Custom, Excise & Service Tax Tribunal
Hutti Gold Mines Company Limited vs Belgaum on 19 March, 2024
E/26922,26924,26974/2013
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 1
Central Excise Appeal No. 26922 of 2013
(Arising out of Order-in-Original No. 08/2013-Commr/ C.Ex. dated
28.03.2013 passed by the Commissioner of Central Excise and
Customs, Belgaum.)
M/s. Hutti Gold Mines Company Limited,
III Floor, KHB Complex,
National Games Village,
Koramangala,
Bangalore-560 047. ..............Appellant(s)
VERSUS
Commissioner of Central Excise and Customs,
71, Club Road,
Belgaum-590 001. .........Respondent(s)
WITH Central Excise Appeal No. 26924 of 2013 (Arising out of Order-in-Original No. 08/2013- Commr/C.Ex. dated 28.03.2013 passed by the Commissioner of Central Excise and Customs, Belgaum) Shri. Dr. V. Chandrasekhar I.A.S, Ex-Managing Director M/s. Hutti Gold Mines Company Limited, III Floor, KHB Complex, National Games Village, Koramangala, Bangalore-560 047. .........Appellant(s) VERSUS Commissioner of Central Excise and Customs, 71, Club Road, Belgaum-590 001. .....Respondent(s) AND Central Excise Appeal No. 26974 of 2013 (Arising out of Order-in-Original No. 08/2013-Commr/ C.Ex. dated 28.03.2013 passed by the Commissioner of Central Excise and Customs, Belgaum).
Page 1 of 27E/26922,26924,26974/2013 Shri D.Y. Venkatesh M/s. Hutti Gold Mines Company Limited, III Floor, KHB Complex, National Games Village, Koramangala, Bangalore - 560 047. .........Appellant(s) VERSUS Commissioner of Central Excise and Customs, 71, Club Road, Belgaum-590 001. .........Respondent(s) Appearance:
Shri G. Shivadass, Sr. Advocate Mr. Md. Ibrahim, Advocate For the Appellant Mr. P. R. V. Ramanan, Special Counsel For the Respondent CORAM:
Hon'ble Dr. D.M. Misra, Member (Judicial) Hon'ble Mr. Pullela Nageswara Rao, Member (Technical) Final Order No. 20168 - 20170 /2024 Date of Hearing: 22.09.2023 Date of Hearing:19.03.2024 Per : D.M. Misra These appeals are filed against Order-in-Original No.8/2013 dated 28.03.2013 passed by the Commissioner of Central Excise and Customs, Belgaum.
2. The learned Commissioner ordered as follows:
1) It is hereby ordered that M/s. HGMCL are not eligible for the exemption under Notification 5/2006-
CE dated 01.03.2006 (Sl.No.21) in respect of gold bars manufactured in their factory at Hutti;
2) It is ordered to classify the gold bar manufactured in their factory under tariff heading 71081200 of the First Schedule to the Central Excise Page 2 of 27 E/26922,26924,26974/2013 tariff Act, 1985. Accordingly, the duty is levied and payable on gold bar manufactured and cleared;
3) I demand and order for recovery of duty of excise of Rs.141,37,26,577/-(Rupees One Hundred and Forty one Crores Thirty Seven Lakhs Twenty Six Thousand Five Hundred and Seventy Seven only)(including education cess and Secondary and Higher Education cess) in respect of gold bar manufactured and removed by M / s Hutti Gold Mine Company Limited, Hutti during the period from 01.01.2007 to 31.12.2011 under proviso to section 11A of the Central Excise Act 1944 with interest thereon under Section 11AB of the said act;
4) I order appropriation of duty of Rs.3,54,61,240/-
stated to have been paid against the above
demanded amount;
5) I impose penalty of Rs.141,37,26,577/- (Rupees
One Hundred and Forty One Crores Thirty Seven Lakhs Twenty Six Thousand Five Hundred and Seventy Seven only) under Section 11AC of the Central Excise Act, 1944 on M/s Hutti Gold Mines Company Limited, Hutti and
6) I impose penalty of Rs. 10,00,00,000/- (Rupees Ten Crores Only) on D.Y. Venkatesh, and Rs. 10,00,00,000/- (Rupees Ten Crores only) on V. Chandrasekhar under Rule 26 of the Central Excise Rules, 2002.
3. Briefly stated the facts of the case are that the appellants are a Public Sector Undertaking, wholly owned by Government of Karnataka. The Appellant are engaged in mining of gold ore in their mining lease area located at Hutti and Chitraguda. On the Page 3 of 27 E/26922,26924,26974/2013 basis of the intelligence, that duty though required to be paid on the manufactured gold by the Appellant but not paid, DGCEI visited their mines and factory premises at Hutti on 13.09.2010 and retrieved relevant records from the premises. On investigation, it revealed that the appellants are not registered with the Central Excise department nor discharging Central Excise duty on the removals of gold bars manufactured by them in their factory situated within the mining leased area. The appellants are manufacturing gold bars by processing gold ore extracted from the adjacent underground mines situated at Hutti and other nearby mines, which belong to the appellant but failed to discharge duty on the same. Consequently, on completion of investigations, show-cause notice was issued to the appellant on 07.02.2012 proposing recovery of Central Excise duty not paid on the gold bar for the period 01.01.2007 to 31.12.2011 amounting to Rs.141,37,26,577/- along with interest and proposal for penalty under Section 11AC of Central Excise Act, 1944 and Rule 25 of Central Excise Rules, 2002 on the company and penalty under Rule 26 of the said Rules on other Noticees. On adjudication, the demand was confirmed with interest and order was passed as stated above. Hence, the present appeals.
