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CASE NO.: Appeal (civil)  3139 of 2002

PETITIONER: M/s Continental Foundation Joint Venture Sholding, Nathpa H.P.

RESPONDENT: Commissioner of Central Excise,Chandigarh-I

DATE OF JUDGMENT: 29/08/2007

BENCH: Dr. ARIJIT PASAYAT & S.H. KAPADIA

JUDGMENT: J U D G M E N T

CIVIL APPEAL NO.3139 OF 2002 [With C.A. No.3504 of 2002, C.A. No.3336 of 2002]

Dr. ARIJIT PASAYAT, J.

1.      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.   

2.      The 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.  M/s 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.

3.      The 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

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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:

"It 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’".

4.      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.   There 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 following observations:

"Based 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."

5.      In 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:

"16. Another argument is about the time bar  of demands. It is contended that, in view of

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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."

6.      Similar view was expressed by the CEGAT in other  appeals which is the subject-matter in the other appeals.

7.      Mr. 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

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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 correct  view.

8.      In 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.  

9.      We 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.   Section 11A of the Act postulates suppression and, therefore,  involves in essence mens rea.   

10.     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.          

11.     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.  Undisputedly, 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.   

12.     As 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

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11A.  Mis-statement of fact must be wilful.          

13.     That being so, the adjudicating authorities were not  justified in raising the demand and CEGAT was not justified in  dismissing the appeals.   

14.     On the ground of adjudication beyond the normal period  of limitation and non-availability of the extended period of  limitation, the appeals are allowed.  No costs.