Excise Duty on Ready Mix Concrete
- The complexities of the issues pertaining to the levy of indirect tax on construction related activities are bigger than the boulders and stickier than the concrete. The construction industry is adopting every new, relevant and viable technologies nowadays to improve the efficiency and reducing the cycle time for the constructions. Most relevant examples of the latest technology is the use of “Ready Mix Concrete” rather than the “Concrete Mix”.
- The Hon’ble Supreme Court in the recent case of M/s. Larsen & Toubro Ltd. reported in 2015-TIOL-236-SC-CX=2015 (324) ELT 646 (SC) has held that the exemption under the Notification no. 12/2012-CE is available only to “Concrete Mix” and not to “Ready Mix Concrete (RMC)”! Profoundly examining the product “Concrete Mix” or “RMC”, the characteristics of the end product does remain the same, however, the process of preparation of “Concrete Mix” or “RMC” is distinct, the same which was concluded by the Supreme Court in the above referred case. Let us check out the chronicles of the events of the leviability of excise duty on the “Concrete Mix” and “RMC”.
- The Notification No.4/1997-CE dated 01.03.1997 granted exemption from the levy of central excise duty to the product as “concrete mix” falling into Chapter Heading 38 of the Central Excise Tariff was issued. The Notification No. 4/2006-CE dated 1.3.2006 vide S. No. 74 provided that concrete mix manufactured at the site of construction for use in construction work at such site was exempt from levy of excise duty. Notification No. 12/2012-CE dated 17.03.2012 was issued by suppressing Notification No. 4/2006-CE whereby the said notification vide Sr. No. 144 retained the exemption for the levy of excise duty on the concrete mix manufactured at the site of construction for use in construction work at such site.
Analysis of the Case Law
- The Hon’ble Supreme Court in the referred case has held that the exemption under the above referred exemption notifications is available only to “Concrete Mix” and not to “Ready Mix Concrete”. The Hon’ble Supreme Court has also noticed that there is a difference in the process of manufacture of “Concrete Mix” and “Ready Mix Concrete” and therefore, both the products are different commodities.
- The Hon’ble Court has thus adhered that the exemption from levy of central excise duty is available only to “Concrete Mix” and not to “Ready Mix Concrete”.
Impact of the Judicial Decision
- As such in the common parlance, there is no difference between “Concrete Mix” and “Ready Mix Concrete”. Both are considered as synonyms for the same product. Even in case of Ranjit Sagar Dam reported in 2007 (217) ELT 345 (P&H), Hon’ble Punjab & Haryana High Court has also taken a view that there is no difference between “Concrete Mix” and “Ready Mix Concrete” and exemption from payment of central excise duty is available if such product is used at site where it is manufactured. However, the Hon’ble Supreme Court has held that the commodities concrete mix ad ready mix concrete are different on the basis of the different process in manufacturing and producing.
- It was a prevalent practice in industry to claim exemption from the levy of central excise duty on manufacture of ready mix concrete manufactured at the site. The manufacturers already availed the exemption from the payment of excise duty on the RMC being produced at the various project sites under the stated notification by understanding the “Concrete Mix” & “RMC” as the same. The department has already started the action by issuing show cause notices and inquiries to the manufacturers and producers to consider in the net of excise.
- However it may be noted that it would be practically very difficult to identify the process involved and check the technology used for the manufacturing of concrete at the site.
- Hence due to the practical issues involved we urge nation-wide associations to write to Ministry of Finance and pray that the Central Government be kind enough to examine the matter concisely for the levy of excise duty on manufacture of the RMC and issue a retrospective exemption in the forthcoming budget.