 9th August, 1996 is sustainable subject to verification of the plea that the appellants were eligible to credit equal to or in excess of the amount of the duty confirmed. The demand on articles of marble is also subject to verification of this plea.
vi. Duty liability, if any, remaining after considering the claim for SSI benefit and revenue neutrality, is to be recalculated by taking the sale value as cum-duty price.
vii. The issue of levy of interest for the period subsequent to 28/09/1996 shall be considered afresh in the light of the above.
I have carefully gone through the order recorded by my learned Sister.
I concur with the findings that marble tiles and articles of marbles manufactured by the appellants are classifiable and dutiable under subheading No. 2504.31 and heading No. 68.07 respectively. In respect of other issues, my views are as under: - (1) Duty liability of marble slabs obtained by edge cutting, polishing, fiber glass reinforcement, coating of resin: - In CCE vs. Fine Marble and Minerals (Supra), it is held that marble slabs sawn from marble blocks are not commercially distinct: commodity and hence there is no manufacture. In Associate Stone Industries (Supra), it is again decided that marble slabs sawn from marble blocks cannot be called a distinct commodity. In the case of Kotah Stone (Supra), it is decided by majority decision that the process of cutting, edging, trimming and polishing of marble blocks to form marble slabs did not amount to manufacture. In the present case, the issue does not relate to conversion of marble blocks into marble slabs. The reply dated 21.4.1999 of the appellants referred to in page 6 of the impugned order makes it clear that they are receiving marble slabs from either job workers or from others which is manufactured from imported marble blocks falling under heading No. 2515.11 of the Customs Tariff and the same pays excise duty as slabs under sub-Heading No. 2504.21 of the Excise Tariff before reaching the appellants. It is, therefore, very clear that duty on marble slabs manufactured from marble blocks is being paid under the new Excise Tariff even before the same reaches the appellants and therefore there is no dispute in this regard requiring us to apply the aforesaid case laws earlier rendered in the context of conversion of marble blocks to marble slabs under the old tariff.
The issue for decision before us in this case relates to conversion of duty paid marble slabs received by the appellants into marble slabs which have undergone the process of edge cutting, polishing, fiber glass reinforcement, coating of resin etc. Admittedly, the slabs received by the appellants from the job workers and others and the slabs produced by the appellants with the help of above processes will fall under the same sub-heading 2504.21. It is now well settled that even if inputs and finished products are classified under the same tariff heading or sub-heading, the finished products would be chargeable to duty again if the processes involved amount to manufacture resulting in production of a new marketable commodity. In my view, this issue needs to be re-examined by the adjudicating Commissioner applying the test of manufacture of a new product and marketability.
Appellants have raised the question of availing modvat credit of duty paid on marble slabs (as per their own statement marble blocks imported did not pay any additional duty) and entitlement to small-scale exemption in respect of the articles of marble before the Tribunal. Entitlement to such credit and small-scale exemption are subject to various conditions under the relevant rules and notification. Hence, such entitlement has to be decided by the Adjudicating Commissioner with reference to such conditions and the matter, therefore, requires to be remanded to him for decision.
The issue of limitation is to be examined with reference to the question of revenue neutrality and the correspondences exchanged between the appellants and the department. As regards the question of revenue neutrality, my learned Sister has expressed the view that the matter requires to be remanded to the original adjudicating authority. As regards the question of exchange of correspondence between the appellants and department, in the case of Awdhooth Industries (Supra), the Tribunal took the view that such correspondences have a significant bearing on the aspect of limitation and remanded the case for consideration of the same. In the instant case also, I am of the view that the matter requires to be remanded to the Adjudicating Commissioner for fresh decision for the same reason particularly keeping in view the fact that the appellants in their letter dated 09.08.1996 had claimed use of power below 10 H.P. which has been found to be incorrect.Alagappa Cements (P) Ltd. (Supra) and Monika Electronics Ltd and Ors. v. CCE, New Delhi - 2001(46) RLT 866 (T), it has been held that penalty under Section 11 AC can not be imposed prior to its enactment and-since the penalty was not apportioned under Section 11AC and Rule 173Q, composite penalty was set aside.
