Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Pradhan Industries on 18 May, 1992
Equivalent citations: 1992(62)ELT756(TRI-DEL)
ORDER N.K. Bajpai, Member (T)
1. This is an appeal against the orders of Collector of Central Excise (Appeals), Calcutta by which he has set aside the order of Asstt. Collector of Central Excise, Sambalpur denying the benefit of exemption to graphite powder/flakes produced by the respondents herein under Notification 23/55-C.E., dated 29-4-1955 as amended. The Assistant Collector had held that the graphite powder/flakes were obtained by process of grinding, washing, froth floatation and pulverisation etc. whereas the notification confines the exemption only to "natural black minerals namely graphite". The respondents have all along claimed that they were covered by the decision of the Tribunal in the case of T.P. Minerals (Pvt.) Ltd. v. Collector of Central Excise [1989 (40) E.L.T. 149] in which it was held that the exemption under Notification 23/55 in respect of graphite was not a conditional one and would be available to graphite in the form in which it is produced.
2. The appellant-Collector has submitted in the department's appeal that an appeal against the decision of the Tribunal in T.P. Minerals case (supra) has been filed in the Supreme Court. Further, the graphite obtained from the mines is not pure and has to be processed and impurities removed before it is fit for marketing. The graphite powder/flakes used by the respondents are not "natural graphite" but manufactured/processed graphite to which the exemption does not apply because of the specific wordings "natural black minerals" in the notification. Lastly, Note (2) to Chapter 25 of the Central Excise Tariff which speaks of Headings 25.01,25.03 and 25.05 covering only products which have been washed, crushed, ground, powdered etc. lays down guidelines for classification and is not applicable to the interpretation of the exemption notification in question.
3. Arguing for the Department, Shri K.K. Bhatia, the learned Joint Chief Departmental Representative, referred to the decisions of the Supreme Court in the catena of cases beginning with the Union of India v. Delhi Cloth & General Mills [1977 (1) E.L.T. (J 199)] and South Bihar Sugar Mills v. Union of India [1978 (2) E.L.T. (J 336)] and submitted that the underlying principle in these cases was that if a different product has come into being and is marketed differently as a result of processing etc., it is said to have undergone a process of manufacture. This being the law as interpreted by the highest Court, exemption under Notification 23/55 was not available to the impugned goods. He went on to say that what is exempt is only what is mined and quarried and not the graphite which is subsequently subjected to processing and then brought to a marketable state. Shri Bhatia submitted that it was significant that the wordings used in the notification were "natural black minerals" which obviously means that the exemption was confined to the form in which graphite was mined in the quarries and any subsequent processing would take the product out of exemption.
4. Thereafter, Shri Bhatia referred to para 5 of the decision of the Tribunal in T.P. Minerals' case (supra) which is as under, and submitted that the Tribunal had not considered the fact that the notification exempts "natural black minerals" :-
"5. We observe that the graphite is covered under Serial No. 2 of Not. 23/55 as amended from time to time and as pointed out by the learned Consultant for the appellants. The exemption in respect of graphite is not a conditional one and this exemption therefore would be available in respect of graphite in the form in which it is produced."
5. Shri V. Lakshmikumaran, the learned Counsel for the respondents submitted that the use of the words "natural black mineral" in the notification was significant because the exemption was not available to "artificial" or "synthetic" graphite. He referred to Hawley's Chemical Dictionary (p. 509) which shows that besides occurring naturally in several countries, graphite was also produced synthetically by heating petroleum coke to about 3000°C in electric resistance furnaces. He therefore contested the claim of the learned JCDR about the scope of the exemption and claimed that the exemption was available to graphite powder/flakes which were processed from crude graphite after removing the impurities. In support of his contention, Shri Lakshmikumaran also referred to Ilmenite (black), which was a titanic iron ore (FeO TiO2) as also Manganese Dioxide both of which were listed along with graphite as "natural black minerals" to which the exemption was granted by the notification. He submitted that it would be seen from Hawley's Chemical Dictionary that all the three - Graphite, Ilmenite black and Manganese Dioxide - occurred naturally and were also produced synthetically. But the exemption under the notification was confined only to natural substances. He referred to Note (2) to Chapter 25 and submitted that it was not their case that the product graphite powder/flakes had been subjected to any of the processes of roasting, calcination or mixing. Shri Lakshmikumaran contested the argument of the learned JCDR about applicability of Note (2) only for classification purposes and submitted that the question of exemption from duty would arise only after it was held that the impugned goods were excisable in terms of the aforesaid note. Government would not have thought of giving exemption from duty under Notification 23/55 unless it was first held that the goods were excisable.