4. At the outset, the learned Sr. Advocate for the appellant has submitted that the Appellant undertakes mining activity at their three mines located at Hutti, Uti, Heera Buddini villages. Explaining the process he has submitted that; the gold ore is mined from reefs from a depth of 2500 feet below the ground level; the gold ore (less than 8 inches) is brought to the surface through shafts and transferred, either directly through conveyors or by using tippers to the Metallurgical Plant for further processing; the Plant comprises of four sections viz., Crushing Section, Grinding Section, Cyanidation cum Carbon in pulp process Section and Smelting Section. The crushing operation is carried out in three stages viz., Primary Crushers, Secondary Crushers and Tertiary Crushers, where gold ore is crushed to reduce its size to 10 mm. The crushed ores are carried out in the Page 4 of 27 E/26922,26924,26974/2013 primary mills and secondary mills. The discharge of mills is passed through woollen blankets and free gold is recovered through gravity process. The gold recovered is passed through cyclone classifiers and the coarse gold is again subjected to grinding in the secondary mill. The process is repeated till the ore is reduced to 75 micron size. The woollen blankets are washed every 3 hours and the washings (rough concentrates) collected are stored in concentrate tanks for 24 hours. These rough concentrates are fed to vibrating tables, treated and cleaned to remove impurities. The free gold recovered from this process is called 'Table Concentrate', which is taken for further processing of roasting and magnetting to obtain gold powder.
4.1 Further it is submitted that the fine gold which could not be recovered through gravity process is recovered by chemical process called Carbon-in-Pulp process. The slurry containing very fine gold particles, discharged from the overflow by the cyclone classifier, is sent to the leaching plant in the Cyanidation-cum- carbon in pulp process section. The slurry is mixed with Sodium Cyanide, where all gold particles are dissolved in cyanide. This cyanide slurry is passed through carbon contactors, where dissolved gold is absorbed to the carbon. The gold deposited carbon is separated from the slurry by washing on the screen. This carbon is taken for acid and alkaline washing. After washing the carbon is taken to elusion process, where it will be treated with sodium hydroxide and sodium cyanide and the temperature is maintained at 90 - 95° C. Then the eluted gold solution will be sent to Electro Winning process in which gold is deposited on the steel wool cathodes. Then, the loaded steel wool cathodes will be removed manually from time to time and subjected to acid digestion and drying to obtain Gold Precipitate Powder. The gold powder obtained as roasted and magnetted table concentrate and gold precipitate powder are taken separately to the melting refining section, wherein the concentrate is mixed with flux (Borax, Manganese dioxide, Nitre and Silicon) and heated up to 1200 degree by using oil fired furnace. The gold melts at 1063° Page 5 of 27 E/26922,26924,26974/2013 and settles at the bottom of the crucible owing to its density. The impurities, which are lighter will float on the top and removed as slag after pouring into the moulds to obtain gold buttons after cooling. The purity of gold button smelted from table concentrate and buttons smelted from the gold precipitate powder vary slightly in quality or gold content. The buttons obtained from both the process are melted together to eliminate further impurities and cooled to obtain a homogenous Gold Dore Bars having gold content of 90-92%, silver content of 6-7% and other impurities.
4.2 He submits that the present dispute relates to admissibility of the exemption under Sl. No.21 of the Notification No.5/2006-CE dated 1.3.2006 on the manufacture of 'Gold Dore Bars' as the Notification allows exemption to "Primary Gold converted with aid of power from any form of gold".
4.3 Tracing the history of exemption allowed to primary Gold, the learned Sr. Advocate submits that for the first time by Notification No.157/1990-CE dated 16.11.1990, the Central Government granted exemption to primary gold converted from any form of gold falling under Chapter 71 from duty as is in excess of the amount calculated at the rate of Rs.175/- per kg. The term 'primary gold' was defined for the purpose of this Notification to mean gold in unfinished/semifinished form and includes ingots, bars, blocks, slabs, billets, shorts, pellets, rods, sheets, foils and wires. In the said Notification the meaning of expression "in any form of gold' was not prescribed. Thereafter, this Notification was rescinded and fresh Notifications were issued from time to time allowing exemptions at different rate.
4.4 It is his contention that in all these Notifications issued from time to time, the Central Government has consistently defined the term 'primary gold' by way of an Explanation. The said entry has not undergone any change and Page 6 of 27 E/26922,26924,26974/2013 the Central Government also did not find reason to define the phrase "any form of gold". Thus, the understanding of all concerned was that the expression of 'any form of gold' means dore bars, powder, mud or ore / concentrate.
4.5 It is submitted that a dispute of similar nature about the admissibility of exemption Notification No.6/2000 dated 01.03.2000 was raised for the first time in the case of Birla Copper Ltd. Vs. CCE, Vadodara: 2007 (208) ELT 385 (Tri.- Mum.). In the said case, the department proposed to collect duty on gold bars manufactured and cleared by Birla Copper Ltd., denying the benefit of exemption Notification No.6/2000-CE dated 01.03.2000 on the ground that 'anode slime' which was the primary input in the process of manufacture of gold bars was not a form of gold. The matter reached before the Tribunal, with a majority opinion, the Tribunal held that the primary gold viz., gold bars manufactured out of 'dore anode' (which emerged as an intermediate product during the process of manufacture) is a form of gold and hence, eligible for the exemption Notification. The Hon'ble Supreme Court on an appeal against the said judgment of the Tribunal reported at CCE, Vadodara vs. Hindalco Industries Ltd.: 2015 (325) ELT 427 (SC) held that 'gold mud', which also emerged as an intermediate product is itself a form of gold and therefore, benefit of exemption was to be extended to gold bars manufactured by the appellant from the gold mud.
