Continental Foundation Joint Venture Sholding, Nathpa H.P. Vs. Commissioner of
Central Excise, Chandigarh-I  Insc 878 (29 August 2007)
Arijit Pasayat & S.H. Kapadia
APPEAL NO.3139 OF 2002 [With C.A. No.3504
of 2002, C.A. No.3336 of 2002] Dr. ARIJIT
These appeals involve identical question of law and are, therefore, disposed of
by this common judgment. The controversy relates to the financial year 1997-98.
Post 1997- 98 the tariff entry provides that the rate is nil. The basic facts
are noted in the appeal filed by Continental Foundation Joint Venture-the
appellant in Civil Appeal No.3139 of 2002.
appellant M/s Nathpa Jhakri Power Corporation (in short 'NJPC') is a Joint
venture between the Government of India and Govt. of Himachal Pradesh, set up
for the purpose of construction of a power-project between the towns of Nathpa-
Jhakri in Himachal Pradesh known an Nathpa Jhakri Power Corporation funded by
the World Bank. The civil work relating to the project was allotted to three
construction companies viz.
Continental Foundation Joint Venture (in short 'CFJV'), M/s Nathpa Jhakri Joint
Venture (in short 'NJJV') and M/s Jai Prakash Hyundai Consortium, (in short
'JPHC'). The agreement was entered into by M/s NJPC and the construction
companies to provide inter alia 'mix concrete' for execution of various items
of work under the contract.
Commissioner of Central Excise, Chandigarh issued a show cause notice dated
20.1.1999 to all the above parties alleging that the construction companies
employed by M/s NJPC were manufacturing Ready Mix Concrete (in short 'RMC') on
which no central excise duty is being paid. Since the said RMC falls under
Chapter Heading No.3824.20 of the Schedule to the Central Excise Tariff Act,
1985 (in short 'Tariff Act') and is subject to Central Excise duty under
Central Excise Act, 1944 (in short the 'Act'), duty is payable. All the three
parties are adopting the same method of manufacture of RMC for which the rock
is blasted from the designated quarry of M/s NJPC. It is transported to the
crusher and crushed to the specified sizes and specific quantity at the project
site. Some aggregate, cement and sand are also produced from the crushing plant
set up at the site. Some natura1 sand is also used. The aggregate and sand are
transported and stored in bins adjacent to the automatic batching plant. The
cement purchased from the market is stored in the cement silons at the site.
The batching plant is an automatic plant which regulates and delivers the
specified sizes and quantities of aggregate, sand and cement into the mixing
drums through the built- in-conveyor. The admixture for water reduction or air
entraining is incorporated in the concrete as per the approved mix design given
by the NJPC. The whole process is fully automatic and is electronically
controlled. The concrete of approved mix design and the specified quantity is
manufactured in the batching plant strictly in accordance with IS: 456-1978 as
stipulated in the contract with M/s NJPC. The concrete so produced is
transported by transit mixers upto the location of placement and is placed at
the specified location by concrete pumps or placers before the setting time of
concrete, which varies depending upon the type of cement used. Noticee
companies are manufacturing RMC but with some motive, they are naming it as
mixed concrete to evade the central excise duty. There is a difference between
the process and method of manufacture of RMC provided in the Bureau of Indian
Standards (in short 'BIS') literature under IS: 4926/1976 and the Board's
letter No.368/l/98-CX dated 6.1.1998. In this Circular of the Board, the
process of manufacture of RMC is spelt out and it is clarified that RMC is a
dutiable product. The matter was referred to the BIS who vide their letter
dated 23.10.1998 reported that the query raised by the department vide their
letter dated 9.7.1998 was considered by the Concrete Sub Committee and its
views are as follows:
is agreed that in so far as the process of manufacturing the concrete is
involved, the process described in the letter of Central Excise is similar to
the process given in IS;4926 specification for "Ready Mix Concrete'".
Considering the reply of the notices, the Commissioner of Central Excise, Chandigarh-I
confirmed the amounts of duty and also imposed penalty in terms of Rule 209A of
the Central Excise Rules, 1944 (in short the 'Rules'). One of the stands taken
by the appellant was that the extended period of limitation under Section 11A
of the Act was not available.
were doubts raised and, in fact, at different points of time, circulars have
been issued. This plea was turned down by the adjudicating authority with the
on above discussions, it is evident that Mix Concrete manufactured and used at
the site of construction is in fact Ready Mix Concrete and M/s NJPC alongwith
three construction companies have concealed its nomenclature with an obvious
intention to escape the duty on the said Ready Mix Concrete. M/s NJPC have
apparently abetted the contravention of non payment of Duty, they are
therefore, liable for penal action the said abetment."
