No Excise Duty On Export Unit's Domestic Sale Of Marble Slabs Cut From Imported Blocks Pre-2006: CESTAT Delhi

The Principal Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) in New Delhi has recently held that no central excise duty could be levied on the domestic sale of marble slabs and tiles by Abhishek Exporters, a 100% export-oriented unit, after finding that cutting imported marble blocks into such products during 2002 to August 2005 did not amount to manufacture.

A bench of President Justice Dilip Gupta and Technical Member K. Anpazhakan partly allowed appeals filed by Abhishek Exporters and connected appellants against an order passed by the Commissioner of Central Excise & CGST, Udaipur.

“Thus, by relying on the decision of the Tribunal in Jain Grani, it is held that the process of cutting the marbles into marble slabs/tiles undertaken by the appellant on the imported marble blocks in this case, does not amount to 'manufacture' as defined under Section 2(f) of the Central Excise Act. Accordingly, we hold that no central excise duty is payable by the appellant on the clearances effected to the Domestic Tariff Area. ” the tribunal held.

Abhishek Exporters, a 100% export-oriented unit engaged in marble exports, had imported rough marble blocks duty-free between 2002 and August 2005 under customs exemption notifications meant for EOUs. These imported blocks were cut into marble slabs and tiles. Some were exported, while others were sold in the domestic market after payment of concessional excise duty.

The dispute arose after the department alleged that the company had used domestically procured serpentine stone products to meet its export obligations. At the same time, it sold products made from duty-free imported marble in the domestic market, making it ineligible for customs exemption on the imported marble blocks.

Relying on earlier rulings including Jain Grani Marmo Pvt Ltd and Supreme Court judgments in Aman Marble Industries and Rajasthan SEB v Associated Stone Industries, the tribunal accepted the appellants' argument that cutting marble blocks into slabs or tiles did not amount to manufacture during the relevant period.

It held that the issue was squarely covered by the earlier Jain Grani ruling.

However, the tribunal upheld the customs duty demand for the normal limitation period. It found that the company had exported goods made from domestically procured serpentine stone instead of products made from imported marble blocks.

Referring to the reasoning adopted in Jain Grani, the tribunal observed that the condition for duty-free import under the EOU scheme had not been fulfilled in respect of the imported marble blocks.

The bench held that the extended limitation period could not be invoked after finding that the company had regularly disclosed its import, export and domestic clearance details through statutory filings and that its export consignments had been examined under departmental supervision.

“Since the facts pertaining to the transactions undertaken by the Appellant were within the knowledge of the department, it is held that the extended period of limitation cannot be invoked,” the tribunal held.

It also rejected the department's attempt to rely on the B-17 bond to sustain the extended limitation period.

The tribunal further held that confiscation of the imported marble blocks and the redemption fine imposed on the company were unsustainable because the goods had already been used and were no longer physically available.

The appeals were accordingly partly allowed. The excise duty demand and related penalties were set aside. The customs duty demand survived only for the normal limitation period. The extended-period demand, corresponding penalties, and redemption fine were quashed.

For Appellants: Advocates B.L. Narashimhan and Shri Anurag Kapur, 

For Department: Ajay Jain, Special Counsel