In view of the fact that the matter is being remanded to the Adjudicating Commissioner for re-determination on various issues and recalculation of duty and to examine eligibility to modvat credit and small-scale exemption, I am of the view that it would be in the fitness of things to keep open the question of imposition of penalty and charging of interest to be re-determined at the time of such re-adjudication. The appellants will be at liberty to make factual and legal submissions before the Adjudicating Commissioner.
The following points of difference are placed before the Hon'ble President for reference to Third Member: Whether the process of cutting, polishing, resin coating and fibreglass reinforcement of marble slabs does not amount to manufacture and the marble slabs cleared by the appellants do not attract duty liability; whether the issue of eligibility to modvat credit and small scale exemption availability for marble tiles and marble articles only is to be remanded for verification; whether the demand on marble tiles for the period from 9^th August, 1996 onwards is barred by limitation and the demand on marble tiles for the period from June, 1996 to 9th August, 1996 is sustainable subject to verification of the plea of eligibility to modvat credit, and whether the composite penalty is to be set aside, as held by Member(Judicial) The demand on marble slabs is to be reexamined by the Commissioner applying the test of manufacture of new product and marketability; whether the issue of eligibility to modvat credit and small scale exemption is to be reexamined for marble slabs, marble tiles and articles of marble; whether the issue of limitation is to be remanded both for the period from 9/8/96 onwards as well as for the prior period, and whether the issue of penalty is also required to be remanded, as held by Member (Technical).
Although the appellant's Assistant General Manager is present, appellant's letter dated 23.10.2003 requests a decision on the basis of the submissions made in the grounds of appeal and the written submissions made to the Bench after the matter was heard. I have read these and heard the Departmental Representative.
2. I shall deal with each of the questions referred to me separately.
3. The Member (Judicial) has held that the process undertaken by the appellant of cutting, polishing, resin coating and fibreglass reinforcement of marble slabs does not amount to manufacture. The Member (Technical) has said that this issue needs to be re-examined by the adjudicating Commissioner. The Member (Judicial) has relied upon the decision of the Tribunal in CC v. Fine Marble and Minerals Pvt. Ltd.Associated Stone Industries Ltd v. CC,Kota Stone Pvt Ltd. v. CC Vadodara, 1995 (8) ELT 145, in which it has been held that cutting, sizing and polishing of marble blocks is not a process of manufacture for the reason that no new and distinct commercial product comes into existence, and the finished product is still marble and known as such. The Member (Technical) has found that these decisions are inappropriate to the facts in the present case. This issue, he says, relates to conversion of duty-paid marble slabs into marble slabs which have undergone processes of edge cutting, polishing, fibreglass reinforcement and coating of resin.
4. It is true that in the decisions that the Member (Judicial) has relied upon, the process involved was cutting of marble slabs into smaller ones and edge cutting, trimming and polishing. The reinforcing with fibreglass and coating with resin were not considered in these decisions. The notice issued to the appellant in fact did not rely upon the fact of fibreglass reinforcement or coating with resin in order to say that the process was manufacture.
The basis for the notice is that such operations as edge cutting, polishing and buffing are incidental or ancillary to the completion of the manufactured product into a fully finished product constitute manufacture, in that they result in the emergence of a new commercial commodity distinct from the duty-paid marble slabs that the appellant receive. The Commissioner also concludes that manufacture has resulted because the appellant cu trough blocks into regular blocks and polished them. Each of these processes were held in the earlier decisions of the Tribunal not to be manufacture. The Departmental Representative is not able to show that reinforcement with fibreglass and resin coating themselves constitute processes of manufacture, I do not find anything in the order of the Member (Technical) to say why the issue should be remanded to the Commissioner - in other words, what it is that is required to be considered by him that he has not already done. I therefore agree with the Member (Judicial) in this regard.
