Custom, Excise & Service Tax Tribunal
) M/S.Rungta Mines Ltd vs Commissioner Of Central Excise, ... on 29 February, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH: KOLKATA
1-5) Appeal Nos. EA-71397/13, 75367/14, 71306/13, EA-75746/14, EA-75912/15
Arising out of Order-in-Original No.
1) CCE/BBSR-II/No.07/COMMISSIONER/2013 dated 04.9.2013
2) CCE/BBSR-II/No.05-06/COMMISSIONER/2013 dated 03.09.2013
3) CCE/BBSR-II/No.01-04/COMMISSIONER/2013 dated 16.8.2013
4) CCE/BBSR-II/No.13-14/COMMISSIONER/2013 dated 29.10.2013
5) BSR-EXCUS-002-COM-025-14-15 dated 23.03.2015
All passed by the Commissioner of Central Excise, Customs & Service Tax , Bhubaneswar-II.
FOR APPROVAL AND SIGNATURE
HONBLE DR. D.M. MISRA, MEMBER(JUDICIAL)
HONBLE SHRI H.K.THAKUR, MEMBER(TECHNICAL)
1. Whether Press Reporters may be allowed to see
the Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the
CESTAT(Procedure) Rules, 1982 for publication in any
Authorative report or not?
3. Whether Their Lordship wishes to see the fair copy
of the Order?
4. Whether Order is to be circulated to the Departmental
Authorities?
1) M/s.Rungta Mines Ltd.
2) M/s.Rungta Sons Pvt.Ltd.
3) M/s.SAIL
4) M/s.Kamal Jeet Singh Ahluwalia
5) M/s.Odisha Mining Corporation Ltd.
Applicant (s)/Appellant (s)
Vs.
Commissioner of Central Excise, Customs & Service Tax, BBSR-II
Respondent (s)
Appearance:
S/Shri K.Kurmy & S.B.Sharma, R.K.Chowdhury, B.N.Pal, Adv.s, Manas Mahapatra, sr.Adv., Ankit Shah, Adv. & Shri K.K.Acharya, Adv. for the Appellants Shri S.C.Jana, Spl.Counsel and Shri K.Chowdhury, Supdt.(AR) and Shri A.Roy, Supdt.(AR) for the Revenue CORAM:
Honble Dr. D.M. Misra, Member(Judicial) Honble Shri H.K.Thakur, Member(Technical) Date of Hearing :- 27.01.2016/15.02.2016 Date of Pronouncement :- 29.02.2016 ORDER NO.FO/75216-75220/2016 Per Dr. D.M. Misra.
These appeals are filed against respective orders passed by the Commissioner of Central Excise, Bhubaneswar-II. Since the questions of law involved in all these appeals are common with marginal variation of facts, hence all these appeals are taken up together for disposal.
2. Stating the facts, in Ex.Ap. No.75367/14 the appellant M/s Rungta Mines Ltd. are engaged in mining of iron ore at their mines located at Jajank, Distt. Keonjhar, Odissa. On blasting of the mine faces, large boulders and fines are generated. The iron ore boulders of bigger sizes are collected with the help of excavators and brought to the crusher plant. In the said crusher plant the boulders are crushed into different sizes of 5-18 mm, 10-30/40 mm and iron ore fines of 0-10 mm are also generated. After crushing it is screened at the screening plant where the iron ores of different sizes are segregated. Alleging that by the aforesaid processes ores are converted into concentrate, as per chapter note 4 Chapter 26 of CETA,1985 inserted w.e.f. 1.3.2011, hence the said processes amount to manufacture, two show cause cum demand notices were issued for the period from March, 2011 to September, 2012 demanding duty of Rs.206,32,99,768/-. On adjudication, the demands were confirmed and penalty of equivalent amount had been imposed.
3. In Appeal No.Ex.Ap.71397/13 the appellant M/s Rungta Sons Pvt. Ltd. are engaged in the mining of iron ore at their mines at Oraghat, Sanindapur. The processes carried out by them are similar to the one mentioned above. The appellant was also issued with a show cause cum demand notice on 28.2.2012 demanding duty of Rs.38,03,50,566/- for clearance of the goods during the period March, 2011 to December, 2011. On adjudication demands were confirmed and penalty of equivalent amount had been imposed.
