Simplex Infrastructures Ltd vs The Joint Commissioner Of Central ...
2021 Latest Caselaw 5385 Kant

     IN THE HIGH COURT OF KARNATAKA AT BENGALURU

        DATED THIS THE 3RD DAY OF DECEMBER, 2021

                         PRESENT

           THE HON'BLE MRS.JUSTICE S.SUJATHA

                           AND

THE HON'BLE MR. JUSTICE HANCHATE SANJEEVKUMAR

                W.A.No.942/2021 (T - RES)

BETWEEN :

1.      SIMPLEX INFRASTRUCTURES LTD.,
        BRIGADE PLAZA, UNIT C,
        1ST FLOOR, NO.71/1, S.C.ROAD,
        ANAND RAO CIRCLE,
        BENGALURU- 560 009
        REP BY ITS MANAGER
        Mr. Md. TANVIR AKHTAR.

2.      Mr. S.B.DAS
        SENIOR VICE PRESIDENT OF
        SIMPLEX INFRASTRUCTURES LTD.,
        S/O LATE R.L.DAS
        AGED ABOUT 64 YEARS
        R/AT NO.4/54, CHANDITOLA LANE,
        KOLKATTA- 700040                        ...APPELLANTS

               (BY SRI SANDEEP HUILGOL, ADV.)

AND :

1.      THE JOINT COMMISSIONER
        OF CENTRAL TAX,
        BENGALURU WEST COMMISSIONERATE
        OFFICE OF THE PRINCIPAL COMMISSIONER
        OF CENTRAL TAX, 1ST FLOOR,
        BMTC BUS STAND, KANAKAPURA ROAD,
        BANASHANKARI, BENGALURU- 560070
                             -2-




2.   THE SUPERINTENDENT OF CENTRAL TAX
     RANGE-E, DIVISION-5,
     BENGALURU WEST COMMISSIONERATE
     TTMC, BMTC BUILDING,
     KANAKAPURA ROAD, BANASHANKARI,
     BENGALURU- 560070

3.   THE ADDITIONAL COMMISSIONER
     OF CENTRAL TAX
     (FORMERLY KNOWN AS THE ADDITIONAL
     COMMISSIONER OF CENTRAL EXCISE,
     BANGALORE III COMMISSIONERATE)
     OFFICE OF THE COMMISSIONER
     OF CENTRAL TAX, P.B.NO.5400,
     C.R.BUILDING, QUEEN'S ROAD
     BENGALURU- 560001               ...RESPONDENTS

              (BY SRI JEEVAN J. NEERALGI, AGA.)

     THIS W.A. IS FILED UNDER SECTION 4 OF THE
KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE
ORDER PASSED IN THE WRIT PETITION NO.10766/2020 (T-RES)
DATED 24.05.2021.

     THIS APPEAL COMING ON FOR PRELIMINARY HEARING,
THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING:

                     JUDGMENT

This is an intra Court appeal filed under Section 4

of the Karnataka High Court Act, 1961, assailing the

order of the learned Single Judge dated 24.5.2021

passed in W.P.No.10766/2020, whereby the writ

petition filed by the petitioners/appellants has been

dismissed.

2. Appellant No.1 is a private limited company

and appellant No.2 is its Vice President. The appellants

assert that appellant No.1 - company is engaged, inter

alia, in the business of execution of civil works

contracts, inter alia, numerous Government

undertakings, such as the Bangalore Metro Rail

Corporation Ltd., Bangalore Development Authority, etc.

The appellants contend that in the course of business,

appellant No.1 was awarded a contract by Tata Housing

Development Corporation Ltd., for construction of

residential buildings in the Promont Hilltop residential

project in Bengaluru. As per the terms of the contract

between the parties and in the course of constructing

such residential buildings, appellant No.1 was required

to manufacture concrete mix at the site of the

construction itself for exclusive use in such

construction activity. The appellants claim that the

concrete mix was duly manufactured by appellant No.1

at the site of the said residential building and was

transported to the building site from the batching plant

which was merely adjacent to the project site. Thus,

there was also no removal of the concrete mix as it was

captively used at the site of the residential project itself.

3. The manufacture of concrete mix at project

site for the purpose of construction was exempt from

the levy of excise duty in terms of Notification

No.4/1997-CE, dated 1.3.1997. It appears, similar

notifications came to be issued under the Act. The

latest of such notification which is applicable to the

subject tax period is Notification No.12/2012-CE, dated

17.3.2012.