6. Shri Lakshmikumaran thereafter cited the decision of the Supreme Court in the case of Minerals & Metals Trading Corporation of India v. Union of India [1983 (13) E.L.T. 1542 (SC)] in which it was held that Wolfram Ore concentrate containing 65% WO3 of merchantable quality was covered by Item 26 of the Indian Customs Tariff which related to metallic ores all sorts. He submitted that if this principle is applied to graphite powder/flakes they would also qualify for exemption from duty as "natural black minerals" because they are produced by grinding of the crude graphite which is subjected to washing etc. He read out from para 3 of their letter dated 1-5-1990 (Annexure 6 to their Cross Objection) to the Assistant Collector, Central Excise. Sambalpur which explains the process of mining etc. and is as under :-
"Crude graphite produced from the mine is fed into a primary Jaw Crusher followed by grinding in Ball Mills and finally the ground material are subjected to washing through a container containing water and kerosene mixed together. The forth i.e. the skimmed graphite portion floats on the surface with the support of the kerosene oil/pine oil and other material like mud, sand etc. fall to the bottom. The forth/skimmed graphite portion is collected in separate container and subjected to further grinding so as to obtain graphite in different sizes as required by different users.
Thus there is no process of "manufacture" bringing into existence any goods other than graphite. An expert opinion from a mining consultant/authority also confirms that the product of our Firm is nothing but graphite. It is further urged and asserted that we do not deal with goods other than graphite which includes "Graphite as such or in powder or flake form "Graphite" in our product remains "Graphite" in its powder or flake form and does not undergo any characteristics/ structural change and "Graphite" is a "natural black mineral" within the said expression as in Serial No. 2 of the Notification No. 23-C.E., dl. 29-4-1955 as amended from time to time. It has therefore, been clarified by the Department that Graphite Powder and flakes are classifiable under sub-heading No. 2505.00 (kindly refer to Trade Notice No. 6/87, dated 30-1-1987, Bombay-I, Collectorate)."
7. The Learned Counsel also cited the decision of the Tribunal in the case of Steel Authority of India Ltd. v. Collector of Central Excise [1991 (54) E.L.T. 414] in which it was held that crushing of limestone into fine lime did not amount to manufacture for the purposes of the Central Excise Tariff Act. He also referred to another decision of the Tribunal in the case of Collector of Central Excise, Patna v. Pyrites, Phosphates and Chemicals Ltd., Bihar [1983 (12) E.L.T. 537] in which it was decided that crushing/sieving of pyrites did not bring about any new product and therefore there was no manufacture in terms of Section 2(f) of the Central Excises & Salt Act, 1944.
8. Shri Lakshmikumaran countered the argument of the learned JCDR about the Supreme Court decisions in the DCM and South Bihar cases (supra) and submitted that in the concept of "manufacture" expounded in these cases, a new product with a distinctive name, identity and use must come into existence and it cannot be said that the processing of crude graphite had resulted in the emergence of anything different from graphite itself. The ratio of these decisions was not therefore applicable. He also referred to the Supreme Court judgment in the case of Khandelwal Metal & Engineering Works v. Union of India [1985 (20) E.L.T. 222] according to which Chapter Notes of the Tariff were part of the tariff itself and had to be taken into consideration while interpreting the Headings and sub-headings. The contention in the appeal that Note (2) to Chapter 25 which defines the scope of the sub-headings merely lays down the guidelines for interpretation was therefore misconceived. Shri Lakshmikumaran also cited the decision of the Tribunal in the case of Western India Plywoods Ltd. v. Collector of Central Excise, Cochin [1985 (19) E.L.T. 590] in which it was, inter alia, held that in fiscal legislation a general term used for describing any commodity covers that commodity in all its forms or varieties. Applying this principle to the facts of the present case, the word "graphite" will cover graphite in all its forms - powder and flakes too. This principle had also been confirmed by the Supreme Court in its judgment in the case of Bharat Forge & Press Industries (P) Lid. v. Collector of Central Excise [1990 (45) E.L.T. 525] .
