National Asphalt Prod. and Vs. Cce - Court Judgment

Excerpt:
1. this is an appeal against order-in-original bearing no. 33/94, dated 22-8-1994 passed by collector of customs and central excise, trichy, wherein, it has been held that sand blocks produced by the appellants are liable to central excise duty under heading 68.07. since duty was not paid and central excise procedure followed, therefore, the order confirms demand of rs. 3,55,363.31 under proviso to section 11a(1) and also imposes a penalty of rs. 15,000/- under rule 173q.2. heard learned advocate shri arvind p. datar for the appellants and learned jdr, shri s. kannan, for the department. the show cause notice was issued on 1-1-1993 and the demand covers a period from 5-10-1988 to 10-10-1990. thus the impugned order-in-original invokes the extended period.3. learned advocate for the appellants submitted that the appellants are civil contractors, who have entered into a contract with m/s.neyveli lignite corporation (nlc) for construction of a ash-bund with the help of sand blocks. he further explained that the chemical composition of the said sand blocks which were cast manually on site using wooden templates is having cement and sand blended in the ratio of 1 : 8, which is then admixed with water, cast and cured and used at site for erection of the bund. it is the contention of the appellants that the said sand blocks are not marketable and, therefore, not "goods". learned advocate submitted that as per the settled law, it is for the department to discharge the burden of proof regarding the marketability of sand blocks. however, no such market enquiry has been made and no evidence has been led to show that this is a marketable product or that it was normally being marketed and bought and sold. he further submitted that this is not an off the shell product; it does not even have standard shape and size known to the market as such. it has been made according to the specific requirement of the civil engineering contract for erecting ash-bund. it is not in standard size of bricks or concrete hollow brick form. he further submitted that the statement of the appellant's partner was recorded on 23-3-1992 and, therefore, as per settled law, the show cause notice should have been issued within 6 months thereafter, but was issued after more than 9 months and, therefore, it is fairly time barred. he further submitted that there is no allegation of any evidence on suppression with wilful intent to evade duty. in their reply to the show cause notice at the original adjudication stage, both the grounds i.e. the sand blocks not being goods and that the demand was hit by time bar had been raised before the learned collector. he cited in this connection the decision in the case of indian textile paper tube co. v. c.c.e. as reported in 1995 (77) e.l.t. 372 (tribunal), wherein, the majority decision has held that for test of marketability the initial burden is on the department to prove that the product is known in the market and is marketable. it has been further held therein that mere mention of the product in the tariff schedule does not make it ipso facto marketable.since the burden was not discharged in that case, the hon'ble tribunal held that the product was not goods and not chargeable to duty. learned advocate submits that the principle involved in this decision squarely applies to the facts of the present case.4. heard learned jdr, shri kannan, who reiterated the department's view that sub-heading 68.07 clearly covered sand blocks made out of cement.it is nobody's case that this sand blocks have not been made out of cement and sand. he further referred to clause 89 of the contract entered into between the appellant and nlc which makes it very explicit that liability on taxes and duties involved in these works contract lies squarely on the appellants. therefore, the argument of the appellant and his learned friend that what was supplied was cement and sand at site by nlc and what they did was merely arrange the labour and, therefore, the nature of job work done was one of works contract, is not tenable. the contract clearly shows that the entire responsibility for not only erecting the works but also liability for all duties and taxation, if any on products emerged dutiable therefrom, squarely lay on the appellants. he further submitted that in page 9 of the impugned order it has been discussed that the appellants have claimed that the said blocks as mentioned in the contract are on the basis of cum-duty price. he, therefore, argued that the appellants at the same time cannot take the stand that the products were valued on a cum-duty price and yet were not dutiable.5. we have carefully considered the arguments on both sides as well as the records of the case. we find considerable merit with the argument of the appellants that the sand blocks emerging at the site of the ash-bund (the site of m/s. nlc) as not marketable and, therefore, is not goods for the following reasons :- (a) the said sand blocks do not confirm to any standard shape or size as known in the market, as is distinct from normal bricks or precast or pre-stressed cement concrete blocks, for both of which a clear market exists. (b) in their captive use as per the contract entered with m/s. nlc, there is no sale of the blocks involved as such because the contract is one of erection i.e. it is a works contract. therefore, the sand blocks as such are not sold by the appellants to m/s. nlc. (c) as has been laid down in the case of national textile paper tube co. supra, the initial burden for proving marketability of the product is to classify under sub-heading 68.07 of ceta, 1985, lies on the department. it is not disputed that the show cause notice leads no evidence to show that any market enquiries were made and they reveal that a market exists or that these sand blocks are marketable. not even a single instance of a purchase enquiry, let alone the sale thereof has been led in the show cause notice. therefore, applying the ratio of the said decision, we find that the burden in this case has not been discharged by the department and the products cannot be considered as goods and, therefore, chargeable to duty. while applying the ratio of the said decision, we find that the decision reflects well settled law as it follows a large number of decisions including bhor industries v. collector -1989 (40) e.l.t. 280 (s.c.), collector v. ambalal sarabhai -1989 (43) e.l.t. 214 (s.c.), a.p. electricity board v. collector -1994 (70) e.l.t. 3 (s.c.).6. since the appeal is liable to succeed on merits itself, we do not go into the question of limitation at all.7. in view of the aforesaid findings, we set aside the impugned order-in-original and the appeal succeeds with consequential relief.