4. The relevant entry reads thus;

         Chapter or
 S.      heading No.
                         Description of goods       Rate    Conditions
 No.       or sub-
         heading No.
                       Concrete              mix
                       manufactured at the site
144.         38        of construction for use in   Nil        ---
                       construction work at
                       such site

5. Further, the CBIC has issued a Circular

bearing No.368/1/98, dated 6.1.1998. The relevant

clauses of the Circular are quoted hereunder for ready

reference;

"5. A doubt has been raised as to whether concrete mix manufactured at site using large mechanical devices is a form of ready mix concrete.

6. The matter has been examined and concrete mix implies the conventional method of concrete production conforming to the ISI Standard 456- 1978, which is produced and used at the site of construction. It is this concrete mixture, manufactured at the site of construction which is fully exempt vide Notification No. 4/97-CE dt. 1.3.97(S.No. 51). It is thus clarified that ready are mix concrete or pre-mixed concrete, by its very nature, cannot be manufactured at the site of construction and is brought from the factory of manufacturer for use in construction.

7. In view of the above and keeping in mind the distinction between Ready Mix Concrete and "Concrete Mix" it is clarified that Ready Mix

Concrete is an excisable product classifiable under sub-heading 3824.20, chargeable to duty at the appropriate rate whereas "Concrete Mix" manufactured at the site of construction for use in construction at such site, is fully exempt vide Notification No. 4/97-CE dt. 1.3.97-(S.No. 51).

8. All Pending disputes/ assessments on the issue may be settled in the light of these guidelines."

6. While the position stood thus, a show cause

notice was issued by the adjudicating authority alleging

acts of deliberate omissions and commissions

committed by the appellants i.e., suppression of the fact

of manufacture of RMC by it. In response to the show

cause notice, a reply was submitted by appellant No.1

denying the allegations reiterating that it was solely

engaged in the manufacture of controlled concrete at

the project site itself and as such, the said goods

manufactured by it were exempt from excise duty under

the Central Excise Act, 1944 ('Act' for short) as per the

Circular dated 6.1.1998 issued by the CBIC, opposing

the invoking of extended period of limitation.

Considering the said reply, respondent No.1 passed the

impugned order in original dated 14.6.2019 confirming

all the proposals made in the show cause notice barring

the proposal to confiscate the goods in question.

7. The appellants submit that immediately after

the receipt of the impugned order in original, the same

was forwarded to their Tax Consultant with instructions

to prepare, finalize and file appeal before the first

appellate authority within the time prescribed under

Section 35 of the Act. It is the contention of the

appellants that they were under the bona fide belief that

the appeal was filed against the order in original; On

receipt of the impugned letter dated 3.9.2020 from

respondent No.2 directing them to immediately pay the

duty, interest and penalty levied in the impugned order

in original, non filing of the appeal by their Tax

Consultant is said to have come to their knowledge. By

that time, the extended period for filing the appeal

before the first appellate authority had already expired.

In such circumstances, the appellants had approached

the Writ Court seeking for a writ or direction quashing

the impugned order in original passed by respondent

No.1 or alternatively permit the appellants to file an

appeal before the first appellate authority with a

direction to consider the same on merits without raising

the issue of limitation.

8. The Writ Court on examining the

explanation offered by the appellants for not filing the

statutory appeal held that the reasons for delay caused

explained must be construed as unreasonable.

Thereafter, proceeded to examine the challenge made to

the order in original said to have been passed without

jurisdiction. Placing reliance on the decision of the

Hon'ble Apex Court in the case of Larsen and Toubro

Ltd. and another v. Commissioner of Central Excise,

Hyderabad, reported in (2015) 15 SCC 455, observed

that the appellants have set up a batching plant

comprising of separate silos and concrete mixer with

necessary pumps, piping system and control panel to

manufacture concrete mix of required grades and

quality as per the contractual terms and the said

manufacturing process adopted by them is not different

from the process involved for manufacturing RMC.

Accordingly, upheld the classification of concrete mix

manufactured by the appellants at the project site as

RMC, rejecting the writ petition. Being aggrieved by the

same, the appellants have filed this appeal.

9. Learned counsel appearing for the appellants

would submit that the intention of the Union

Government has always been to grant exemption from

payment of duty on the concrete mix manufactured at

the construction site for use in the construction which

- 10 -

could be evidenced from the exemption notifications

issued under the Act. Referring to CBIC Circular dated

6.1.1998 submitted that the concrete mix manufactured

at the site of construction for using construction of such

site is fully exempted. Thus, the aforesaid instructions

issued by the CBIC is binding on the respondents -

authorities, passing of the order in original directly

contrary to the said circular suffers from infirmity and

being without authority of law.

