Custom, Excise & Service Tax Tribunal
Med On The Basis Of Chapter Note 4 Of ... vs Uoi 2011 (273) Elt 3 (Sc). He Submits That ... on 15 February, 2016
med on the basis of Chapter Note 4 of Chapter 26 of CETA, 1985 inserted w.e.f. 01.03.2011. He has argued that a cumulative reading of Boards Circular dated 17.02.2012, Chapter Note 4 to Chapter 26 of CETA,1985, HSN Explanatory Notes, clarification issued by the Ministry of Mines, it would be clear that excise duty is leviable only when a part or all of the foreign matters contained in the ores are removed by special treatment either because such foreign matter may hamper subsequent metallurgical operation or with a view to economical transport. It is his contention that no special treatment is involved in the crushing and screening of ore and ore would meet the definition of concentrate as per HSN notes only when a part or all the foreign matter removed. It is his contention that there is no allegation that the appellant has subjected the mined ore to any of the special treatment such as milling, hydraulic separation, magnetic separation, floatation and concentrate thickening, hence the order is being contrary to the clarification of Board, bad in law. In support, he has referred to the decision of Honble Supreme Court in the case of Dhiren Chemical Industries vs. CCE, Vadodara 2002 (139) ELT 3 (SC) and 2002 (143) ELT 9 (SC).
10.3 Further, he has submitted that it is well-settled proposition of law that a fiscal legislation has to be construed strictly and one has to look merely at what is said in the relevant provision; there is nothing to be read in; nothing to be implied and there is no room for any intendment. In support he has referred to the judgement of Honble Supreme Court in the case of Ranbaxy Laboratories Ltd. vs. UOI 2011 (273) ELT 3 (SC). He submits that in view of the judgement of this Tribunal in SAILs case (supra) upheld by the Honble Supreme Court rejecting Revenues Appeal saying that processes of crushing and screening to the mined ore cannot be treated as a process of conversion of ore to concentrate so as to tantamount to manufacture. It is his contention that insertion of chapter note 4 to 2 chapter 26 has no relevance whatsoever to its activities in as much as the appellant never subjected the mined ore to any processes with the view to remove any part or all of the foreign matters contained in it so as to result into conversion of iron ore into iron ore concentrate.
10.4 He has also submitted that all activities of crushing/grinding/screening of iron ore in Appellants mines are undertaken by contractors and assuming without admitting that the activities results into manufacture then the contractors who discharged Service Tax on the same services are bound to be treated as manufacture and Central Excise duty should be recovered from them.
11. Shri S.C.Jana, ld.Spl.Counsel appearing for the Revenue rebutting the arguments advanced on behalf of M/s Rungta Mines Ltd. & M/s.Rungta Sons. Pvt.Ltd. submitted that as per chapter note 4 of chapter 26 of CETA any process of converting ores into concentrates shall amount to manufacture; process of concentration of ores even though not mentioned in CETA, 1985 are elaborated in detail in the HSN notes. It is his contention that as per HSN notes, even physical or physico-chemical processes, which include crushing, screening etc. could be called as processes of concentration of ores. It has been clearly stated that even if any process is conducted on the ores to remove part or all of the foreign matters, whether to make such ores fit for economic transport or for subsequent metallurgical operations, such process would merit to be called as the process of concentration of ores, therefore, the plea of the appellant is devoid of merit, when chapter note 4 of chapter 26 of CETA read with HSN notes, the processes of crushing and screening conducted on the ores has definitely led to the manufacture of concentrates from ores, even if such processes have been conducted only for the purpose of economic transportation of the ores.
11.2. Further, reiterating the orders of the adjudicating authority submitted that after insertion of chapter note 4 to chapter 26, now there is no confusion on the issue of levy of duty on concentrates. In its Circular dated 17.2.2012 issued by CBEC, it has been clarified by the Board after taking into consideration the opinion expressed by the Ministry of Mines, in its Office Memorandum dated 25.1.2012 that excise duty is attracted only in cases whether the products meets the definition of concentration as per HSN notes i.e. ores which have had part or all of the foreign matter removed by special treatment either because such foreign matter may hamper subsequent metallurgical operations or with a view to economical transport. Therefore, it can be understood from the said clarification that to convert ores into concentration of the processes, necessarily for all the process of beneficiation need not be carried out; even if few processes mentioned in the HSN notes, like crushing and screening are carried out, so as to meet the requirement of ores to be used for subsequent metallurgical operations or with a view to economical transport. It is his contention that this twin requirements need to be satisfied before charging duty on concentrates. He has contended that in the present case the processes of crushing and screening are satisfied the said requirement accordingly duty is leviable on concentrates irrespective of whether there has been change in the ferrous content in the ores.
