Indian Kanoon - Search engine for Indian Law

Custom, Excise & Service Tax Tribunal

Edelweiss Metals Limited vs Ahmedabad on 22 January, 2019

     In The Customs, Excise & Service Tax Appellate Tribunal
                West Zonal Bench At Ahmedabad


                    Appeal No. C/11351/2018-DB
 [Arising out of OIO-AHM-CUSTM-000-COM-015-17-18 dated 22.02.2018 passed by Principle
                 Commissioner Customs, Excise and Service Tax-AHMEDABAD]


M/s Edelweiss Metals Ltd                                                 Appellant

Vs

C.C.,- Ahmedabad                                                        Respondent

Represented by:

For Appellant: Sh. T. Vishwanath (Advocate) Sh. A. Nainawati (Advocate) Sh. Manish Jain (Advocate) For Respondent: Shri T.G. Rathod (AR) CORAM:

HON'BLE MR. RAMESH NAIR, MEMBER (JUDICIAL) HON'BLE MR. RAJU, MEMBER (TECHNICAL) Date of Hearing: 17.12.2018 Date of decision: 22.01.2019 Final Order No. A/ 10156 /2019 Per: Ramesh Nair The brief facts of the case are that the Appellant M/s Edelweiss Metals Ltd. (Now known as Sovereign Metals Ltd.) had imported Gold dore bar falling under Customs tariff Item 7108 12 00. The Appellant while importing the goods had availed exemption under serial no. 318 of the Notification No. 12/2012-Cus dated 17.03.2012. They were issued show cause notice that the imported goods were produced by M/s Philippine Associated Smelting and Refining Corporation ('PASAR') which is a copper smelter and refinery and is not a mining company or laboratory attached to the mining company. The 'PASAR' owns and operates only copper smelter and refinery in Philippines. The Gold dore produced by PASAR were by-products of their smelter process. The Gold Dore bar were not accompanied along with the packing list issued by the mining company which had produced the same and also the assay

2|Page C/11351/2018-DB certificate issued by the mining company or the laboratory attached to it. The assaying of the gold bars was done by the metallurgical laboratory division of PASAR which was not a mining company. The supplier of the Gold dore bar was M/s Glencore International AG ('Glencore') and the consignor was PASAR. It was alleged that the Appellant had not fulfilled the condition no. 34 (b) and (c) of the serial no. 318 of the Notification No. 12/2012 -Cus which are as under:

"(b) the goods are imported in accordance with the packing list issued by the mining company by whom they were produced;

(c) the importer produces before the Deputy Commissioner of Customs or the Assistant Commissioner of Customs, as the case may be, an assay certificate issued by the mining company or the laboratory attached to it, giving detailed precious metal content in the dore bar;"

It was therefore proposed to deny the benefit of the subject notification and to charge differential duty amounting to Rs. 9,73,21,118/- ; to hold the goods liable for confiscation under the provisions of Section 111 (d) and 111 (m) of the Customs Act, 1962; and to charge interest u/s 28AA and to impose penalty u/s 112 (a) of the Act.

2. The proposals made in the show cause notice were confirmed by the adjudicating authority holding that the gold bar have not been produced by the Glencore which is a mining company. It has been produced by PASAR which is not a mining company. Therefore the packing list issued by PASAR has no relevance and thus the condition

(b) is not fulfilled. As regard assay certificate the adjudicating authority held that Glencore has issued only provisional certificate and not final. The assaying of the gold dore bar has been done by the metallurgical division of PASAR which is not mining company. It is also not established that metallurgical laboratory division of PASAR was a laboratory attached to the mining company namely Glencore. Therefore neither the assay certificate issued by the mining company can be