10. It was further submitted that the test

propounded by the Hon'ble Apex Court in the case of

Larsen and Toubro, supra, would indicate that the

concrete mix manufactured at the site can be classified

as RMC subject to considering the following

characteristics; (1) the plant and machinery set-up for

its manufacture, (2) the manufacturing processes

involved, (3) the properties of the concrete mix and (4)

the manner of delivery. The adjudicating authority has

- 11 -

not examined the matter on all these aspects while

arriving at the decision that the concrete mix

manufactured at the site by appellant No.1 is RMC

exigible to service tax. The appellants had prayed to

remand the matter to the assessing officer setting aside

the impugned order. Accordingly, seeks for setting

aside the order passed by the Writ Court and to remand

the matter to the adjudicating authority for fresh

consideration to examine the process of manufacture of

concrete mix in the light of the test propounded by the

Hon'ble Apex Court in Larsen and Toubro, supra, vis-

à-vis Circular dated 6.1.1998.

11. Learned counsel Sri.Jeevan J Neeralgi,

appearing for the Revenue supporting the impugned

order would submit that no writ petition is maintainable

against the order in original filed beyond the limitation

period prescribed under the statute having regard to the

law enunciated by the Hon'ble Supreme Court in the

- 12 -

case of Oil and Natural Gas Corporation Limited v.

Gujarat Energy Transmission Corporation Ltd., and

others, reported in (2017) 5 SCC 42 and Assistant

Commissioner (CT) LTU, Kakinada and others v. M/s

Glaxo Smith Kline Consumer Healthcare Ltd.,

reported in 2020 SCC Online SC 440. It was further

argued that the learned Single Judge has rightly

analyzed the material on record in the light of the

judgment of the Hon'ble Apex Court in the case of

Larsen and Toubro, supra, and rejected the writ

petition, the same deserves to be confirmed by this

Court.

12. We have carefully considered the rival

submissions of the learned counsel appearing for the

parties and perused the record.

13. It is not in dispute that the order in original

was passed by the adjudicating authority on 14.6.2019

and the writ petition was filed by the appellants before

- 13 -

this Court in the month of September 2020. The

statute prescribes the limitation period of 60 days with

the next 30 days as per the proviso i.e., totally 90 days

in filing the appeal before the Commissioner of Central

Excise (Appeals) against the order in original under

Section 35 of the Act. The appellants having not availed

the said statutory remedy, challenged the order in

original impugned contending that they have

manufactured the concrete mix at the project site which

is exempt under Circular dated 6.1.1998 and no RMC

was manufactured.

14. It is true that the appellants have not availed

the alternative remedy of statutory appeal available

under the Act and have filed the writ petition

challenging the order in original, but the Writ Court not

merely dismissed the writ petition as not maintainable

but further proceeded to decide the matter on the merits

of the case, thereby concluded that the concrete mix

- 14 -

manufactured by the appellants at the project site

classified by the adjudicating authority as RMC is

justifiable. Ordinarily, we would not have interfered with

the order of the Writ Court, in rejecting the writ petition

as not maintainable, but in the facts and circumstances

the finding given by the Writ Court on the merits would

warrant interference since the factual aspects which are

required to be analyzed by the first appellate authority

and the CESTAT - the statutory authorities, cannot be

adjudicated under the Writ jurisdiction.

15. A machinery is provided under the Act and

the hierarchy of officers/authorities to analyze the

factual aspects where the scientific analysis could be

made with the assistance of the experts in the field

which would finally come to the aid of the Court in

deciding the matter on merits in appeal. Circumventing

the same, if the assessee has approached a Writ Court,

except in certain circumstances as enunciated in M/s

- 15 -

Practice Strategic Communications India Private

Limited v. The Commissioner of Service Tax,

Bangalore, reported in ILR 2016 Kant. 4493,

ordinarily no writ could be entertained. The relevant

paragraphs 11, 13, 14, 15 reads thus;

"11. In view of the above referred decision of this Court, if this Court finds that the authority has passed the order without jurisdiction or has exercised the power in excess of the jurisdiction or by overstepping or crossing the limit of jurisdiction or that there is failure of justice, or it has resulted in gross injustice, it would be a case falling under the exceptional category for exercising the power under Article 226 of the Constitution and to interfere with the order of the original authority or the Appellate Authority, as the case may be. In order to find out as to whether the case is fit for exercising of the power under Article 226 of the Constitution, we may record that as per the decision of the Delhi High Court, Rule 5, on the basis of which the original authority has passed the order for levying of tax is held to be ultra vires to Section 67 of the Act. Further, the matter may fall in the realm of correct interpretation of Section 67 as to whether the