4. In the Appeal No.EA-71306/13 facts of the case are that the Appellant M/s. SAIL , a Govt. of India Enterprises, engaged in mining activities amongst other places at its Barsua Iron Ore Mines. The mining activity include drilling and blast of rocks containing iron ore. The blasted rock is subjected to tracing operation comprising washing and sizing. Iron ore extracted from the said mines is solely and exclusively used as iron ore on their integrated steel plants. Four show cause cum demand notices were issued for the period from March, 2011 to December, 2012 demanding a total duty of Rs.42,11,77,311/-. On adjudication, the demands were confirmed by the ld.Commissioner and penalty of equivalent amount was imposed.
5. In Appeal No.EA-75746/14, the Appellant M/s.Kamal Jeet Singh Ahluwalia are engaged in the mining of iron ore at their mines Nuagaon Iron Ore Mines located at Vill.Gulli, Distt.Keonjhar. In the said process of mining, they carry out drilling/blasting of rocks wherefrom Run Of Mines (ROM) is obtained. The boulders of bigger sizes are collected with the help of excavators and then brought to the crushing/screening plant where the said boulders are crushed into sizes of 5-18 mm and 10.30 mm and 10-40 mm and thereafter it is screened to segregate the iron ore of desired sizes i.e. 5-10 mm, 10-30 mm and 10-40 mm. In a nutshell, the appellants are engaged in only crushing and screening of the ROM in the plant installed in the leasehold premises. In the process of said crushing and screening iron ore fines are also generated. Two show cause cum demand notices were issued for the period from March, 2011 to January, 2012 demanding a total duty of Rs.196,54,28,109/-. On adjudication the demand was confirmed and penalty of equal amount imposed.
6. Appellant M/s.Odisha Mining Corporation Ltd., a Govt. of Odisha Undertaking are engaged in crushing and screening of the iron ore at Hilltop and the finished/(CLO and fines) are transported to Ghatroad and brought to Bali Parbat and Daitari Railway Side. The screened sizes of iron ore which are marketed are 10-100 mm, 10-40 mm and 10 mm for the material period. Seven periodical demand notices were issued for recovery of duty amounting to Rs.117,38,20,898/- for the period from March, 2011 to September, 2014. On adjudication, the demands were confirmed with imposition of equivalent penalty on the Appellant.
7. Shri Kartik Kurmy, ld.Adv. appearing for M/s.Rungta Mines Ltd. and M/s.Rungta Sons (P) Ltd. has submitted that the appellant are engaged in mining and sales of iron ore lumps/fines for more than two decades. The iron ore produced by the appellant from these mines are having ferrous (Fe) content 55% to 65%. These are high grade iron ore, hence does not require any concentration. He has submitted that the appellant filed returns under the Mines & Mineral (Regulation & Development) Act, 1957 showing the production and sale of iron ore lumps/fines. As per the said returns, which are accepted by the mining authorities, the production of concentrate is nil. Explaining the process ld.Adv. has submitted that on blasting first Run of Mines (ROM) are obtained which then transported to crushing and screening plant inside the mining area where the same are crushed and screened to required sizes. It is further submitted that in the process of crushing and screening, iron ore fines are also generated which are sold without carrying out any further processes.
7.1. It is his contention that the appellant do not carry out any beneficiation process for removal of foreign matters from the iron ores so as to result into manufacture of iron ore concentrates falling under Chapter sub-heading No.26011150 of CETA and the appellant had not installed any concentration plant in their premises. It is his submission that the process of beneficiation or concentration is a process of removal of foreign matters such as silica, alumina etc. from ores by special treatment for enrichment of the ore. He has contended that concentration is carried out with low grade iron ore (having 35% to 45% Fe content) for removal of foreign matters with a view to enrich it up to 60% to 65% of the Fe content for its use in further metallurgical operations or for economic transport. By application of the process of beneficiation the Fe contents in the iron Ore cannot be increased/upgraded beyond 65%. The rest of the gangue matters beyond 65% is removed by smelting for steel making in the form of slag.