Judgment:
1. This is an appeal against Order-in-Original bearing No. 33/94, dated 22-8-1994 passed by Collector of Customs and Central Excise, Trichy, wherein, it has been held that Sand Blocks produced by the appellants are liable to Central Excise duty under Heading 68.07. Since duty was not paid and Central Excise procedure followed, therefore, the order confirms demand of Rs. 3,55,363.31 under proviso to Section 11A(1) and also imposes a penalty of Rs. 15,000/- under Rule 173Q.2. Heard learned Advocate Shri Arvind P. Datar for the appellants and learned JDR, Shri S. Kannan, for the department. The show cause notice was issued on 1-1-1993 and the demand covers a period from 5-10-1988 to 10-10-1990. Thus the impugned order-in-original invokes the extended period.

3. Learned Advocate for the appellants submitted that the appellants are civil contractors, who have entered into a contract with M/s.

Neyveli Lignite Corporation (NLC) for construction of a Ash-Bund with the help of sand blocks. He further explained that the chemical composition of the said sand blocks which were cast manually on site using wooden templates is having cement and sand blended in the ratio of 1 : 8, which is then admixed with water, cast and cured and used at site for erection of the bund. It is the contention of the appellants that the said sand blocks are not marketable and, therefore, not "goods". Learned Advocate submitted that as per the settled law, it is for the department to discharge the burden of proof regarding the marketability of sand blocks. However, no such market enquiry has been made and no evidence has been led to show that this is a marketable product or that it was normally being marketed and bought and sold. He further submitted that this is not an off the shell product; it does not even have standard shape and size known to the market as such. It has been made according to the specific requirement of the civil engineering contract for erecting Ash-Bund. It is not in standard size of bricks or concrete hollow brick form. He further submitted that the statement of the appellant's partner was recorded on 23-3-1992 and, therefore, as per settled law, the show cause notice should have been issued within 6 months thereafter, but was issued after more than 9 months and, therefore, it is fairly time barred. He further submitted that there is no allegation of any evidence on suppression with wilful intent to evade duty. In their reply to the show cause notice at the original adjudication stage, both the grounds i.e. the sand blocks not being goods and that the demand was hit by time bar had been raised before the learned Collector. He cited in this connection the decision in the case of Indian Textile Paper Tube Co. v. C.C.E. as reported in 1995 (77) E.L.T. 372 (Tribunal), wherein, the majority decision has held that for test of marketability the initial burden is on the department to prove that the product is known in the market and is marketable. It has been further held therein that mere mention of the product in the Tariff Schedule does not make it ipso facto marketable.

Since the burden was not discharged in that case, the Hon'ble Tribunal held that the product was not goods and not chargeable to duty. Learned Advocate submits that the principle involved in this decision squarely applies to the facts of the present case.

4. Heard learned JDR, Shri Kannan, who reiterated the department's view that sub-heading 68.07 clearly covered sand blocks made out of cement.

It is nobody's case that this sand blocks have not been made out of cement and sand. He further referred to Clause 89 of the contract entered into between the appellant and NLC which makes it very explicit that liability on taxes and duties involved in these works contract lies squarely on the appellants. Therefore, the argument of the appellant and his learned friend that what was supplied was cement and sand at site by NLC and what they did was merely arrange the labour and, therefore, the nature of job work done was one of works contract, is not tenable. The contract clearly shows that the entire responsibility for not only erecting the works but also liability for all duties and taxation, if any on products emerged dutiable therefrom, squarely lay on the appellants. He further submitted that in page 9 of the impugned order it has been discussed that the appellants have claimed that the said blocks as mentioned in the contract are on the basis of cum-duty price. He, therefore, argued that the appellants at the same time cannot take the stand that the products were valued on a cum-duty price and yet were not dutiable.

5. We have carefully considered the arguments on both sides as well as the records of the case. We find considerable merit with the argument of the appellants that the sand blocks emerging at the site of the Ash-Bund (the site of M/s. NLC) as not marketable and, therefore, is not goods for the following reasons :- (a) The said sand blocks do not confirm to any standard shape or size as known in the market, as is distinct from normal bricks or precast or pre-stressed cement concrete blocks, for both of which a clear market exists.

(b) In their captive use as per the contract entered with M/s. NLC, there is no sale of the blocks involved as such because the contract is one of erection i.e. it is a works contract. Therefore, the sand blocks as such are not sold by the appellants to M/s. NLC. (c) As has been laid down in the case of National Textile Paper Tube Co. supra, the initial burden for proving marketability of the product is to classify under sub-heading 68.07 of CETA, 1985, lies on the department. It is not disputed that the show cause notice leads no evidence to show that any market enquiries were made and they reveal that a market exists or that these sand blocks are marketable. Not even a single instance of a purchase enquiry, let alone the sale thereof has been led in the show cause notice.

Therefore, applying the ratio of the said decision, we find that the burden in this case has not been discharged by the department and the products cannot be considered as goods and, therefore, chargeable to duty. While applying the ratio of the said decision, we find that the decision reflects well settled law as it follows a large number of decisions including Bhor Industries v. Collector -1989 (40) E.L.T. 280 (S.C.), Collector v. Ambalal Sarabhai -1989 (43) E.L.T. 214 (S.C.), A.P. Electricity Board v. Collector -1994 (70) E.L.T. 3 (S.C.).

6. Since the appeal is liable to succeed on merits itself, we do not go into the question of limitation at all.

7. In view of the aforesaid findings, we set aside the impugned order-in-original and the appeal succeeds with consequential relief.