- 16 -

expenses reimbursed by the consumer to the service provider, can be included for the purpose of computation of the service tax or not. We do not propose to express any further view on the said aspects in view of the order which we may pass hereinafter, but suffice it to observe that in view of the decision of the Delhi High Court, there was a strong case on merits on the part of the petitioner to be considered by the taxing authority. Unfortunately the decision of the Delhi High Court though was specifically brought to the notice of the original authority in the reply to the show cause notice, in the impugned order of the original authority, there is no reference whatsoever. Under these circumstances, we find that the case may fall in the exceptional category for exercise of the power under Article 226 of the Constitution.

12. xxxxxx

13. In view of the aforesaid, we find that directions issued hereunder shall meet the ends of justice.

14. The impugned order of the First Appellate Authority as well as the order of the Tribunal are set-aside, on condition that the petitioner deposits the amount of 7.5% of the duty

- 17 -

demanded and further pays cost of Rs.25,000/- to the respondent, within a period of one month from the date of receipt of certified copy of the order.

15. After the aforesaid condition is complied with, the matter shall stand restored on the file of the Commissioner (Appeals) with a further direction that he shall consider the appeal on merits in the light of the observations made by this Court in the above judgment and after giving opportunity of hearing to all concerned."

16. Given the circumstances, in our considered

view, it would be appropriate in the interest of justice and

equity to permit the appellants to prefer an appeal before

the first appellate authority i.e., Commissioner of Central

Excise (Appeals) to consider the matter on merits without

going into the issue of limitation subject to imposing costs

and the petitioner depositing the amount as required, for

preferring an appeal. We have arrived at this conclusion

since the process of manufacture of concrete mix and

RMC has to be investigated minutely keeping in mind

the Circular dated 6.1.1998 issued by the CBIC. A

- 18 -

line has to be drawn between the manufacturing

process of these two, viz. concrete mix and RMC, merely

for not utilizing the stone crushers and sand mill

machine, no decision can be taken inasmuch as the

manufacture of the product whether is concrete mix or

RMC. There is no cavil on the proposition that RMC

and concrete mix are two different commodities

involving distinct process of manufacturing and that

only concrete mix is eligible for the benefit of exemption

notification. But what is the distinct process of

manufacture has to be clearly discussed and reasons

are to be assigned for such distinct process. Further,

the manner of delivery also assumes significance. The

adjudicating authority appears to have proceeded to

analyze on the plant and machinery set up for its

manufacture in detail, but not in the light of the

notification issued by the CBIC/Union Government vis-

à-vis the dictum laid down by the Hon'ble Apex Court in

Larsen and Toubro, supra, in its entirety.

- 19 -

17. In the usual course if the assessee knocks

the doors of the Writ Court without exhausting the

alternative remedy of appeal available under the Act, no

exception can be found with the Writ Court in rejecting

the writ petition as not maintainable, but having regard

to the peculiar facts and circumstances of the case, as

in the present case when the appellants have

approached the Writ Court with an alternative relief of

seeking permission to file an appeal before the appellate

authority, any finding recorded on the merits of the case

which indeed relates to facts warrants interference.

18. Thus, it is clear that in the absence of power

vested with the appellate authority to condone the

delay, in the peculiar facts and circumstances of the

case, the ends of the justice would be met in permitting

the appellants to file an appeal instead of adjudicating

the matter on merits subject to conditions as aforesaid.

- 20 -

19. For the reasons aforesaid, we pass the

following:

ORDER

i) Writ appeal is allowed in part subject to

payment of costs of Rs.1,00,000/- (Rupees

One Lakh) payable by the appellants to the

Chief Minister's Covid-19 Relief Fund within

a period of two weeks from today.

ii) The order dated 24.5.2021 passed by the

learned Single Judge in W.P.No.10766/2020

is set aside.

iii) Liberty is granted to the appellants to file an

appeal before the Commissioner of Central

Excise (Appeals) - first appellate authority

within a period of four weeks from the date

of receipt of certified copy of the order.

iv) In the event of filing such an appeal, subject

to pre-deposit as required under law, the

appellate authority shall consider the matter

- 21 -

on merits without raising objections on the

issue of limitation and decide the same on

merits in accordance with law in an expedite

manner.

v) All the rights and contentions of the parties

are left open.

vi) This order being rendered in the peculiar

facts and circumstances of the case, the

same shall not be treated as a precedent.

Sd/-

JUDGE

Sd/-

JUDGE

nd