4.6 It is the argument of the Ld. Sr. Advocate that in spite of conflicting views expressed by the Members of the Tribunal way back in the year 2005/2006, no clarification has been brought by the Central Government to the expression "any form of gold". Thus, the said expression has always given a wide meaning by the industry and department.
Page 7 of 27E/26922,26924,26974/2013 4.7 The Notification in question i.e., No.5/2006-CE dated 01.03.2006 continued to grant exemption to primary gold converted with aid of power from any form of gold. The amendment was carried out to the said Notification through amending Notification No.11/2010-CE dated 27.02.2010 whereby Sl. No.21A was inserted, which for the first time Government sought to tax integrated factories manufacturing gold bars. This Sl. No.21A of the Notification was further amended by Notification No.05/2011-CE dated 01.03.2011, whereby for the first time gold bars manufactured from the stage of dore bars was brought within the tax net. Simultaneously, the Central Government also amended Sl. No.21 of the Notification No.5/2006-CE dated 01.03.2006 to exclude 'Dore Bars' from the expression 'any form of gold' which read as 'primary gold converted with the aid of power from any form of gold other than gold ore concentrate or dore bars'.
4.8 Summarising the amendments to Notification No.5/2006-CE dated 01.03.2006 from time to time, the learned Sr. Advocate has submitted that: (i) by virtue of 2010 amendment for the first time, concessional rate of duty was sought to be introduced in respect of gold bars manufactured from the stage of gold ore or concentrate but the levy was restricted to gold bars bearing manufacturer's or refiner's engraved serial number and weight expressed in metric grams, units and gold coins. (ii) the levy in terms of Entry Sl. No. 21A was sought to be extended to gold bars which were manufactured from the stage of 'gold dore bar' by the virtue of amendment in March 2011. (iii) Simultaneously by amending Sl. No.21 and excluding from the words 'any form of gold' other than gold ore concentrate or dore bar.
4.9 Assailing the finding of the learned Commissioner that; (i) the gold ore or concentrate is a mineral and not metallic gold and cannot be considered as form of gold so as to extend the Page 8 of 27 E/26922,26924,26974/2013 benefit of exemption of Notification No.5/2006-CE dated 01.03.2006; secondly, extraction of gold from Ore cannot be equated to conversion of one form of gold into other primary form metallic gold, the learned Sr. Advocate submitted that the Hon'ble Supreme Court's decision in Hindalco Industries case (supra) be read in the context of identical exemption Notification No.6/2006-CE dated 01.03.2006 decided both the issues in favour of the assessee.
4.10 It is argued that the process of manufacture of gold bar from the stage of copper ore in the said case, and the process of manufacture of gold bars from the stage of gold ore are more or less similar and comparable. In that case, the contention of the Revenue was that the primary input for manufacture of gold bar was 'anode slime' and anode slime or the intermediate product 'dore anode' and 'gold mud' which emerges for the first time in the factory during the process of manufacture cannot be considered as "any form of gold". Further the term 'any form of gold' covers only articles/ornaments of gold or primary form of gold and that the recovery of gold by detailed process of refining cannot be considered as a conversion of any form of gold to another form.
4.11 Analysing the judgment of the Tribunal, the learned Sr. Advocate has submitted that the majority judgment of CESTAT has held that 'dore anode' be considered as 'any form of gold' and gold bars manufactured from it are held to be exempted under Notification No.6/2000 dated 01.03.2006. It was further observed that duty was required to be determined on the value at the stage of emergence of 'dore anode' during the process, as the same was manufactured from the stage of anode slime but since the show-cause notice did not direct the demand on the emergence of dore anode by proposed recovery of duty on converted primary gold, which are exempt, the duty demand was set aside.
Page 9 of 27E/26922,26924,26974/2013 4.12 It is further submitted that the Hon'ble Supreme Court confirmed the majority view but took a holistic view of the Notification by holding that 'gold mud' qualifies as 'any form of gold' and gold bars being primary gold and procured from gold mud is eligible for exemption under the relevant Notification. Criticising the minority view, it is observed that there is a fallacy in the said view that the gold ore recovered from anode slime and not dore anode.
4.13 Further the learned Sr. Advocate has submitted that this Tribunal in Bangalore Refinery Pvt. Ltd. vs. CCE, Bangalore: 2009-VIL-35-CESTAT-BLR-CE held that dore bars having percentage of gold 80-90% is covered under any form of gold and the process of manufacture of gold bars from 'dore bar' is construed as conversion. The learned Sr. Advocate has vehemently argued that the decisions of the Apex Court/CESTAT are squarely applicable to the facts of the present case. He has pleaded that in the present case, immediately preceding material for manufacture of 'gold dore bar' is 'gold buttons' containing gold content of 85-92%. Gold button is in turn obtained from gold precipitate powder/table concentrate in powder form, therefore, by applying the reasoning of the Hon'ble Supreme Court, wherein gold mud which might have presence of gold at the most 30% was held to be a form of gold. Thus, gold precipitate/table concentrate which has gold content of more than 60%, would definitely fall under the expression 'any form of gold'. In support, they have also referred to the reasoning of the Tribunal in the case of CCE. Vs. Vijaya Packaging: 2000 (118) ELT 160 (Tri.) and also the following decisions:
• Dhruvco Printers vs. CCE: 1996 (85) ELT 62 (T) • CCE vs. Jayna Packaging Pvt. Ltd.: 2000 (122) ELT 140 (T) • Palas Associates Pvt. Ltd. vs. CCE: 1999 (105) ELT 166 (T) Page 10 of 27 E/26922,26924,26974/2013 It is submitted that the demand of duty on the manufacture of 'gold dore bars' deserves to be set aside.
