On-site concrete mix not RMC under CETH 38245010; exemption allowed absent IS 4926 compliance evidence

CESTAT Bangalore held that the product manufactured at the construction site by the appellant could not be classified as Ready Mix Concrete (RMC) under CETH 38245010, as there was no evidence that it conformed to IS 4926. The contract and records only indicated supply of concrete conforming to IS 456, and no samples were drawn or inspections conducted by authorised officers. Relying on Circular No. 368/1/98-CX and relevant exemption Notifications, the Tribunal treated the product as "concrete mix" manufactured and used at site, eligible for excise exemption. The demand of duty, interest, and penalty was set aside and the appeal allowed.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the product manufactured at the batching plant in the construction site was correctly classifiable as "Ready Mix Concrete (RMC)" under the relevant tariff heading or was only "concrete mix" manufactured at site.

1.2 If the product was "concrete mix" manufactured at site, whether it was exempt from central excise duty under the applicable exemption notifications.

1.3 Consequent validity of the demand of duty, interest and imposition of penalties on the principal appellant and its General Manager.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification as Ready Mix Concrete (RMC) or site-mixed concrete

Legal framework (as discussed)

2.1 The Court referred to Board Circular No. 368/1/98-CX dated 06.01.1998, which:

2.1.1 Defines "Ready Mix Concrete" (RMC) as an excisable product with a separate tariff entry, known under Indian Standard IS: 4926-1976 as concrete delivered at site or into the purchaser's vehicle in a plastic condition and requiring no further treatment before placement.

2.1.2 Clarifies that "concrete mix" implies the conventional method of concrete production conforming to IS 456-1978, produced and used at the site of construction, and that RMC "by its very nature, cannot be manufactured at the site of construction and is brought from the factory of manufacturer for use in construction".

Interpretation and reasoning

2.2 The contract required supply of reinforced concrete conforming to IS 456 standard, not IS 4926. The Court noted that the technical specifications indicated manufacture of concrete as per IS 456.

2.3 There was no evidence on record to show that the batching plant installed at the project site was capable of manufacturing RMC conforming to IS 4926, as assumed by the adjudicating authority.

2.4 No samples of the product were drawn and no inspection was conducted by any authorised person to determine the nature and standard of the concrete produced. The findings of the authorities below were based primarily on statements, including that of a finance officer of another concern, without any technical or evidentiary corroboration.

2.5 In light of the Board Circular, the Court distinguished between:

2.5.1 RMC, as per IS 4926 and normally not manufactured at the site of construction; and

2.5.2 Site-produced concrete mix conforming to IS 456, produced and used at the construction site and covered by exemption.

2.6 The Court found that the factual and contractual matrix supported the view that the product manufactured was concrete mix as per IS 456 at the site of construction and not RMC as per IS 4926.

Conclusions

2.7 The product manufactured at the batching plant in the project site was not established to be Ready Mix Concrete (RMC) as per IS 4926 and Board Circular; it was only concrete mix conforming to IS 456, manufactured at site.

Issue 2: Exemption for concrete mix manufactured at site and liability to duty, interest and penalty

Legal framework (as discussed)

2.8 The Court relied on:

2.8.1 Board Circular No. 368/1/98-CX dated 06.01.1998, clarifying that concrete mix produced and used at the site of construction conforming to IS 456 is exempt under the relevant notifications.

2.8.2 Notification No. 4/2006-CE dated 01.03.2006 (up to 16.03.2012) and Notification No. 12/2012-CE (from 17.03.2012 onwards), providing exemption to concrete mix manufactured at the site of construction for use in construction work at such site.

Interpretation and reasoning

2.9 The show cause notice itself recorded that the batching plant was installed at the project site and that the concrete was manufactured thereat.

2.10 Having held that the product was concrete mix as per IS 456 and manufactured at the construction site, the Court applied the above notifications and the Board Circular to conclude that such concrete mix was exempt from duty.

2.11 As the basic premise of the demand-namely, that the product was excisable RMC under the specified tariff heading-was not established, the foundation for demand of duty, interest and penalty failed.

Conclusions

2.12 Concrete mix manufactured at the batching plant located at the construction site and used in the construction at that site was exempt from central excise duty under Notification No. 4/2006-CE (up to 16.03.2012) and Notification No. 12/2012-CE (from 17.03.2012).

2.13 The confirmation of duty demand, interest and penalty based on classification of the product as RMC was unsustainable and liable to be set aside.

Issue 3: Validity of penalties on the principal appellant and its General Manager

Interpretation and reasoning

2.14 Once it was held that the goods were not RMC and were exempt concrete mix manufactured at site, there remained no excisable liability and no valid basis for alleging contravention attracting penalties.

2.15 In the absence of any other independent allegation or finding against the General Manager, the penalty imposed on him could not survive when the demand itself was set aside.

Conclusions

2.16 The impugned order upholding demand of duty, interest and penalty against the principal appellant was set aside.

2.17 The penalty imposed on the General Manager was also set aside, there being no sustainable finding of manufacture of dutiable RMC or any other independent violation.

2.18 Both appeals were allowed with consequential relief in accordance with law.

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