3|Page C/11351/2018-DB accepted as it is provisional nor the final assay certificate has been issued by a laboratory attached to the mining company. Hence the condition 34 (c) is also not fulfilled. He also held that Glencore is a mining company and PASAR is smelting and refining company. Glencore extracts copper concentrates whereas PASAR sources these copper concentrates from Glencore for producing Gold Dore bars as a by- product of the smelting process. Merely for the reason that Glencore is holding 78.2% stake in PASAR would not mean that Glencore and PASAR are single entities for the purpose of availing exemption. For the purpose of exemption both should be considered separate entities. He held that the expenditure and income of subsidiaries or controlled unit could go to their parent group company. These are for consolidation as the group's expenditure and income in their financial statements. These arrangements are merely financial and business arrangements for a group company. They are to be treated as multiple legal entities of a same group. Only for business and financial consolidation and accounting purposes all these multiple entities of the same group are clubbed into an integrated unit. However they cannot be called integrated unit in terms of observance of law. Being aggrieved, the Appellant has filed the present appeal.

3. Shri T. Vishwanath, Ld. Counsel appearing for the Appellant submits that the gold dore bar were produced by PASAR in which Glencore Group holds 78.2%. PASAR sources its copper concentrates from different mines of Glencore and dore bars are by-product as result of smelting process carried out by PASAR, Philippines as evidenced by the contract between the Appellants and the supplier. The Airway bill shows that the goods were shipped from Philippines. There is no dispute regarding the country of shipment. He submits that PASAR is subsidiary

4|Page C/11351/2018-DB company of Glencore where more than 51% shares are held by Glencore as it holds 78.2% shares of PASAR. The entire production of PASAR (be it copper or gold) are accounted for are controlled by PASAR and its production is treated as own by Glencore. He has submitted the Annual Report of Glencore in support of his contention. He relies upon the relevant Page 176 of the Annual Report showing PASAR as Principal subsidiary of Glencore. Also that the revenue of PASAR is counted as revenue of M/s Glencore and page 53 and 190 of the Annual report where the production of PASAR is included within the total production of Glencore. He submits that thus the packing list issued by Glencore and packing list of Pasar would satisfy the condition 34 (b) as Pasar is controlled asset of Glencore. If the entities were different, then the production of PASAR would not have been counted as of Glencore. The Books of accounts/ financial statements of Glencore on record support their contention. The supplier has the ability to govern and regulate the production of PASAR which is why the production of PASAR is treated as production of Glencore. Therefore there is no distinction between the mining company and the producer company. He submits that the Accounting standards (AS) 21 by the ICAI deals with the consolidated financial statements and states that the resource of parent company and subsidiary can be treated as single economic activity. The international financial standard also views the same.

4. The contention of the Ld. Commissioner that both are separate entities is not correct. According to the adjudicating authority the mining company and supplier should be same. He submits that the above manner of reading of notification would lead to unintended denial of exemption notification from mined ore, from smelters which are not part of mining company. The content of the imported goods is verified and

5|Page C/11351/2018-DB certified by the supplier (Glencore) and PASAR. Therefore there is no distinction between the mining company and the producer company and the impugned order is not correct. He also submits that the contention of the adjudicating authority that the Appellant did not declare in any documents filed before the Customs that imported gold bar were manufactured by Pasar and they did not declare the fact that consignment was loaded at Cebu is also factually incorrect. The provisional certificate issued by Glencore submitted before customs clearly shows that load location is Cebu, Philippines and country of origin is Philippines. Thus it is evident from documents submitted before customs that goods are loaded from Cebu, Philippines and there is no dispute that the goods were loaded from Philippines. Hence the reasons given by the adjudicating authority for confiscation of goods are absolutely erroneous. He also relies upon the Tribunal judgment in case of M/s Hindalco Industries Ltd. vs. CCU, Ahmedabad 2015 (329) ELT 395 (TRI) as upheld by the Apex Court in Com. Vs. Hindalco Industries Ltd. 2016 (331) ELT A38 (SC) and draws parallel between the notification involved in the present case and the Hindalco case. He also relies upon the orders in case of Rajesh Exports Vs. CBEC 2016 (335) ELT 3 (KAR) as affirmed by the Apex Court reported in 2017 (349) ELT A90 (SC), Com OF Cus (Imp.) Vs. Tullow India Operations Ltd. 2005 (189) ELT 401 (SC), Com. Vs. Malwa Industries Ltd. 2009 (235) ELT 214 (SC) to say that the exemption notification has to be construed liberally once it is found that the notification is applicable to the case of the assessee.