4.14 Further assailing the findings of the learned Commissioner that any form of gold refers to metallic gold and gold ore / concentrate being 'mineral' would not qualify as a form of gold, he has submitted that the Notification nowhere uses the term metallic gold, hence restricting the meaning of any form of gold to metallic gold would be inserting new words and meaning for the purpose of interpretation of the said Notification. He has submitted that 'ore' generally refers to any mineral deposit of precious or other metals and 'gold ore' refers to a substance from which gold can be obtained and is a natural form of gold. Natural form is one amongst various forms of gold and cannot be excluded from the phrase 'any form of gold' for the purpose of Sl. No.21 of Notification No.5/2006-CE dated 01.03.2006. Further, he has submitted that gold ore classifiable under Chapter 26 and gold dore bar under Chapter 71 is also not a relevant factor for interpretation of the exemption Notification.
What is significant is final product i.e., Primary gold which is classified under Chapter 71 as held by the Hon'ble Supreme Court in the case of Hindalco Industries (supra). Therefore, examining from any angle, appellant is eligible to exemption at Sl. No.21 of Notification No.5/2006-CE dated 01.03.2006 for the period January 2007 to April 2011.
4.15 Also, he has submitted that the demand of duty interpreting Sl. No.21A of the said Notification for the period after 1.3.2010 to 31.3.2011 is also not sustainable. He has submitted that the gold bars manufactured by the appellants are engraved with Sl. No. and invoices carried weight expressed in metric units. Further, Sl. No.21A, which provides exemption to primary gold converted with aid of power from any form of gold continue to remain till its amendment through Notification No.25/2011-CE dated 24.03.2011. Referring to the judgment in Page 11 of 27 E/26922,26924,26974/2013 Bangalore Refineries' case (supra), he has submitted that amendment to Sl. No.21 through Notification No.25/2011 dated 24.03.2011 excluding from the scope of any form of gold viz., ore or gold concentrate and dore bars is prospective in nature and not clarificatory as argued by the Revenue.
4.16 Further, assailing the classification of the 'gold dore bars' by the Commissioner under Chapter subheading 7108 1200 as 'unwrought form of gold' and not under chapter subheading 7108 1300 as 'semi-manufactured forms' being not subjected to any kind of process after its emergence from its refinery, he has submitted that the demand of duty proposed in the show-cause notice dated 07.02.2012 is on gold bars manufactured by the appellant; but no proposition for determination of the correct classification of the said goods. Referring to the website meaning of unwrought bars, the learned Sr. Advocate has further submitted that gold ores are subjected to the process of crushing, concentration, leaching, precipitation, electrolytic refining, etc., and therefore, the resultant dore bars are rightly classifiable under Chapter Heading 7108 1300 as 'semi- manufactured forms' and not as 'unwrought forms of gold'. It is his contention that, in any case, the classification of the product cleared by the appellant under Chapter heading 7108 1200 or 7108 1300 is not material in deciding the benefit of exemption under Sl. No.21 of the Notification No.5/2006-CE dated 01.03.2006.
4.17 Further, assailing the finding of the learned Commissioner on the issue of limitation, the learned Sr. Advocate has submitted that show-cause notice issued on 07.02.2012 proposing recovery of duty for the period 01.01.2007 to 31.12.2011 is barred by limitation for the period prior to January 2010 as relevant facts regarding extraction of gold ore and its processing for the manufacture of gold bars were within the knowledge of the department, since setting up of Page 12 of 27 E/26922,26924,26974/2013 the factory of the appellant, hence allegation of fraud, suppression on the part of the appellant with intent to evade duty cannot be sustained. Besides, he has submitted that officers visited the factory on 13.09.2010 and notice was issued on 07.02.2012; hence, there cannot be suppression of fact pursuant to the visit of the officers to the factory. Referring to the development of notifications, amendments were issued from time to time, he has submitted that the issue involved in the present case is purely legal in nature and relates to interpreting the scope of exemption notification, hence, in such circumstances, invoking of extended period of limitation cannot be sustained. In support, he relies on the following judgments:
• British Airways vs. CCE, Delhi: 2014 (36) STR 598 (Del.) • Mangalore Refinery and Petrocheicals Ltd. vs. CCE & ST:
2019-VIL-413-CESTAT-BLR-CX • Bharat Electronic Limited vs. CCE, Meerut: 2004 (165) ELT 485 (SC) • Hindustan Insecticides Ltd. vs. CCE, Delhi: 2017 (6) GSTL 218 (Tri.-Del.) 4.18 Consequently, imposition of penalty under Section 11AC read with Rule 25 Central Excise Rules,2002 is also not sustainable. Further, challenging the impugned order imposing penalty under Rule 26 of Central Excise Rules, 2002 on Shri D. Y. Venkatesh, Executive Director and Dr. V. Chandrasekhar, Ex-
Managing Director, he has submitted that the said appellants were not concerned with removal of excisable goods physically and with the knowledge or reason or belief that the goods are liable for confiscation. No evidence has been brought on record by the Revenue to establish knowledge on the part of these appellants, hence, imposition of personal penalties cannot be sustained. In support, he has referred to the following judgments:
• Nirmal Inductomelt Pvt. Ltd. Vs. Commissioner of Central Excise, Jaipur: 2010 (259) ELT 243 (Tri.-Del.) • Anil Kumar Saxena vs. CCE: 2000 (129) ELT 351 • Laurel Organics Ltd. Vs. CCE: 2000 (117) ELT 69 (Tri.) Page 13 of 27 E/26922,26924,26974/2013
5. Learned Special counsel for the Revenue reiterating the findings of the Commissioner has submitted that the appellants are extracting gold from gold ore through various stages of manufacture like crushing, grinding, melting, etc. They obtained gold bars, which are known as 'dore bars' in the market and the percentage of gold is around 80-90% in these bars. These bars so produced are purchased by refineries, wherein serial numbers are given and manufacturer's name and particulars are embossed and ultimately sold. He has submitted that the core issue in the present case is whether the phrase 'any form of gold' would include "gold ore or concentrates" with which the process of manufacture commences at appellant's factory are referred to any form of gold like powder, wire, sheets, pellets, etc., or gold in the form of ornaments, broken ornaments or articles. The Revenue has contended that all along exemption under Sl. No.21 under Notification No.05/2006-CE dated 01.03.2006 is available only when primary gold is obtained by conversion in any form of gold like powder, sheets, pellets, etc. The expression 'conversion' according to the department implies that the metal to be converted must already exist and the process employed by the appellant to obtain primary gold by extracting gold from gold ore through various processes could not be called conversion from one form of gold to another.
