Concrete Mixed Near Project Site Not Ready-Mix Concrete: CESTAT Bengaluru Grants Relief To Marymatha Infra

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Bengaluru, has set aside a Rs. 17.53 lakh excise duty demand against Marymatha Infrastructure Pvt. Ltd., holding that the concrete manufactured by the company near the Thanneermukkom Barrage construction site in Kerala was “concrete mix” and not “Ready-Mix Concrete (RMC)” liable to duty.

Judicial Member Dr. D.M. Misra and Technical Member R. Bhagya Devi observed that the Revenue had failed to produce evidence showing that retarders and plasticizers typically associated with RMC production were used in the manufacturing process.

“We find that retarders and plasticizers were not added in the present case, as no evidence has been brought in this regard by the Revenue nor argued that retarders and plasticizers were used as admixture and added to the concrete mix. Besides, it is the claim of the appellant that concrete mix manufactured by the appellant are as per IS 456: 2000; whereas for Ready-Mix Concrete is IS 4926:2003.” the bench observed.

The dispute arose from the construction of the Thanneermukkom Barrage project, where the company had set up a dedicated batching plant near the work site because the actual construction area was situated in the middle portion of the Vembanad Kayal and did not permit storage or on-site mixing.

The plant was installed on land allotted by the Irrigation Department, and the concrete produced there was transported over a distance of less than 2 km to the construction site using transit mixers. The entire production was used exclusively for the project and was not sold outside.

A show cause notice issued on July 16, 2018 alleged that the company had manufactured Ready Mix Concrete classifiable under sub-heading 3824.20 (now 3824 5010) and cleared it without payment of excise duty.

The notice proposed recovery of Rs. 17.53 lakh along with interest and penalty by invoking the extended limitation period on grounds of suppression of facts. The demand was subsequently confirmed and upheld in appeal.

Before the Tribunal, the company argued that the activity involved only basic mixing of cement, aggregates, water and admixtures, and not the sophisticated process associated with Ready Mix Concrete production.

It contended that the concrete was prepared at a temporary batching plant located near the construction site exclusively for captive consumption and without the use of retarders and plasticizers.

The Revenue, on the other hand, argued that the activity resulted in the manufacture of Ready Mix Concrete and therefore did not qualify for the exemption.

The Tribunal examined the manufacturing process, machinery deployed and nature of the product, and relied on the Supreme Court's decision in Larsen and Toubro Ltd. vs. CCE, Hyderabad, which distinguished between concrete mix and RMC based on factors such as plant sophistication, use of retarders and plasticizers, and delivery systems.

It noted that the appellant had stated that machinery such as stone crushers, conveyors, vibrator screens and sand mills typically associated with RMC production were not used at the site, and that the concrete was transported only over a short distance for use in the same project.

“The difference between Concrete Mix and Ready-Mix Concrete depending on the requirement has also been given due emphasis by the Board in its Circular dated 06.01.1998,” the bench observed.

Holding that the product manufactured by the company was “concrete mix” and not RMC, the Tribunal ruled that it was entitled to exemption under Notification No. 12/2012-CE.

On limitation, the tribunal observed that the company had disclosed details regarding the manufacturing process and clearances to the department as early as 2015. It therefore held that invocation of the extended limitation period on grounds of suppression was unsustainable.

“When all the information are available with the department in the year 2015 itself, demanding differential duty after receiving the information for the subsequent period invoking suppression of facts, in our opinion, is unsustainable in law. Consequently, the appellant succeeds both on merits as well as on limitation.” the bench observed.

Accordingly, the tribunal set aside the impugned order and allowed the appeal with consequential relief, holding that the demand failed both on merits and limitations.

For Appellant: Advocate M. S. Nagaraja

For Respondent: Vikalp Jain, Superintendent