Taxability of Ready Mix Concrete, now-a-days has gathered a great impetus, due to various investigations and show cause notices being raised by the excise department to collect excise duty applicable to RMC from various construction industries.
However, a lot of confusion persists regarding difference between Ready Mix Concrete and Concrete Mix.
So far as concrete mix is concerned, exemption from payment of excise duty is given vide Notification 12/2012-CE dated 01.03.2012 vide Sl. 144, which exempts “Concrete mix manufactured at the site of construction for use in construction work at such site”
Thus the exemption notification 12/2012-CE is applicable only to concrete mix, and in contrast, RMC {classifiable under tariff heading 3824 50 10} was chargeable at tariff rate of 6% {and further in terms of Notification No. 1/2011- C.E. dated 01.03.2011 as amended (Sl.No.46) an option to pay the excise duty at concessional rate of 2% was also available subject to non-availment of CENVAT credit}.
The difference in “Concrete Mix” and “Ready mix concrete” regarding manufacturing process and taxability under Excise is analysed by the department in the para 4, 5, 6 & 7 of Circular No. 368/1/98-CX, dated 6-1-1998,which is produced hereunder;
“Para 4. Ready Mix Concrete is thus an excisable product which has a separate tariff entry under sub-heading 3824.20 of the Central Excise Tariff Act, 1985. It is also known under the Indian Standard IS : 4926-1976, which for the purposes of that standard defines Ready Mix Concrete as concrete delivered at site or into the purchaser’s vehicle in a plastic condition and requiring no further treatment before being placed in the position in which it is to stay and harden. Ready Mix Concrete attracts duty at the rate of 13% prior to 21-10-1997. Subsequent to 21-10-1997 vide Notification No. 65/97-C.E., dt. 21-10-1997 the duty on Ready Mix Concrete classified under sub-heading 3824.20 has been reduced to 8%.
Para 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.
Para 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-C.E., dated 1-3-1997 (S. N. 51). It is thus clarified that ready 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.
Para 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 now 3824.50.10, 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-C.E., dated 1-3-1997 (S. No. 51).”
From the supra discussion, it is clear that the two products, “Mixed Concrete” [ISI Standard: 456-1978] and “Ready Mix Concrete” [ISI Standard: 4926-1976] are different products and till now, “Mixed Concrete” is an exempted product (goods) while “Ready Mix Concrete” is an excisable product (goods).
Para 3 of Circular No. 237/71/96-CX, dated 12-8-1996 confirms taxability of RMC under Excise considering all the aspects associated with it, as hereunder;
“Para 3. In the instant case, the activity engaged for making the product “Ready Mix Concrete” very much falls within the ambit of the meaning of the word “manufacture”, as envisaged under Section 2(f) of CESA, 1944 and in view of the pronouncements of the Hon’ble Supreme Court, as a new product with a new name emerges. As regards, the marketability vis-a-vis the shelf life of the impugned goods, it is quite apparent that in spite of the fact that the goods have a short shelf life, the same are marketable. Thus to put it simply, the product “Ready Mix Concrete” is marketable though within the time frame of its short shelf life. As such, the product satisfies the twin test of “goods” and “marketability” which are needed if they are to be held as chargeable to Central Excise duty under CETA, 1985. So, we can say that “Ready Mix Concrete” is undoubtedly an excisable product. Underlined portion of Para 6 of Circular No. 368/1/98-CX, dated 6-1-1998 clearly states that what is manufactured at plant away from site can never be “Mixed Concrete” considering its very short shelf-life but will only be “Ready Mix Concrete”.
Further, the issue pertaining to leviability of excise duty on RMC is also settled in plethora of cases wherein it was held that RMC is not exigible for Exemption as available to concrete mix.
The Tribunal in the case of Larsen & Toubro Ltd. v. Commissioner 2005 (190) E.L.T. 132 (Tri. - Bang.), while upholding the findings of original adjudicating authority, observed that:
“what distinguishes RMC from other cement concretes is the manner in which it is manufactured, the high degree of precision and stringent quality control observed in the selection and processing of ingredients, namely aggregates, cement, sand, additives and water. After a detailed examination, he has come to the conclusion that the product manufactured by the appellants is only RMC.”
Further, the Supreme Court in the case of Larsen and Toubro Ltd Vs. CCE, Hyderabad dated 06 October 2015 {2015 (324) E.L.T. 646 (S.C.)}, while deciding on the Exemption Notification no. 4/1997-C.E. (as amended by 12/2012-C.E.),has clarified that Concrete Mix and Ready Mix concrete have two different meanings and the said exemption notification is applicable only to Concrete Mix manufactured at the site of construction for use in construction work at such site.
The relevant extract of the same is reproduced as below:-
“15. Mr. Yashank Adhyaru, learned senior counsel appearing for the Revenue while rebutting the aforesaid arguments submitted that CM and RMC were two different products which was clear from the Chapter Note entries itself. He further submitted that it is the process by which concrete is mixed that determines as to whether it is CM or RMC and consumption of the material at site was irrelevant. According to him, the process of CM was somewhat crude in contra-distinction to the sophisticated process by which RMC of a comparatively very high quality is produced. Referring to the order of the Tribunal, he pointed out that since in the instant case, high quality RMC was required for the construction of the highly advanced quality cement plant, that too in large quantity, in the process not only heavy machines in the form of Stone Crushers, Conveyors, Vibrator Screens to segregate different sizes of stone aggregates were used, there was addition of sand mill to produce sand from stones and other sophisticated equipments were also used for manufacture of RMC which are taken note of by the CESTAT and these are :
(i) Stone Crushers, Conveyors, Vibrator Screens to segregate different sizes of stone aggregates.
(ii) Sand mill to produce sand from stones.
(iii) Two batching plants in which all aggregates were weighed and batched by electrical controls and limit switches.
(iv) Cement silo where cement is stored and carried to the batching plant by a screw conveyor operated with automatic weighing gauges.
(v) Flow-meters to feed water after subjecting into chemical analysis.
(vi) Mixer to mix stone aggregates sand, cement and water.
(vii) Transit mixer mounted on a truck chassis for transporting the concrete to the actual site of construction.”
However, nullifying the effect of the Apex Court’s decision, and in a way to provide a big relief to the real estate sector, Hon’ble Finance Minister, in the current Union Budget 2016, has extended the benefit earlier available to concrete mix only, to RMC as well, thereby suitably amending the earlier notification 12/2012 vide Notification no. 12/2016-C.E. effective from 01-03-2016 so as to include Ready Mix Concrete for providing exemption from Excise duty along with Concrete Mix.
The said entry of the notification 12/2016 is read as follows:
“Concrete Mix or Ready-mix Concrete (RMC), manufactured at the site of construction for use in construction work at such site.
Explanation. – For the purpose of this entry, the expression “site” means any premises made available for the manufacture of goods by way of a specific mention in the contract or agreement for such construction work, provided that the goods manufactured at such premises are solely used in the said construction work only.”
Thus, w.e.f. 01-03-2016, both, Concrete Mix as well as Ready Mix Concrete, are exempted from the levy of excise duty.
Tags :Excise
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