Consequently, the exemption to the gold 'dore bars' manufactured by the appellant is not available.
5.1 Elaborating his argument, he has submitted that gold ore or concentrate in its physical form with their nature and character does not fall under the category of any form of gold. Further, to avail exemption in respect of primary gold, the starting material should be identifiable as gold metal by itself. Extraction of gold from ore cannot be equated to conversion of one form of gold into other form of primary metallic gold. There must exist metallic gold as such in different form (i.e., Page 14 of 27 E/26922,26924,26974/2013 ornament, article, powder or other primary form) in the initial stage, which is not present in the instant case; accordingly, the benefit of the Notification is not available. Referring to the observation of the Tribunal, while disposing the stay application in the present case, he has submitted that the Tribunal did not find force in the arguments of the assessee on merit. Rebutting the argument that gold ore is not a form of gold, he has submitted that primary gold comes into existence for the first time only at the stage of 'gold dore bar', hence no conversion took place in obtaining gold in any form.
5.2 He has further submitted that the decision rendered in the case of Birla Copper (supra), which has been later confirmed by the Hon'ble Supreme Court could be referred for comparison. In the said judgment, the Hon'ble Apex Court concurred with the view that 'Anode slime' from which 'dore anode' is obtained cannot be regarded as gold in any form, while 'dore anode' being the first stage of primary gold can be regarded as gold in any form. It is his argument that the implication of this decision is that to be regarded as in any form of gold, the input should have acquired the state of primary gold, thereafter, conversion of such primary gold into other forms of primary gold would attract exemption. Thus, gold ore which is comparable to anode slime cannot be regarded as any form of gold. Rebutting the argument that concentrate obtained from gold ore could be regarded as any form of gold; he has submitted that with reference to the manufacturing process that the concentrate emerges at the intermediate stage in a continuous process and is not identifiable as gold by the concerned trade and the appellant has not demonstrated that it is marketable. If they do so, then duty would be attracted at the stage of concentrate in the light of the view taken in the case of Birla Copper (supra). In fact, if the said line of argument is accepted, only the emergence of gold button after the said concentrate is processed further can be regarded as first stage of obtaining any form of gold. In such a case, duty would be Page 15 of 27 E/26922,26924,26974/2013 attracted at that stage and on the value of gold button, thereafter conversion of button could be eligible for exemption under Notification No.5/2006-CE dated 01.03.2006 as amended in terms of ratio of the Birla Copper's case.
5.3 Rebutting the argument that amending Notification No.25/2011 dated 24.3.2011 has settled the issue, the learned Special Counsel argued that subsequent amendment to the Notification cannot be called in an aid of the interpretation of an earlier legal decision. No doubt, retrospective effect cannot be given to the amendment but at the same time, no adverse inference can also be drawn from the amendment. This view is supported by the judgment of the Tribunal in Bangalore Refinery Pvt. Ltd.'s case.
5.4 For invoking extended period of limitation, he has enumerated the various stages of investigation as below:
• On 14.09.2010, appellant furnished details of clearances of gold bars for the period from 01.03.2010 to 31.08.2010. • By their letter dated 06.10.2010, they contended that they were availing exemption under Notification No.5/2006 and that they were not required to obtain registration and comply with the direction to pay duty.
• Thereafter, statements of key personnel were recorded between 10.03.2011 and 12.08.2011.
• The statement of Director of Mines safety was recorded on 08.01.2012 to ascertain the activities of appellant and verify the statements given by the officials of appellants.
• In reply furnished by the Managing Director of the appellant-company on 12.08.2011, it was stated by him that there was no discussion about payment of excise duty before the summons were received by the officials and that they took legal advice only thereafter.
Page 16 of 27E/26922,26924,26974/2013 • Appellant furnished details of clearance for the period from 2006-07 to 2009-2010 on 21.02.2011 and refused to obtain Central Excise registration.
• Later on 16.01.2012 they furnished provisional figures of clearances for the period from 01.01.2007 to 31.03.2009 as per the format provided by the DGCEI.
• On 25.01.2012, they intimated the jurisdictional officer that they had obtained registration and they propose to pay duty for the period from 01.04.2011 to 31.12.2011 amounting to Rs.3,54,61,240/-.
• On 07.02.2012, the show-cause notice was issued to the appellants.