7.2. Narrating the process of benefication, he has submitted that it generally includes (i) grinding of iron ore fines to a size below 0.20 mm (i.e. making powder); (ii) gravity separation (hydraulic separation); (iii) magnetic separation; (iv) froth flotation (using organic chemical/reagents). The concentrates fines are then agglomerated i.e. palletized, briquetted or sintered for use in steel making. In support he had referred to the Technical Resource Document (Vol.3) published by US Environmental Protection Agency (Aug.1994).
7.3. Assailing the impugned order, the ld.Adv. has submitted that there is no conversion of ores into concentrates. Referring to chapter note 2 under chapter 26 he has submitted that ores has been defined therein, but concentrates are not defined under the CETA,1985; the HSN explanatory notes defines concentrates. He has submitted that the Honble Apex Court has laid down that in absence of any statutory definition, HSN explanatory notes can be referred to as a safe guide. of CCE v. Phil Corporation Ltd. 2008 (223) ELT 9(SC), CEON Bharat Ltd. v. CCE 2007 (207) ELT 165 (SC).
7.4. Further, he has argued that the process of crushing and screening cannot remove foreign matter nor these are special treatment. It is his contention that without removal of foreign matters (i.e.without enrichment of ferrous content), there cannot be any concentration. Concentrates are goods of intensified strength as per HSN explanatory notes, upgradation of ferrous content that too by special treatment is sine qua non for determination of whether the process is concentration or not.
7.5. Referring to the clarification dated 25.1.2012 issued by Ministry of Mines, Govt. of India, he has submitted that in the said letter it has been clarified that no special treatment is involved in crushing and screening of run of mines (ROM) to lumps and fines and lumps and fines are naturally occurring forms of ore. The process of crushing and screening of ore to different sizes of lumps and fines without further process of beneficiation in the grade of ores does not amount to producing concentrate. It is his submission that the said clarification has been endorsed by CBEC by its circular No.332/1/2012-TRU dated 17.2.2012. The CBEC has clarified that the levy of excise duty is attracted only in cases where the product meets the definition of concentrate as per HSN notes. The said circular is binding on the deptt..
7.6. It is contention that in the case of Indian Rare Earths v. CCE 2002 (139) ELT 352, the Tribunal held that without special treatment of the ores it will remain as ores only. Referring to the decision of Honble Supreme Court in National Mineral Development Corporation Ltd. v. State of M.P. (2004) 6 SCC 281, he has submitted that the process of beneficiation consists of grinding, magnetic separation, froth floatation which are carried out in large concentration plants for concentration of ores. It is his contention that in the case of Hyderabad Industries Ltd. v. UOI - 1995 (78) ELT 641 (SC) and Minerals & Metals Trading Corp. of India v. UOI 1983 (13) ELT 1542(SC) it has been held that the process of mining does not amount to concentration. He has further submitted that the process of crushing and screening results into concentration need to be established by the department and the burden squarely rests on the department. In support he has referred to the judgement of the Honble Supreme Court in the case of Board of Trustees v. CCE 2007 (215) ELT 543(SC), UOI v. Garware Nylons Ltd. 1996 (87) ELT 12(SC), Hindustan Ferodo Ltd. v. CCE 1997 (89) ELT 16(SC).
7.7 Advancing an alternative argument he has submitted that the appellant are entitled to the exemption Notification No.63/95-CE dated 16.3.1995 as the said process was carried out within the mines of the appellant.
8. Shri R.K.Chowdhury, ld.adv. for M/s.SAIL has submitted that the iron ore are subjected to normal processes, namely crushing, grinding, screening, washing etc. for preparation of the ores for the extraction of metal and the same are called physical or physico-chemical operation resulting 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 confirmed 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 contention, they have referred to the judgements of this Tribunal in M/s Indian Rare Earths case and M/s SAILs case(supra), the meaning of concentrate as per the HSN , the clarifications issued by the Ministry of Mines and the Central Board of Excise and Customs. The Revenues contention on the other hand is that after insertion of chapter note 4 to chapter 26 a legal fiction has been created whereby conversion of ores into concentrates becomes manufacture and the processes carried out by the appellants on the mined Ores, satisfy the meaning of concentrate prescribed in the HSN, accordingly chargeable to duty.