5. The next question is the availability of modvat credit and small-scale exemptions for determining the duty liability on marble tiles end marble articles. This issue would not apply to marble slabs since I have agreed with the Member (Technical) that no duty would be payable on them. The Member (Judicial) has said remanded the matter to the adjudicating authority to consider the availability of the small-scale exemptions contained in notifications 1/93, 16/97 and 8/98. The Member (Technical) has said that entitlement to modvat credit and small scale exemptions are subject to various conditions under the relevant rules and notifications hence such entitlement should be decided by the adjudicating Commissioner with reference to such conditions and the matter is, therefore, required to be remanded to him for decision.
6. Therefore, so far as the availability of the small-scale exemption is concerned, I am not able to find any point of disagreement between the two members, each of whom held that its availability is to be considered by the adjudicating authority.
7. So far as modvat credit is concerned, Member (Judicial) has remanded the matter to Commissioner to verify "revenue neutrality" by way of availability of modvat credit and if not, if not to consider availability of modvat credit. The larger bench decision in Jay Yushin v. CC, 2000 (119) ELT 718, has held that if it can be shown that if the revenue neutral situation comes about in relation to the credit available to the assessee himself, the demand is to be reduced accordingly. Therefore, if it can be shown by verification of documents that the appellant would have been entitled to take credit equal to or greater than the duty payable, the demand for duty would not be sustainable. Alternatively, if the assessee can show by production of relevant documents that it had utilized duty - paid inputs in the manufacture of the finished goods, it would be entitled to take modvat credit and use it for paying duty. Here again I do not find any difference of opinion between the two Members, each of whom has remanded the matter to Commissioner for his decision on consideration of relevant facts. So also I find that the question of liability to interest has been ordered to be determined by the Commissioner by both Members.
8. The Member (Judicial) has set aside the combined penalty imposed under Section 11AC and Rule 173Q following the Tribunal's decision in Agarwal Pharmaceuticals v. CCE, Delhi, 2002 (146) ELT 190 and Alagappa Cements Pvt. Ltd. v. CCE Tiuichi, 2002 (53) RLT 324. The Member (Technical) has, on his view that these decisions have set aside the combined penalty on the basis that penalty under Section 11AC was imposed prior to its enactment, has ordered remand to the Commissioner 9. In Alagappa Cements P. Ltd., the Tribunal has set aside the composite penalty on the ground that Section 11AC has been invoked for imposing penalty in respect of clearances made prior to its enactment. The decision in Agarwal Pharmaceutical v. CC followed Punjab Recorders v. CC, 2001 (132) ELT 4. In that decision the Tribunal rested its decision to set aside the combined penalty on the grounds that Section 11AC could not have been invoked, not being on the statute book during the relevant period. It is not the appellants contention that penalty under Section 11AC could not have been imposed on it. I therefore agree that the ratio of these decisions will not apply to the facts and concur with the Member (Judicial)'s order to remand to the Commissioner the quantum of penalty.
10. The next question relates to limitation. The Member (Judicial) has held that the demand on marble tiles for the period from 9^th August 1996 is barred by limitation and the Member (Judicial) has remanded the matter to the Commissioner to consider whether the demand is barred by limitation. The issue revolves around letters written by the appellant to the Departmental Officers between July and October 1996. The Member (Judicial) has found that through these letters, the appellant had informed the Department that it was manufacturing marble tiles with the aid of power and had also furnished a list of machinery installed in its factory. Although the letter of 9-8-1996 stated that tiles were manufacture with the aid of power where the EMF use was less than 10 HP, the list of machinery showed that the machinery of EMF exceeding 10 HP was used for manufacture. It appears that this correspondence was not cited in the proceedings before the Commissioner. There is no ground of appeal that effect. The only ground so far limitation is concerned is that the slabs and tiles which were seized in 1996 were released for investigation. In this situation of fact where it has not been established that the correspondence had been cited before the Commissioner, it would be desirable to have the matter examined by the Commissioner. I agree with the Member (Technical) that this question should be remanded to the Commissioner.
We hold mat the process of cutting, polishing, resin coating and fibreglass reinforcement of marble slabs does not amount to manufacture and marble slabs cleared by the appellants do not attract duty liability; that me issue of liability to penalty is remanded to the Commissioner and that the issue whether the demand on marble tiles for the period From 9th August, 1996 is barred by limitation is remanded for re-examination by the Commissioner.