5.5 He has submitted that appellant on their own decided not to obtain registration and pay appropriate excise duty due on the gold bars cleared by them. Neither they consulted the department nor sought legal advice about the status of duty payment. Also, from the statements of the Managing Director, prior to the receipt of the summons, the issue of excise duty on the 'dore bars' cleared by them had never been disclosed.
5.6 It is further submitted that on the other hand, in their letter dated 06.10.2010, they claimed that they were availing duty exemption under Notification No.5/2006-CE dated 01.03.2006; thus, it is incorrect to say that because of the addition of Sl. No.21A to the Notification, the issue of liability to duty was raised by the DGCEI. He has submitted that the insertion of said Sl. No. is merely to change the duty from 8% ad valorem to Rs.280/- per gm. In support, he has referred to the Finance Minister's Budget Speech 2010-11.
5.7 Further, it is argued that the provisional figures relating to clearances of 'dore bars' were furnished only on 16.01.2012 i.e., 16 months after the visit in September 2010 and the show-cause notice was issued immediately on Page 17 of 27 E/26922,26924,26974/2013 07.02.2012 without delay. The appellant failed to produced any evidence to show that they were under a bona fide belief for non payment of duty. Further, he has submitted that the concept of knowledge of the facts cannot be read into the provisions of invoking extended period has been held by the Gujarat High Court in the case of Commissioner of Central Excise, Surat Vs. Neminath Fabrics Pvt. Ltd.: 2010 (256) ELT 369 (Guj.). Thus, there has been wilful default on the part of the appellants and invoking extended period in confirming the demand is justifiable. Consequently, imposition of penalties are also justified on the appellants and the Directors.
6. Heard both sides and perused the records. The issues for consideration are whether: (i) The appellants are entitled to the benefit of Sl. No.21 of exemption Notification No.5/2006-CE dated 01.03.2006 on the manufactured 'gold dore bars' during the period 01.01.2007 to 31.03.2011.;(ii) The demand issued on 07.02.2012 is partially time barred; and (iii) Penalties are imposable on the appellants.
7. The Revenue's allegations are that the appellant manufactured 'gold dore bars', the primary form of gold, from 'gold ore' through various processes, which cannot be considered as 'conversion from any form of gold', hence does not satisfy the condition of the Notification i.e., 'primary gold converted with the aid of power from any form of gold'. It is the contention of the Revenue that the expression "any form of gold" cannot be interpreted to mean 'gold ore' or 'gold concentrate'.
8. The Appellant rebutted the said interpretation of the Revenue by submitting that even though the expression 'primary gold' has been defined under Entry 21 of the said Notification No. 5/2006 CE dt. 01.03.2006, however, in the absence of a definition/meaning of expression 'any form of gold' it would include gold precipitate/concentrate, which is also a form of gold Page 18 of 27 E/26922,26924,26974/2013 being obtained from gold ore (which is also a form of gold). In other words, the appellant's arguments are that the various stages of manufacture of gold commencing from gold ore could be considered to cover under the expression 'any form of gold' and conversion from one stage to another stage of manufacture till reaching the stage of 'gold dore bars', the primary gold, be construed as conversion of one form of gold to another. In support of their contention, the appellant has heavily relied upon the majority opinion of the Tribunal in the case of Birla Copper's case, which has been later considered by the Hon'ble Supreme Court in the Hindalco Industries' case (supra).
9. Before adverting to the rival contentions on the admissibility of the benefit of the Notification No.5/2006-CE dated 01.03.2006, the relevant portion of the said Notification is reproduced below:
Sl. Chapter Description of excisable goods Rate No. Heading Primary gold converted with the aid of power from any form of gold.
Explanation: for the purpose of this exemption, "primary gold" means 21 71 gold in any unfinished or semi- Nil finished form and includes ingots, bars, blocks, slabs, billets, shorts, pellets, rods, sheets, foils and wires.
A simple reading of the said Notification conveys that the primary gold when converted with the aid of power from any form of gold, be eligible to 'Nil' rate of duty of goods falling under Chapter 71 of Central Excise Tariff Act, 1985. There is no dispute about the end product i.e., 'dore bar' manufactured by the appellant satisfy the meaning of 'primary gold' provided in the said Notification. The entry 21 of the said Notification No. 05/2006-CE dt. 01.03.2006 has been amended by Notification Page 19 of 27 E/26922,26924,26974/2013 No.25/201-CE dated 01.04.2011 and the Appellant discharged duty from 01.04.2011 to 31.12.2011, which has been appropriated in the impugned order.
10. However, the dispute centres around the interpretation of the expression conversion 'from any form of gold' to primary gold i.e., 'dore bars' as was in the said entry at Sl. No.21 till 31.03.2011. In the impugned order, it is observed that 'any form of gold' would mean gold in its original form, that is, it should be in existence before its conversion into another form of gold i.e. 'dore bars'. Applying the common parlance test, the Revenue has argued that the old ornaments of gold, articles of gold, other primary form of gold like ornaments, pellets, etc., is 'gold in any form'. It is an age-old practice to make new ornaments from old/broken ornaments; and for making new ornaments, old articles are melted to obtain specific form of gold or that the same could be used again in making new articles. In the said process, existing gold is transformed into another form by melting the same and there is no emergence of altogether a new item on conversion. Thus, it is the intention of the Government to exempt primary gold obtained/ manufactured from any other existing form of gold. The Commissioner has held that any form of gold refers to metallic gold.