15.3 Before examining the rival contention, it is necessary to refer to the development of the tariff entry of iron ores and concentrates under CETA,1985.:-
Heading No. Sub-heading No. Description of goods Rate of duty (1) (2) (3) (4) 26.01 2601.00 Iron ores and concentrates, including roasted iron pyrites 16% From 2005-06, the said tariff heading reads as follows:-
Tariff Item Description of goods Unit Rate of duty (1) (2) (3) (4) 2601 Iron ores and concentrates, including roasted iron pyrites
-Iron ores and concentrates, other than roasted iron pyrites:
2601 11
--Non-agglomerated:
2611 11 10
---Iron ore lumps (60% Fe or more) kg.
16% 2611 11 20
---Iron ore lumps (below 60% Fe, including Black iron ore containing up to 10% Mn) kg.
16% 2601 11 30
---Iron ore fines (62% Fe or more) kg.
16% 2601 11 40
---Iron ore fines (below 62% Fe) kg.
16% 2601 11 50
---Iron ore concentrates kg.
16% 2601 11 90
---Other kg.
16% 2601 12
-- Agglomerated:
2601 12 10
---Iron ore pellets kg.
16% 2601 12 90
---Other kg.
16% 2601 20 00
- Roasted iron pyrites kg.
16% 15.4 A cumulative reading of both the tariff headings, it is clear that in the year 2005-06, the tariff entry becomes more elaborative and iron ore concentrate is assigned a separate tariff sub-heading, namely, 26011150.
15.5 The contention of the Revenue is that w.e.f. 01.03.2011, the chapter note 4 has been added to chapter 26 which reads as follows:-
4.In relation to products of this Chapter, the process of converting ores into concentrates shall amount to manufacture.
15.6 It is the Revenues argument that application of the processes of crushing, grinding, screening and washing to ores converts it into concentrates and becomes manufacture w.e.f 01.3.2011, which activities were earlier held by this Tribunal as not amounting to manufacture. It is vehemently opposed by the Appellants submitting that the processes of crushing, grinding, screening of ores would not make the resultant as concentrates unless some special treatment, like the process of benefication is carried out on the ores to improve the Fe content so as to call the resultant as iron ore concentrates and the Tribunal in both these cases observed that application of the very same processes to Ores had not resulted into concentrates, accordingly, no manufacture took place.
15.7 Thus, the sheet anchor of the argument rests on the principle of law laid down in two judgements of this Tribunal, namely Indian Rare Earth Ltd. vs. CCE and CCE vs. SAIL (supra). Before proceeding to analyse and apply the ratio of the said judgments, it is relevant to keep in mind the guidelines laid down by the Honble Supreme Court in this regard. Striking a note of caution against indiscriminate application of the case laws as precedent in a given case their Lordships in the case of Collector of C.Ex.,Calcutta Vs. Alnoori Tobacco Products 2004 (170) ELT 135(SC) observed as:
11.?Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of Courts are neither to be read as Euclids theorems nor as provisions of the statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of Courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes. In London Graving Dock Co. Ltd. v. Horton (1951 AC 737 at p. 761), Lord Mac Dermot observed :
The matter cannot, of course, be settled merely by treating the ipsissima vertra of Willes, J as though they were part of an Act of Parliament and applying the rules of interpretation appropriate thereto. This is not to detract from the great weight to be given to the language actually used by that most distinguished judge.
12.?In Home Office v. Dorset Yacht Co. [1970 (2) All ER 294] Lord Reid said, Lord Atkins speech is not to be treated as if it was a statute definition. It will require qualification in new circumstances. Megarry, J in (1971) 1 WLR 1062 observed: One must not, of course, construe even a reserved judgment of Russell L.J. as if it were an Act of Parliament. And, in Herrington v. British Railways Board [1972 (2) WLR 537] Lord Morris said :
There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances made in the setting of the facts of a particular case.