11.3. He has further submitted that the decision cited by the ld.Adv. are not applicable to the facts and circumstances of the present case as the same had been passed not in the context of chapter note 4 of chapter 26 introduced w.e.f. 01.3.2011, but while considering the argument whether conversion of Ores to concentrate results into a new commodity. It is his submission that before 01.3.2011, no legal friction was created to call the conversion of ores into concentrates a process of manufacture, therefore, there was no scope for any discussion as to whether concentrates are new products arising from ores similarly by process of concentration, as such conversion has been statutorily recognized as a manufacturing process.
11.4 On the eligibility of exemption Notification No.63/95-CE dated 16.3.1995 the ld.Spl.Counsel submitted that exemption from duty is an exception to the rule therefore it is question of fact and ought to have been raised before the adjudicating authority. Since the appellant had not raised the said issue this cannot be allowed at this stage as the appellant ld.adjudicating authority had not examined the issue. However, he has no objection in remanding the case to the adjudicating authority for verification of necessary facts.
12. The ld.AR Shri K.Chowdhury for the Respondent, rebutting the arguments advanced by the Appellant M/s. Kamaljeet Singh Ahluwalia, submitted that the appellant mines iron ores. The iron ore found in rocks in the form of Hematite or Magnetite. In the process of mining, rocks are drilled and blasted and Run of Mines(ROM) consisting of large size iron ore called boulders is obtained. At this stage, the iron ores are neither suitable for metallurgical operations nor feasible for economical transportation because of their sheer size and their containing of foreign matters including mud and earth. Thus, these are crushed and thereafter crushed ores are screened.
12.1 It is his contention that during crushing and screening, the foreign matters get removed, thus rendering the ores suitable for metallurgical operations as well as for economical transportation. He submits that these resultant ores become concentrates falling under tariff item No.26011150 in view of the chapter note 4 inserted to chapter 26 of CETA, 1985 w.e.f. 01.03.2011 laying down that the process of conversion of ores into concentrates would amount to manufacture. Also, the Board has clarified by issuing Circular dated 17.02.2012 that resultant product becomes concentrates as per HSN notes and accordingly liable to duty. He has contended that even though the appellant admits that crushing and screening are special treatments within the meaning of HSN notes in the reply to the show cause notice, but simultaneously claims that these two processes alone do not convert ores into concentrates and concentrate would emerge only when the metal content in the ore is enhanced.
12.2 Referring to the meaning of ore contained in note 2, and newly inserted chapter note 4 of chapter 26 of CETA, 1985, HSN notes and Board Circular dated 17.02.2012, the ld.AR contended that to attract Central Excise levy, concentrates must meet the HSN definition i.e. concentrates applies to ores which have had part or all of the foreign matters removed by special treatments either because such foreign matter might hamper the subsequent metallurgical operations or with a view to economical transport. Responding to the appellants argument that process of concentrates requires special treatment, like crushing, grinding, screening, magnetic separation, gravimetric separation and agglomeration etc. whereas the appellants undertook only crushing and screening only, therefore, the resultant product is not concentrate, the ld.AR submitted that HSN notes refers to physical and physico-chemical processes, and the HSN notes cannot be interpreted to mean that all these enumerated processes are necessary for converting ores into concentrates because no ore is subjected to all these processes for conversion into concentrates which depends on the nature of the ore. He has further argued that as per the HSN notes any one or more of the enumerated process(es) undertaken for removing foreign matters with a view to rendering the ore suitable for metallurgical operations or economical transportation is/are concentration process(es). Crushing and screening are enumerated processes and by employing these processes the ore become suitable for metallurgical purposes or economical transportation, therefore excisable goods. It is his contention that judgements which were passed earlier to 01.03.2011 holding that conversion of ores into concentrates does not result into manufacture cannot be considered as good law in view of the chapter note 4 and in view of the judgement of the Honble Supreme Court in the case of Star Industries vs. Commissioner of Customs (Import), Raigad 2015 (324) ELT 656 (SC). Also the Appellant are not entitled to the benefit of Notification No.4/2006-CE dated 17.03.2006.