appeal, apart from the other challenges the plea relating to non-applicability
of the extended period of limitation was also urged. The Tribunal did not
accept the contention with the following observations:
Another argument is about the time bar of demands. It is contended that, in
view of the Board Circular dated 6.1.1998, since they were making the concrete
at site and as per the standards prescribed in IS: 456-1978, they were under a bonafide
belief that what they were manufacturing was mix concrete and not the RMC. The
contention of bonafide belief is also advanced on their eligibility to the
exemption under Notification No.4/97-CE dated 1.3.97. We find little force in
this submission. A specific entry was made in the Central Excise Tariff for RMC
under Heading 3824.20 with effect from 1.3.1997. The exemption under the
notification was provided to mix concrete made at site and not to the RMC. None
of the appellants sought any clarification from their jurisdictional central
excise authorities or obtained any lea1 opinion as to the exigibility of their
product, or its eligibility to the exemption under this notification. The Board
Circular dated 6.1.1998 was issued much after the RMC was brought under the
excise net. In the face of these facts, the plea of bonafide belief by the
appellants is not supported by the evidence on record. Another contention
raised is that the appellants could not have had any intention to evade payment
of duty, since the contract between the applicants and the Power Corporation
specifically provided that any additional cost that was incurred as a result of
any change in legislature or States statutes, regulations or by laws would be
paid by the Power Corporation. It is contended that, where the excise duty is
reimbursed by the buyer, there could not be any intention to evade payment of
duty. It is observed that no such plea is raised before the adjudicating
authority. The Power Corporation is also an appellant in this case and there is
no plea of any such commitment on their behalf in their appeal. There is no
evidence that the stated clause in the contract would bind the Power
Corporation to reimburse the appellants even for the duty liability fastened on
to the appellants on the ground of suppression and misrepresentation etc. and
not on account of any change in legislation, regulation or by laws. The plea of
bonafide belief is, therefore, rejected. The appellants are also claiming the
benefit of modvat credit on the input material but this plea is also not raised
before the original authority. However, in the interest of justice, they could
be given an opportunity to establish their case before the original authority
for eligibility to the modvat credit in respect of the duty paid on the input
material used in the manufacture of RMC with the documentary proof."
Similar view was expressed by the CEGAT in other appeals which is the subject-matter
in the other appeals.
Joseph Vellapally, learned senior counsel for the appellant submitted that
there were various circulars operating at different points of time. There was
no clarity or unanimity in the views expressed by the authorities themselves.
In fact, correctness of the judgment by CEGAT in Continental Foundation Joint
Venture's case (supra) was doubted and the matter was referred to larger bench.
In Chief Engineer Ranjt Sagar Dam v. Commissioner of C.Ex., Jalandhar (2006
(198) E.L.T. 503 (Tri.-LB) larger bench of the Tribunal has held that the view
expressed in Continental Foundation Joint Venture's case (supra) was not the
response, learned counsel for the respondents submitted that the circulars
dated 1.2.1996, 23.6.1997 and 6.1.1998 have no relevance and the judgment in
Chief Engineer Ranjt's case (supra) does not reflect the correct position.
are not really concerned with the other issues as according to us on the
challenge to the extended period of limitation ground alone the appellants are
bound to succeed.
11A of the Act postulates suppression and, therefore, involves in essence mens rea.
The expression 'suppression" has been used in the proviso to Section 11A
of the Act accompanied by very strong words as 'fraud' or "collusion"
and, therefore, has to be construed strictly. Mere omission to give correct
information is not suppression of facts unless it was deliberate to stop the
payment of duty. Suppression means failure to disclose full information with
the intent to evade payment of duty. When the facts are known to both the
parties, omission by one party to do what he might have done would not render
it suppression. When the Revenue invokes the extended period of limitation
under Section 11-A the burden is cast upon it to prove suppression of fact. An
incorrect statement cannot be equated with a willful misstatement. The latter
implies making of an incorrect statement with the knowledge that the statement
was not correct.
Factual position goes to show the Revenue relied on the circular dated
23.5.1997 and dated 19.12.1997. The circular dated 6.1.1998 is the one on which
appellant places reliance.
CEGAT in Continental Foundation Joint Venture case (supra) was held to be not
correct in a subsequent larger Bench judgment. It is, therefore, clear that
there was scope for entertaining doubt about the view to be taken. The Tribunal
apparently has not considered these aspects correctly. Contrary to the factual
position, the CEGAT has held that no plea was taken about there being no
intention to evade payment of duty as the same was to be reimbursed by the
buyer. In fact such a plea was clearly taken. The factual scenario clearly goes
to show that there was scope for entertaining doubt, and taking a particular
stand which rules out application of Section 11A of the Act.
far as fraud and collusion are concerned, it is evident that the intent to
evade duty is built into these very words. So far as mis-statement or suppression
of facts are concerned, they are clearly qualified by the word 'wilful',
preceding the words "mis-statement or suppression of facts" which
means with intent to evade duty. The next set of words 'contravention of any of
the provisions of this Act or Rules' are again qualified by the immediately
following words 'with intent to evade payment of duty.' Therefore, there cannot
be suppression or mis-statement of fact, which is not wilful and yet constitute
a permissible ground for the purpose of the proviso to Section 11A. Mis-statement
of fact must be wilful.
That being so, the adjudicating authorities were not justified in raising the
demand and CEGAT was not justified in dismissing the appeals.
the ground of adjudication beyond the normal period of limitation and
non-availability of the extended period of limitation, the appeals are allowed.