13.?Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper.
14.?The following words of Lord Denning in the matter of applying precedents have become locus classicus :
Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive. ??***??????????***?????????????*** Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it. 15.8 In Indian Rare Earth Ltd.s case the facts are that the appellant, a Central Govt. Undertaking is engaged in separation of valuable mineral sands from the sand available on sea beach. Rare minerals separated by them are Ilmenite, Rutile, Zircon, Sillimanite, Garnet and Monazite. The process carried out by the appellant are that the sand is dredged from the sea beach and sand slurry is subjected to spiraling and as a result the heavier minerals are separated. By this process about 80% of the lighter sand is eliminated, the remaining 20% are brought to the Mineral Separation Plant by pumping the slurry through pipe. There the individual minerals are separated by processes like drying, electro-static separation, magnetic separation and gravity separations. The final recovery of minerals is less than 10% of the sand dredged from the sea of shore. The department sought to levy duty on these minerals considering the process of extraction of such minerals amounts to manufacture as defined under Section 2(f) of Central Excise Act, 1944. Considering the findings of the Commissioner, the argument advanced by both sides and the case laws on the subject, the Tribunal recorded its finding as follows:-
8.It is clear? from the facts of the case that mineral sands freely occurred on sea beach along with ordinary sand. Most of the sand on the sea beach is ordinary sand only. Mineral sands constitute less than 10% of the total quantity of sand on the sea beach dredged out by the appellants. Sand as it occurs on the sea shore cannot be called mineral ores. Such sand is also not bought and sold as mineral ores. The processes carried out by the appellants lead to separation of valuable rare mineral sands from the ordinary sand. The processes are physical and mechanical in nature. No special processes including rosting or chemical treatment is carried out. The processes do not bring about any upgradation or augmentation of purity in the mineral sands separated from ordinary sand. It is also on record that the resultant mineral sands are bought and sold as ores only and not as concentrates of ores. It is clear from note 2 of Chapter 26 of the Central Excise Tariff that only ores which have been submitted to processes, not normal to the metallurgical industries are excluded from ores. Thus, ores which have been subjected to special treatment go out of the scope of ores. No such special treatment is carried out in the present case.
9.The Apex? Court has held in the case of Hyderabad Industries and Ors. v. Union of India & Ors. that no manufacture of a new or distinct commodity takes place on account of the processes of separation of naturally occurring asbestos from asbestos rocks. In the earlier case of Minerals & Metals Trading Corporation of India Ltd., the Apex Court held that the separating of wolfram ore concentrate from the rock to make it usable ore is a process of selective mining. It is not a manufacturing process. The important test according to the Apex Court is that the chemical structure of the ore should remain the same. Thus, the principle of law is clear that basic operations carried out to produce usable ore would not amount to manufacture of a new product. In the instant case, the appellants are carrying out certain physical and mechanical processes to separate mineral sands from ordinary sea shore sand. At the end of the processes, the mineral sands do not undergo any transformation. They remain in the same condition in which they remained along with ordinary sand on the sea beach. No upgradation or augmentation of their purity takes place. The chemical structure of the ore remained the same. The processes are not any special treatments which would take the ores out of the stage of plain and simple ores.
10. From what has been stated above, it is clear that no manufacturing is involved in the present case justifying demand of excise duty. The impugned order which has confirmed excise duty demand is set aside and the appeal filed by M/s. Indian Rare Earths Ltd. is allowed, with consequential relief, if any. 15.9 From the aforesaid observation, the Appellants argued that the Tribunal has held that removal of foreign materials from the sand Ores does not result into concentrates and accordingly no manufacture is involved, consequenlty no duty is leviable on such mineral sands extracted by employing the processes listed in the said order.