13. The ld.AR Shri Chowdhury for the Revenue reiterating the same arguments while replying to the pleas taken by ld.Advocate for M/s.Orissa Mining Corporation Ltd., submitted that the judgement of this Tribunal in the case of Commissioner of Customs and Central Excise, JSR. & BBSR-II vs. SAIL 2003 (154) ELT 65(Tri.-Kol), no doubt observed that crushing and grinding do not amount to manufacture but no where the Tribunal has held that crushing and grinding do not convert ores into concentrates.
14. The ld.AR Shri A.Roy, appearing for the Revenue in response to the arguments advanced on behalf of M/s SAIL more or less subscribed to the stand taken by the revenue in other appeals, however made an attempt to distinguish the judgement of this Tribunal in their own case submitting that the said judgements cannot be considered as applicable to the facts of the present case in view of the change in legal position after insertion of chapter note 4 to chapter 26 of CETA, 1985 and the judgement of the Honble Supreme Court in the case of Star Industries vs. Commissioner of Customs(Imports), Raigad 2015 (324) ELT 656(SC).
15. Heard the learned Advocates for the respective Appellants and representatives of the Revenue at length and perused the records.
15.1 The principal issue needs to be addressed in these appeals is: whether processes of crushing, grinding, screening and in some cases washing of iron ores result into iron ore concentrates and becomes manufacture in view of chapter note 4 to chapter 26 of CETA,1985 inserted w.e.f 01.03.2011,accordingly leviable to duty under tariff sub-heading 26011150 of CETA, 1985.
15.2 The contention advanced on behalf of the Appellants is that on application of the aforesaid processes to ores, it does not convert/result into concentrates, hence no manufacture is involved and therefore, the resultant is not liable to duty under the said tariff heading. To support their contesulting into no chemical change. These processes have been held by the Honble Supreme Court to be not a process for concentration. Further, he has contended that the special treatment used are calcinations, roasting or firing for change of chemical composition and the chemical process for elimination of the unwanted matter i.e. dissolution. He has submitted that M/s.SAIL is neither subjecting the ore to any chemical change nor adopting any chemical process to eliminate any unwanted metal from the ore. Referring to the decision of the Honble Supreme Court in Mineral & Metals Trading Corporation of India Vs. UOI 1983 (13) ELT 1542(SC) he has submitted that unless the ore is roasted or treated with any chemical it cannot be considered as processes. The said decision was followed in Indian Hard Metals(P) Ltd. Vs. UOI 1978 (2) ELT J 667 (667).
8.1 He has further submitted that for application of chapter note 4 of chapter 26, the ore must be subjected to the process of concentration, therefore, the appellant could not be said to be producing concentrates in terms of the HSN as construed by the Honble Supreme Court in the aforesaid cases. Further, he has submitted that in view of the tariff heading of Mines and Mineral (Development and Regulations) Act, 1956 provides that iron ore lumps, iron ore fines and concentrates are distinct commodities known to market and are subjected to different rate of royalty which indicates that the appellants are not manufacturer of concentrates. Further, he has referred to the clarification issued by the Ministry of Minerals by its circular dated 25.1.2012 wherein it is stated that unless the beneficiation process is carried out it cannot be construed as a manufacturer of concentrates. He has submitted that the meaning of concentration has not been explained in the HSN, but it has been explained in the Order dt.19.02.2013 of the Competition Commission relating to Iron Manufacturers Association Vs. National Mineral Development Corporation, case No 09 of 2012. He further submits that the word special treatment referred to in the Boards Circular dated 17.2.2012 and in the HSN has not been defined and hence the process carried out by them cannot be considered as special treatment. Further, he has submitted that the Honble Supreme Court in their own case dismissed the appeal filed by the Revenue against the Order of the Tribunal. He has further submitted that alternatively the Appellant are eligible to the benefit of Notification No.63/95 CE dt. 16.03.1995.
