Sand Lime Bricks is Type of Fly Ash Bricks, Eligible for Excise Exemption: CESTAT Quashes Excise Duty Demand of Rs. 2.6 crores [Read Order]

The Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ), Kolkata has set aside a central excise duty demand of ₹2.67 crore along with penalties against bricks manufacturer and its directors, holding that sand lime bricks are a type of fly ash bricks and hence eligible for exemption under Notification No. 1/2011-CE dated March 1, 2011.

Proceedings were initiated by the Central Excise authorities against M/s. Omkar Infracon Private Limited, the appellant alleging that the company misdeclared the nature of goods manufactured during April 2013 to August 2016.

The department contended that the assessee wrongly classified its products as sand lime bricks to claim excise exemption, whereas the goods were actually fly ash bricks, allegedly outside the scope of the notification.

Based on this reasoning, the Commissioner confirmed a duty demand of ₹2.67 crore, imposed an equivalent penalty on the company, and levied penalties of ₹75 lakh each on its two directors under Rule 26 of the Central Excise Rules, 2002.

On appeal, senior counsel for the appellant argued that the Commissioner had erred in treating sand lime bricks and fly ash bricks as distinct products. It was submitted that sand lime bricks are in fact a sub-category of fly ash bricks and both fall under tariff heading 68159910 of the Central Excise Tariff.

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Further, as the notification explicitly extended exemption to sand lime bricks classifiable under either Chapter 68 or 69, the denial of exemption by the adjudicating authority was unjustified.

The Tribunal found merit in the appellant’s submissions and relied on its earlier decision in Commissioner of CGST & C. Ex., Howrah v. Aum Bricks & Pavers Pvt. Ltd., where it was held that sand lime bricks are a type of fly ash bricks and both are covered under the exemption notification.

The bench of R. Muralidhar (Judicial Member) and K. Anpazhakan (Technical member) observed that “the appellant-company manufactures sand lime bricks, which is a type of fly ash bricks. It is seen that both sand lime bricks and fly ash bricks are classifiable under the Chapter 68 only. We find that there is no other tariff sub-heading available in the Central Excise Tariff which provides classification of sand lime bricks.”

“Accordingly, we hold that the demand of central excise duty of Rs. 2,67,83,024/- confirmed in the impugned order is not sustainable”, ruled the bench.

Accordingly, the Tribunal ruled that there was no basis for the differential duty demand. It was also held that since the primary duty demand itself was unsustainable, the consequential interest and penalties on the company as well as its directors could not survive.

Therefore, the appellate tribunal quashed the entire duty demand of ₹2.67 crore, interest, and penalties, granting relief to the appellants.

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