5. Shri T.G. Rathod, Ld. Joint Commissioner appearing for the revenue reiterates the findings of the impugned order and submits that

6|Page C/11351/2018-DB since the condition of the notification was not followed, exemption has been rightly denied.

6. Heard both the sides and perused the case records. We find that the facts of the case are not much in dispute. The Appellant had entered into contract for purchase of Gold dore bars with the supplier. The contract clearly states that the goods supplied by the supplier are produced by PASAR or Philippine Associated Smelting and Refining Corporation (PASAR). It also states that the bars shall be shipped from Philippines. The revenue has denied exemption on the ground that the condition no. 34 (b) and (c) of the serial No. 318 of the Notification No. 12/2012-Cus dated 17.03.2012 was not followed by the Appellant and hence not eligible for exemption. We find from the case papers that the undisputed fact is that the PASAR is controlled entity of Glencore which is involved in mining. The copper concentrate is sourced by PASAR from Glencore and used in its refining and smelter plant. It also has sulphuric acid plant and a dore plant which produced alloy of gold and silver. M/s Glencore holds 78.2% of the shareholding of PASAR and the production of PASAR is counted as production of Glencore. It is common for an entity to have its economic activity divided into various subsidiary companies. In the present case it is not in dispute that Glencore after mining of copper concentrate is getting the same refined and smeltered at PASAR which is its own subsidiary. Only for the reason that both the concerns are working under different set up, it does not take away the fact that PASAR is part of Glencore. Therefore there is no difference or distinction between the mining company and the producer company. The condition 34 (b) of the notification states that the goods are to imported in accordance with the packing list issued by the mining company by whom they were produced. Further the condition 34 (c)

7|Page C/11351/2018-DB states that the importer has to produce before the Deputy Commissioner of Customs or the Assistant Commissioner of Customs, as the case may be, an assay certificate issued by the mining company or the laboratory attached to it, giving detailed precious metal content in the dore bar.

7. In the present case it is an undisputed fact that PASAR being controlled by Glencore is part of Glencore only and for the purpose of following the conditions of the Notification both the entities has to be considered as one. As far as mining and production is concerned, the different set up are only an artificial difference between both the concern. There is no distinction between the two. The packing list has been issued by the PASAR since it produced the gold dore bar. Similarly the assay certificate has been issued by Glencore as it has mined the ore. In our view both the conditions of the notifications are fulfilled as the packing list has been given by PASAR who produced the goods and assay certificate was issued by Glencore as it is a mining company. Our views are also based upon the judgment of the Tribunal in case of M/s Hindalco Industries Ltd. vs. Commissioner of Customs, Ahmedabad 2015 (329) ELT 395 (TRI) wherein the issue involved was similar in context of Notification No. 24/2011-Cus dated 01.03.2011. The said notification stipulated the condition that the importer had to furnish an assay certificate from the mining company specifying separately, the value of gold and silver content in such copper concentrate. The tribunal accepted the assay certificate from the agency other than mining company. The Order of the Tribunal was affirmed by the Apex Court as mentioned supra. Whereas in the instant case the Appellants are on better footing as the assay certificate was issued by Glencore who is itself a mining company. The assay certificate cannot be denied on the ground that it is a provisional certificate.

8|Page C/11351/2018-DB

             (Pronounced in the open court on 22.01.2019)




    (Raju)                                             (Ramesh Nair)
Member (Technical)                                   Member (Judicial)


Seema