11. The learned Sr. Advocate for the appellant vehemently opposed to the said reasoning of the Learned Commissioner arguing that 'gold ore' is also a form of gold and heavily relied upon the judgment of the majority opinion in Birla Copper's case. Thus, it is relevant to refer to the said judgment of the Tribunal in detail.
12. The facts of the said case are that M/s Birla Copper were primarily engaged in the manufacture of Copper Cathodes classifiable under Chapter 74 of CETA, 1985 and for the said purpose, they import 'copper ore' in the form of concentrate. Copper concentrate is reacted in the melting furnace at a high temperature in the presence of air and oxygen with an aim to Page 20 of 27 E/26922,26924,26974/2013 increase the metal content and to obtain high purity of copper. Sulphide in the concentrate becomes sulphur dioxide and is removed as such, iron combines with silica and is removed with other impurities in the resulting slag. Copper sulphide and iron sulphide form "matte copper", which is then fed into a converter. In the converter, air is blown through the matte copper resulting in emergence of impure copper, sulphur dioxide gas and slag. The impure copper is called "blister copper" which is transferred to anode furnace, where it is fire-refined. Molten copper so obtained is casted into shape of anodes at this stage are of 99- 99.5% purity. Thereafter, the said copper anodes are electro- refined to get copper cathode of 99.9% purity. Electro-refining operations are carried out in non-metallic tanks called electrolytic cell. Copper cathodes emerge as final product in the said tank, which are cleared on payment of duty.
12.1 In the electrolyte, some anode impurities either dissolve or fall into the bottom of electrolytic cell. They are collected and are called 'anode slime'. This collected anode slime, apart from the various impurities also, contains copper, which is removed in an autoclave using sulphuric acid and oxygen and sent back to smelter. The remanent is decopperised anode slime and is in the form of black moist powder. This anode slime is thereafter transferred to another section called Precious Metal Recovery (PMR). From there starts the process of recovery of gold from the said anode slime and subsequent manufacture of gold bars. The anode slime consists of selenium, silver, gold and palladium etc. Selenium is removed by oxidising the same by the process of roasting in the presence of sulphuric acid, thus leaving behind silver, gold and palladium metals. The desalinised anode slime is charged to a furnace called trof furnace, where it is melted with soda and boran which removes impurities as slag. The molten metal is cast into desired shape. The casted product is described as "Dore anode" which approximately weighs 25 Kg. The dore anode mainly consists of gold and silver along with the presence of platinum and palladium group of metals in small traces. For Page 21 of 27 E/26922,26924,26974/2013 the purpose of separation of silver from the above dore anode, the same is subjected to electrolysis in a silver nitrate solution. The electrolysis takes place in moebius cells. The silver crystals which get deposited on S.S blanks are removed from the cells, washed, melted, and cast into silver bars. The residue, after removal of silver, emerges as gold mud and is collected in canvas anode bags. This gold mud is converted into gold powder through the process of leaching and precipitation. Gold powder is then filtered, washed and dried and is of 99.9% purity. The same is subsequently melted and cast into gold bars. The residue of dore anode after extraction of gold and silver consist of palladium group metals concentrate and is called PGM concentrate. The gold bars so manufactured by the appellant are cleared without payment of duty in terms of the Notification No. 6/2000-C.E. dated 01.03.2000 and the subsequent Notification No. 3/2001-C.E. dated 01.03.2001.
12.2 The issue involved for consideration was, whether extracting gold from the stage of 'anode slime' satisfy the expression conversion of any form of gold to primary gold of the Notification No.06/2000-C.E. dated 01.03.2000. There was difference of opinion between the Members of the Bench. The learned Member (Judicial) observed that the process of recovery of gold starts in the PMR plant and anode slime is the basic raw material for the same. The percentage content of gold in the said slime is less than 2%, thus, anode slime consists of gold and silver and traces of other precious metals like platinum and palladium, which cannot be considered as form of gold in the common parlance or by the people dealing in gold. Further, it is observed that the 'dore anode', gold mud, etc., are only intermediary stages of recovery of gold. From the dore anode, emerges gold mud, which is collected and further converted into gold powder through the process of leaching and precipitation. This gold powder having purity of 99.9% and subsequently casted into gold bars, which also cannot be considered as one form of gold being argued by the appellant. Finally, it is held that Page 22 of 27 E/26922,26924,26974/2013 the emergence of gold either at the gold powder stage or at gold bar stage was not from any 'other form' of gold which already existed but emerged during the course of manufacture of copper or zinc by smelting. The Member (Technical) on the other hand observed that 'dore anode' after being converted into purer form of gold viz., dust, pellets, bars of higher percentage purity content of gold would be exempt under the provisions of the relevant Notification. He observed that the duty demanded on the gold bars cannot be sustained. The third Member concurred with the Member (T) and the majority opinion of the Tribunal was that since 'dore anode' is an alloy of gold and therefore a form of gold, hence duty could be determined on the value at the stage of emergence of dore anode.
12.3 The matter reached before the Hon'ble Supreme Court. After analysing the process of manufacture, their Lordships proceeded to examine the issue whether the product manufactured by the appellant is the primary gold which is exempted from payment of duty. There Lordships observed as:
"6. Mr. Adhyaru, learned senior counsel for the appellant relied upon the discussion in the show cause notice and also upon opinion of the dissenting opinion of Judicial Member of the Tribunal and argued that the gold in question cannot be treated as "gold in primary form" as the original product was anode slime which underwent various processes from which product in question came into existence. In other words, he submitted that gold bars are produced from anode slime and anode slime can be treated as "any form of gold". Mr. Adhyaru also referred to the detailed discussion by the Judicial Member which runs as follows:
"12. In view of the forgoing discussion. We held that the emergence of gold either at the gold powder stage or at the gold bar stage was not from any 'other form' of gold which already existed but was during the course of manufacture of Page 23 of 27 E/26922,26924,26974/2013 copper or zinc by smelting. The various intermediary stages, as already discussed are technical necessities of the process of manufacture and to go through stages of increased concentration of gold before arriving at the stage of primary gold.