15.10 The next decision on which heavy reliance was placed is CCE vs. SAIL. The facts involved in the present case in relation to Appeal No. EA-71306/13 filed by M/s.SAIL are more or less similar, therefore, not repeated. This Tribunal referring to the HSN Explanatory Notes, following its earlier decision in Indian Rare Earth Ltd.s case and other materials recorded as:-
6.We have? considered the submissions of both the sides. Heading 26.01 of the Central Excise Tariff applies to Iron Ore and concentrates, including roasted iron by rites. The Revenue wants to levy duty on the ground that the mined iron ore is subjected to crushing, grinding, screening and washing and it becomes iron ore concentrate which is covered by Heading 26.01 of the Tariff. The Revenue has placed heavy reliance on the Explanatory Notes of HSN according to which the term concentrates applies to ores which have had part or all of the foreign matter removed by special treatment. On the other hand the Respondents have contended that the processes undertaken by them do not convert iron ore into iron ore concentrates as no special treatments are undertaken by them nor Fe content increases after the processes undertaken by them. The learned Advocate for the Respondents has emphatically contended that the activities of crushing, grinding, screening and washing do not amount to manufacture of any goods attracting levy of Central Excise duty. It is settled law that the activity or process in order to amount to manufacture must lead to emergence of a new commercial product, different from the one with which the process started. In the landmark judgment in the case of U.O.I. v. Delhi Cloth & General Mills, 1977 (1) E.L.T. (J 199) (S.C.), the Apex Court has held that manufacture is generally understood to mean as bringing into existence a new substance and does not mean merely to produce some change in a substance. The Court has held that ... something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use. The Supreme Court has laid down a two fold test for determining whether the process is that of manufacture in J.G. Glass Industries Ltd. v. U.O.I., 1998 (97) E.L.T. 5 (S.C.) as under :
First, whether by the said process a different commercial commodity comes into existence or whether the identity of the original commodity ceases to exist; Secondly, whether the commodity which was already in existence will serve no purpose but for the said process. In other words, whether the commodity, which was already in existence, will be of no commercial use but for the said process. ?7. Applying the test laid down by the Apex Court we observe that the process undertaken by the respondents remove extraneous, unwanted material from the ore and as such is devoid of gangue which adheres to the blasted ores. From this it has been claimed by the Revenue that the constituents of the final product are distinctly different from that of the blasted ore. The Revenue then applying the Explanatory Notes of HSN has come to the conclusion that iron ore has become a new commodity known as iron ore concentrates which is no more exempted from payment of duty as Notification No. 19/88-C.E., dated 1-3-88 has been rescinded by Notification No. 19/96-C.E., dated 23-7-1996. We find ourselves unable to agree with the Revenue that on account of the processes undertaken by the Respondents, a new and different article has emerged on which Central Excise duty can be levied and collected. Even according to HSN the term concentrates applies to ores which have had part or all of the foreign matters removed either because such foreign matter might hamper subsequent metallurgical operations or with a view to economical transport. In our view, removing of foreign matters would not, in the present matter, bring into existence a new and different article having a distinctive name, character or use. The use of iron ore as mined or iron ore after the process undertaken by the respondents remains same that is to be used in metallurgical industry for the extraction of metals. In Indian Rare Earths case, supra, the Appellants were removing gangue materials from the sand. It has been held by this Tribunal that at the end of the processes, the mineral sands do not undergo any transformation. They remain the same condition in which they remained along with ordinary sand on the sea beach. No upgradation or augmentation of their purity takes place. The Chemical structure of the ore remained the same. The processes are not any special treatment which would take the ores out of the stage of plain and simple ores. The learned Advocate has also relied upon the decision in the case of Super Engineering Co. 1996 (82) E.L.T. 539 wherein the Tribunal has held that the process of pulverizing, washing and cleaning of brass/ash does not result into emergence of a new marketable commodity with a separate, distinct name having separate physical, chemical composition or characteristic. Similar views were expressed in the case of Seth Liladhar Biyani & Sons v. CCE Jaipur, 2001 (129) E.L.T. 423 (T) relied upon by the learned Advocate. In view of this we hold that the processes undertaken by the Respondents do not result in the manufacture of a different commercial commodity. Hence no Central Excise duty is leviable. Accordingly, all the appeals are rejected.
