M/S. Larsen & Toubro Ltd. Ecc Const.Grp vs C.C.E, Hyderabad

In the first two appeals, i.e. Civil Appeal Nos. 6930-6931 of 2004, the assessee is M/s. Larsen & Toubro Limited (hereinafter referred to as 'L&T'). Two appeals are filed by L&T assailing the orders dated April 28, 2005 and October 24, 2005 passed by the Bangalore Bench of the Customs, Excise & Service Tax Appellate Tribunal (for short, 'CESTAT') whereby it held that L&T was not entitled to exemption on the goods known as 'Ready Mix Concrete' (for short, 'RMC') under Notification No. 4/1997-CE dated March 01, 1997 as the said Notification exempted 'Concrete Mix' (for short, 'CM') and not RMC. In the other appeal, wherein the assessee/ respondent is M/s. Chief Engineer, Ranjit Sagar Dam (hereinafter referred as 'Ranjit Sagar Dam'), the judgment impugned is that of the Punjab & Haryana High Court taking a contrary view. Here, the High Court has held that RMC manufactured at the assessee's plant would be entitled to exemption inasmuch as the Notification exempts all kinds of CM from payment of duty, which would include RMC as well It is clear from the above that the issue which arises for consideration is identical in all these appeals. For this reason, they were heard analogously and are being disposed of by the present judgment. We shall, in the first instance, take up the appeals of L&T. CIVIL APPEAL NOS. 6930-6931/2005 AND CIVIL APPEAL NO. 2121/2006 L&T was constructing its own cement plant at Bhogasamundram, Anantpur. For the purpose of the construction of civil structure of the said cement plant, L&T required CM, it used to prepare said CM at site with the help of machinery installed there and the said CM was captively consumed in the construction of the said cement plant by L&T. L&T did not pay any central excise duty on this product taking shelter under Notification No. 4/1997-CE dated Mach 01, 1997, which exempted CM from payment of excise duty.

The Central Excise Officers visited the site and found that the L&T are manufacturing ready mix concrete and not concrete mix. A show-cause notice dated July 22, 1998 was issued by the Commissioner of Customs and Central Excise, Hyderabad-II Commissionerate, proposing excise duty demand of ?1,97,47,626 along with interest, penalty and fine. L&T refuted the aforesaid demand by filing its reply dated September 09, 1998 and submitting that since concrete was prepared at the site and was consumed captively at site, it had to be treated as CM and, therefore, was eligible for exemption under the said Notification which exempted CM from payment of any excise duty. This defence did not find favour with the Commissioner, who passed Order-in-Original dated January 29, 2002 raising the demand in the sum of ?81,39,326 with interest, penalty and fine.

Prior to the above notification, under the previous applicable notification also i.e. Notification No.36/94-C.E. dated March 01, 1994 'Concrete Mix' manufactured at the site for use in construction work was exempted from excise duty, i.e. all along the excise duty for 'concrete mix' manufactured at the site remained 'NIL' Prior to March 01, 1997 there was some doubt expressed as to the excisability and classification of the product 'Ready Mix Concrete'. The Trade was claiming classification of the product under heading 68.07 with benefit of exemption from central excise whereas the department stand was that 'Ready Mix Concrete' was classifiable under sub-heading 38.23[1] of the schedule of Central Excise Tariff Act as it stood prior to March 01, 1997.

(v) The distinction between ready mix concrete and concrete mix is similar to that between garment and ready made garment. Another analogy is home- made food and food ordered from restaurant for delivery at home. Concrete mix manufactured at site is like home-made food, and food order from restaurant for delivery at home is like ready mix concrete. Both are foods ready for consumption, but the former get beneficial tax treatment.

This is enough time for it to be placed and finished. Concrete normally sets or hardens within two to 12 hours after mixing and continue to gain strength within months or even years.

(ii) Ready Mix Concrete refers to concrete that is delivered to the customer in a freshly mixed and non-hardened state. Due to its durability, low cost and its ability to be customized for different applications, Ready Mix Concrete is one of the world's most versatile and popular building materials.