TaxTMI 
TaxTMI 
2003 (10) TMI 467
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....s exempted) and then sent the blocks to job workers for conversion into slabs and after conversion into slabs, job workers cleared them to the appellants herein on payment of duty. On 23-9-1998 the officers of the Central Excise headquarters (Preventive), Mumbai, visited the factory of the appellants on receipt of specific intelligence that they were clearing the goods without following Central Excise procedure and without payment of excise duty. During the search following machines were found inside the cutting section of the factory premises : (i) Cutting machine with three motors having traversing system used for slab cutting. (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)  ....
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....m 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 22-3-1999 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 tha....
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.... 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. (ii) Excisability of Marble Tiles : 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 whethe....
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....ems 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-C.E. (up to 31-3-1997), Notification No. 16/97-C.E. (from 1-4-1997 to 2-4-1998) and Notification 8/98-C.E. (from 2-4-1998 to 24-9-1998) 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. (v) Whether the demand is barred by limitation : The appellants' contention is that the demand is ....
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....ise Law being an central Enactment all companies should be subject to similar treatment under the law. Thanking you, Yours faithfully, For NITCO TILES LTD sd/- AUTHORISED SIGNATORY" Letter dated 9-8-1996 "August 9, 1996 To, The Asstt. Commissioner, Central Excise Deptt., Division IV, Mumbai-II Dear Sir, Sub : Request for release of cut to size marble tiles aggregating to 2719.30 sq. mtr. Ref : Our undertaking dt. 23-7-96 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 customs 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 is no further duty payment involved and accordingly we may be given the consent to enable us to clear the stock as and when required by our customer as per the order placed on us. We confirmed we wi....
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....ing 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-II, along with other 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 s....
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....od 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) E.L.T. 468 and Triveni Engineering & Industries Ltd. v. CCE, Allahabad - 2001 (136) E.L.T. 617 (T). In the case of Awdhoot Industries v. CCE, Nagpur - 2002 (146) E.L.T. 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 9th August, 1996 is barred by limitation and set aside the same. The demand on marble tiles for the period from June, 1996 to 9th August, 1996 is sustainable. The plea of the appellants that suppression wi....
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....ed/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-I - 2002 (146) E.L.T. 190 and Alagappa Cements (P) Ltd. v. CCE, Trichy - 2002 (148) E.L.T. 1220 (Tribunal) = 2002 (53) RLT 324. We accordingly set aside the penalty. 7. To sum up we hold as under : (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 Notificat....
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....d 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, fibreglass 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-headin....
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....supra) and Monika Electronics Ltd. and others v. CCE, New Delhi - 2001 (134) E.L.T. 454 (T) = 2001 (46) RLT 866 (T), it has been held that penalty under Section 11AC cannot be imposed prior to its enactment and since the penalty was not apportioned under Sections 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. Sd/- (C. Satapathy) Member (Technical) Dated 19-8-2003 9. 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 c....
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....on 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. 13. 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-pai....
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....titled 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 utilised 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. 17. 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) E.L.T. 190 and Alagappa Cements Pvt. Ltd. v. CCE, Trichy - 2002 (148) E.L.T. 1220 (T) = 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. 18. In Alagappa Ceme....