9. Replying, Shri Bhatia submitted that none of the decisions cited by the learned Counsel was applicable to the present appeal because those decisions related to change from ore to ore. He reiterated that the emphasis on Note (2) to Chapter 25 was misplaced because it governed only the classification of the goods under the tariff and had no relevance to interpretation of the exemption notification. He also submitted that the word "natural" had not been used in Chapter 25; nor did Notification 23/55 refer to any specific tariff heading or sub-heading for the purpose of exemption from duty.
10. We have carefully considered the appeal, the rival submissions and perused the case records. We observe that the Tribunal had considered the question of eligibility of graphite powder/flakes to exemption in the T.P. Minerals case as early as in May 1987 and decided that Serial No. 2 of the items listed in Notification 23/55, inter alia, related to graphite and since the exemption was not a conditional one, it would be available in respect of graphite in the form in which it is produced. We consider it necessary for the purpose of deciding this appeal to go into other contentions raised before us because these were not raised before the Tribunal when the T.P. Minerals case was argued. We have the additional support of the Supreme Court judgment in the M.M. T, C. case (supra) in respect of Wolfram ore concentrate of which para 7 which is relevant is reproduced below :-
"7. We are wholly unable to comprehend how in order to fall under Item 26 the ore has to be as mined. There is a good deal of force in the argument of Mr. Setalvad for the appellant that the normally acceptable merchantable quality of wolfram or tungsten contains a minimum 65% WO3. This is the usable ore and it is in that sense that it is commercially understood. Wolfram ore when mined contains only 5 to 2 per cent WO3 and in order to make it usable and merchantable ore with minimum 65% WO3, concentration is necessary. If Item 26 of the Import Tariff is to be restricted to Wolfram being material containing 5 to 2 per cent WO3 it would be mainly rock which can neither be imported in large quantity and which will have no market. The separating of wolfram ore from the rock to make it usable ore is a process of selective mining. It is not a manufacturing process. The important test is that the chemical structure of the ore should remain the same. Whether the ore imported is in powder or granule form is wholly immaterial. What has to be seen is what is meant in international trade and in the market by wolfram ore containing 60% or more WO3. On that there is a preponderation weight of authority both of experts and books and of writings on the subject which show that wolfram ore when detached and taken out from the rock in which it is embedded either by crushing the rock and sorting out pieces of wolfram or by washing or magnetic separation and other similar and necessary process it becomes a concentrate but does not cease to be ore. Unless the ore is roasted or treated with any chemical it cannot be classed as processed."
(Emphasis added)
11. Thus, the appellants contention that the use of the word "natural black minerals" in the notification would limit the scope of the exemption only to what is mined in the quarry is not borne out from the detailed examination of the matter in the MM. T. C. case in the case of another ore. We also agree with Shri Lakshmikumaran that since graphite occurs in nature as well as is produced synthetically, the use of the words "natural black minerals" in the exemption notification should be read in that context and exemption given to all forms of graphite occurring in nature and subsequently retrieved from the crude graphite which is what is mined. For this purpose, though Note (2) to Chapter 25 is not directly relevant for determining the question of exemption, it nevertheless supports the contention of the respondents that the goods have to be shown to be excisable before the question of exemption is considered. We also see force in the argument supported by the decision of the Tribunal in Western India Plywoods case (supra) that the general term used for describing the commodity covers that commodity in all its forms or varieties.
12. We are not impressed by the argument that the Department has a case because it has filed an appeal to the Supreme Court against the decision of the Tribunal in T.P. Minerals case (supra). As we have seen, the contentions of the Department have even otherwise no force, quite apart from the fact that the decision of the Tribunal in T.P. Minerals case which was on a limited point was against them. Thus, in view of the foregoing, the Department's appeal fails and is rejected.