13. As we have already held that primary gold comes into existence for the first time in the appellant's factory, there can be no question of 'Conversion' of the same from one form to another. As is seen the expression used in the notification for grant of exemption is 'conversion' from one form to another form. By extracting the gold from the anode slime which is nothing but the residue of the ore after extraction of copper, it cannot be said that the appellant 'converted' the gold. The expression 'conversion' envisage a situation where the metal to be converted already exist. The extraction of gold by the complex process of separating anode slime and undergoing the subsequent process of separation till the point of obtaining of pure gold cannot be called 'conversion'. If the meaning of the term is extended to the 'extraction' of the gold and emergence of the gold in primary form for the first time for the entire notification in our view would becomes absurd.
Our above view is also fortified by the issuance of subsequent notification no. 6/2003, which amended notification no. 6/2002-CE. Sr. No. 259 of the amended notification granted exemption to gold arising in the course of manufacture of copper or zinc by smelting. As such the first time production of gold during the process of zinc or copper was granted exemption was under notification no. 6/2003 CE, effective from 01.03.2003. It may be noted that the earlier entry granting exemption to conversion of gold from one primary from to another was not disturbed and Sr. No. 170 covered the same. This clearly shows that the two entries covered two different situations. If the first Page 24 of 27 E/26922,26924,26974/2013 exemption was broad enough to cover the situation of exemption by introducing a separate Sr. No. It was admitted before us that the second concluded that the exemption was extended to first time production of gold w.e.f. 1.3.2003."
7. It is difficult to accept the aforesaid contention having regard to the description of goods that is exempted by the aforesaid Notification and narrated by us above. The fallacy in the aforesaid argument is to proceed on the basis as if the "primary gold" is converted from anode slime. We don't have to go back and see the original material from which final product came into existence. What is relevant and important is that silver was recovered from anode slime and thereafter gold mud was recovered from silver. Insofar as the product in question viz. gold bars are concerned, these are produced from the gold mud. Thus, gold is converted in the form of bars from gold mud with the aid of power. It is undisputed that gold mud is a form of gold.
(emphasis supplied)
8. What is significant to note that the "primary gold" is the end product which is manufactured. The entry clearly describes that when the said "primary gold" is converted from any form of gold with the aid of power into bars as well, the same would be treated as "primary gold". This is explained by the third Member while concurring with the opinion of the Technical Member in the following manner:
"10. Since dore anode is an alloy of gold and therefore a form of gold, I hold that duty be determined on the value of and at the stage of emergence of "dore anode" as held by learned Member (Technical), and hence concur with his view."Page 25 of 27
E/26922,26924,26974/2013 12.4 Their Lordships had observed that there is a fallacy in the argument to say that primary gold is converted from anode slime. It is not relevant to go back and see the original materials from which the final product came into existence. What is relevant and important is that silver was recovered from anode slime and thereafter, gold mud was recovered from silver. As far as the gold bars are concerned, the same are produced from gold mud, a form of gold. Thus, gold mud is converted into gold bars, a primary form of gold, with the aid of power. It is categorically held by their Lordships that the gold mud is a form of gold.
13. Applying the said judgments to the facts of the present case, we find that the starting point in the present case is gold ore, which has been subjected to both physical and chemical processes to obtain gold concentrate, which is later subjected to further process by which gold powder is obtained. The said gold powder taken to the melting refinery section and mixing the concentrate with other chemicals and heating up to 1200 centigrade, impurities are separated and gold is obtained in the form of buttons after cooling. The purity of gold buttons smelted from table concentrate and that from the gold precipitate powder vary in quality. The buttons obtained from both the processes are melted together to eliminate further impurities and homogenous gold dore bars are manufactured having gold content of 90-92% purity. In the aforesaid judgment, the Hon'ble Supreme Court has held that gold mud is a form of gold which is comparable in the present process of manufacture of 'dore anode' from gold ore to that of gold powder emerged. Therefore, the observation of the Commissioner that to allow exemption to primary gold in the form of dore bar, there should be gold in existence in the form of ornaments, jewellery, etc., which is more or less similar to the minority view of the Tribunal in Birla Copper's case, in our opinion, is contrary to the judgment of the Hon'ble Supreme Court holding that the parentage of the primary gold need not to be looked into but Page 26 of 27 E/26922,26924,26974/2013 the product which emerges before the final process is completed i.e., gold powder/concentrate generated during the course of manufacture of 'gold dore bars' be the decisive factor. The objective is to consider exemption of final products, i.e., primary gold in the form of dore bars resulted from conversion of any form of gold, which in the present case is the gold powder/concentrate. Consequently, the Appellant are eligible to the benefit of the Sl. No. 21 of the exemption Notification No. 05/2006 CE dt.01.3.2006 till it has been amended by Notification 25/2011CE dt.24.3.2011.
14. Since the appellants succeeds on merits, the other issues of limitation and imposition of penalty becomes academic, hence not dealt with.
15. In the result, the impugned order is set aside and the appeals are allowed with consequential relief, if any, as per law.
(Order pronounced in Open Court on 19.03.2024.) (D.M. MISRA) MEMBER (JUDICIAL) (PULLELA NAGESWARA RAO) MEMBER (TECHNICAL) rv Page 27 of 27