9. Shri Manas Mahapatra, ld.Sr.Adv. appearing for M/s.Kamal Jeet Singh Ahluwalia interpreting the HSN explanatory note submitted that for the purpose of ores to be termed as concentrate, two steps are involved. Firstly, a part or all of the foreign matters needs to be removed by a special treatment. Secondly, such removal by special treatment of the foreign matters should be if the foreign matter might hamper subsequent metallurgical operation or with a view to economic transport. He submitted that in their case the appellant has not subjected to ores to any treatment much less a special treatment to for removal of foreign matter hence the next step of the economic transportation cannot be looked into. However, without prejudice to the said argument he has submitted that the word economical transport used in the HSN notes shall not be applicable in the case of appellant for the reason that the ore extracted by the appellant is in a very huge size which is not transportable. Hence, it is crushed to various sizes to make it transportable, therefore ores are being crushed for the purpose to make the same transportable. So the question of economic transportation does not arise. He has submitted that the appellant are involved in the process of crushing and screening only and the process of crushing and screening by no stretch of imagination could be termed as treatment much less a special treatment. It is his submission that the Revenue has admitted that the process carried out by the appellant is inevitable. Further it is contended that quality of the ore is not changed after the process of screening and crushing and the respondent has failed to conduct any test or analysis to show the contrary.
9.1. He has further submitted that license for mining activity has been granted to the appellant by the state authorities. The iron or is excavated/mined from the earth. After removing iron ore lumps from earth, the lumps are so huge that it cannot be transported by any means of transportation. So, the lumps are broken down to make it transportable and while doing so there is no change in the quantity or grade of the iron ore. He has submitted that the issue is covered by the decision of the Honble Supreme Court in the case of CCE v. SAIL. Further he has submitted that iron ore lumps and iron ore concentrates are different and distinct excisable goods and physical transition from one to another is a necessary process to be called process amounting to concentration. The clarification dated 17.2.2012 issued by the Joint Secretary, Govt. of India, Ministry of Finance are mandatory and to be strictly followed by the adjudicating authority. He has submitted that iron ore obtained in the mining activities are exempted in view of the exemption Notification04/2006 CE dated 01.3.2006 as amended by Notification dated 17.3.2012. Further he has submitted the appellant is not required to pay duty on excisable goods which are absolutely exempted under section 5A(1A) of the Central Excise Act, 1944.
10. Shri K.K.Acharya, learned Advocate for the Appellant submitted that two issues are involved for determination in their case, namely whether processes of crushing, screening of iron ore lumps amounts to manufacture and the resultant graded iron be treated as concentrates falling under chapter 26 of CETA, 1985. Tracing the development of levy of duty on iron ore concentrates, the learned Advocate submitted that ores and concentrates falling under chapter 26 of CETA, 1985 was exempted by Notification No.19/88-CE dated 01.03.1988. The said Notification was rescinded by Notification No.19/96-CE dated 23.07.1996 and simultaneously another Notification No.8/96-CE dated 23.07.1996 was issued where under ores classified under chapter headings 26.01 to 26.17 was only exempted and by implication the exemption granted to concentrates was considered to be withdrawn. Thereafter another Notification bearing No.12/2012-CE dated 17.03.2012 continuing with the same effect of exemption of ores from whole of duty.
10.1The learned Advocate submitted that several show cause notices were issued to the appellant after 23.07.1996 alleging that the crushing, grinding and screening resulted into manufacture of concentrates and accordingly exigible to duty. It is the contention that the demands were initially confirmed by the adjudicating authority but on filing Appeal dropped by the ld.Commissioner(Appeals) and the said Order was upheld by the Tribunal by its order dated 22.04.2004 on the basis of an earlier decision of the Tribunal in the case of CCE, JSR & BBSR-II vs. SAIL 2003 (154) ELT 65 (Tri.-Kol). Appeal against the said order was rejected by the Honble Supreme Court by its order dated 17.09.2014. Consequently the adjudicating Commissioner following the said precedent and order of the Honble Supreme Court dropped demand notices for the period upto February, 2011.
10.2. He submits that the present demands were confir