15.11 It is vehemently argued on behalf of the Appellants that the processes narrated in the said decision of this Tribunal remained unchanged and the Tribunal considering such processes has held that Ores subjecting to process of crushing, grinding, screening and washing with a view to remove foreign materials would not result into concentrate, therefore, no manufacturing process involved and accordingly, duty is not leviable on resultant concentrate. It is their further contention that even after insertion of Chapter Note 4 to Chapter 26 since the processes employed to ore do not result into concentrate, therefore, the said Chapter Note 4 is not applicable to their case.
15.12.The Revenue on the other hand argued that the Tribunal has not recorded any finding nor required also in these two cases that with application of such processes to ore, whether the Ore is converted into concentrate or other wise, but the question and finding centered around the issue whether the processes of crushing, grinding, screening, grading etc. resulted into manufacture as defined under Sec2(f)(i) of CEA,1944 as no new commercial commodity came into existence as a result of such process.
15.13 What we find on reading these judgments is that in Indian Rare Earth Ltd.s case this Tribunal has referred to the ratio laid down Minerals & Metals Trading Corporation of India Ltd. vs. Union of India 1983 (13) ELT 1542(SC) and Hyderabad Industries Ltd. & Anr. Etc. v. Union of India 1995 (78) ELT 641 on the meaning and concept of manufacture. Recording reasons at para 9 this Tribunal has held that the principle of law laid down in these two decisions is clear to come to the conclusion that the basic operations carried out to produce usable ore would not amount to manufacture as no new product having distinct name use and character emerged. Proceeding further this Tribunal observed that physical and mechanical process carried out to separate mineral sands from ordinary sea-shore sands no transformation occur to mineral sands and the sand remained in the same content along with ordinary sand on the sea beach; also no upgradation or augmentation of their purity takes place. The chemical structure of the ore remained the same. Finally, the Tribunal reached at the conclusion that no special treatments were applied whereby the ores were taken out of the stage of plain and simple ores.
15.14. More or less similar line of interpretation and observation has been recorded by this Tribunal in M/s. SAILs case. The Tribunal referring to the Tariff Heading 26.01 as was in force prior to 2005-06 observed that in order to accept the processes of crushing, grinding, screening of ores be called as manufacture, it is necessary that the resultant product should be a new commercial commodity having distinct name character and use, different from the one on which the processes were employed and referred to the classic judgement on manufacture i.e. UOI vs. Delhi Cloth and General Mills 1977 (1) ELT J-199. Thereafter, applying the test laid down in the said judgement of the Honble Supreme Court, this Tribunal concluded that the process undertaken by M/s.SAIL to remove extraneous unwanted material from the ore and as such is devoid of gangue which adheres to the blasted ores and rejected the contention of the Revenue that the constituent of the final product are distinctly different from that of the blasted ore. Further, it is observed that on account of the processes undertaken by M/s.SAIL, no new and different article has emerged on which Central Excise duty could be levied and collected. Referring to the meaning of concentrate as in HSN this Tribunal observed that mere removal of foreign matters would not bring into existence a new and different article having a distinctive name, character or use. The use of iron ore as mined or after the process undertaken by M/s.SAIL remains the same, that is, to be used in metallurgical industry for the extraction of metals and finally they observed that the process undertaken by M/s.SAIL do not result of manufacture of different commercial commodity hence no Central Excise duty is leviable.
15.15 A careful reading of the aforesaid decisions, we do not find anywhere in these judgements this Tribunal has held that after application of processes viz. crushing, grinding, washing, grading etc. on ores, the resultant is not concentrate, hence not amounting to manufacture . This follows from the issues raised before this Tribunal for determination, and to resolve the issues, the principle of law referred to and followed by the Tribunal. There is no doubt of the fact that in both these cases this Tribunal has been confronted with the sole question whether the processes employed on the Ores would result into manufacture within the meaning and scope of the definition of section 2(f)(i) of Central Excise Act, 1944. Consequently, the Tribunal referring to the principles in relation to concept of manufacture laid down by the Honble Supreme Court, concluded that the processes of crushing, grinding, washing, grading of iron ores does not satisfy the test of a new commercial commodity having distinct name, character and use so as to qualify the definition of manufacture as prescribed under section 2(f)(i) of CEA,1944. Thus, the claim of the appellant that the issue now raised has been decided in the aforesaid two cases does not carry weight and accordingly does not impress us. Consequently, it is necessary to examine the issues raised in the present appeals de hors the observations made in the aforesaid decisions of this Tribunal.
15.16 In order to find an answer, whether application of processes of crushing, grinding, washing, grading etc. to Iron Ores results into Iron Ore concentrate it is necessary to understand the meaning of the words, namely, ores , concentrates, benefication and the benefication method.
15.17 The ores has been defined under chapter note 2 of Chapter 26 of CETA,1985 which reads as follows:-
2. For the purposes of headings 2601 to 2617, the term ores means minerals of mineralogical species actually used in the metallurgical industry for the extraction of mercury, of the metals of heading 2844 or of the metals of Section XIV or XV, even if they are intended for non-metallurgical purposes. Headings 2601 to 2617 do not, however, include minerals which have been submitted to processes not normal to the metallurgical industry. 15.18 The word concentrates has not been defined under the CETA, but its meaning has been explained in the HSN Explanatory notes along with term ores as:-
The term ores applies to metalliferous minerals associated with the substances in which they occur and with which they are extracted from the mine; it also applies to native metals in their gangue (e.g. metalliferous sands).
Ores are seldom marketed before preparation for subsequent metallurgical operations. The most important preparatory processes are those aimed at concentrating the ores.
For the purposes of the present heading, the term concentrates applies to ores which have had part or all of the foreign matter removed by special treatments, either because such foreign matter might hamper subsequent metallurgical operations or with a view to economical transport.
Processes to which products of this heading may have been submitted include physical, physico-chemical or chemical operations, provided that they are normal to the preparation of the ores for the extraction of metal. With the exception of changes resulting from calcinations, roasting or firing (with or without agglomeration), such operations must not alter the chemical composition of the basic compound which furnishes the desired metal.
The physical or physico-chemical operations include crushing, grinding, magnetic separation, gravimetric separation, floatation, screening, grading, agglomeration of powders (e.g., by sintering or pelleting) into grains, balls or briquettes (whether or not with the addition of small quantities of binders), drying, calcinations, roasting to oxidise or magnetise the ore, etc. (but not roasting for purposes of sulphating, chloridating, etc.) 15.19 The meaning of benefication as per Mc Graw-Hill Dictionary of Scientific and Technical Terms(6th Edition) is as follows:
benefication(minExi) See Mineral processing.
Mineral processing(Min Exi). Crushing, grinding,sizing classification or separation of oreinto waste and value by chemical,electrical,magnetic,gravity and physicochemical methods. First stage Extraction Metallurgy.
beneficiation [MET] Improving the chemical or physical properties of an ore so that metal can be recovered at a profit. Also known as mineral dressing. 15.19 And the Beneficiation Methods, narrated under Technical Resource Document(Extraction and Benefication of Ores and Minerals) vol.3 reads as follows:-
Beneficiation, defined by 40 Code of Federal Regulations (CFR) 261.4, means the following as applied to iron ore: milling (crushing and grinding); washing; filtration; sorting; sizing; gravity concentration; magnetic separation; floatation; and agglomeration (pelletizing, sintering, briquetting, or nodulizing). Although the literature suggests that all these methods have been used to beneficiate iron ore, information provided by members of the American Iron Ore Association indicates that milling and magnetic separation are the most common methods used. Gravity concentration is seldom used at existing U.S. facilities. Floatation is primarily used to upgrade concentrates from magnetic separation by reducing the silica content of the concentrate. 15.20 After introduction of the chapter note 4 to chapter 26, the Board has issued Circular bearing No.332/1/2012-TRU dated 17.02.2012. In the said Circular at para 3, it is clarified as :-
3. Hence, it is clarified that the levy of excise duty is attracted only in cases where the product meets the definition of concentrate as per HSN Notes, that is, ores which have had part or all the foreign matter removed by special treatments either because such foreign matter may hamper subsequent metallurgical operations or with a view to economical transport. 15.21 Both sides heavily relied on the meaning of concentrate prescribed under the HSN. It is Revenues argument that when the ores are subjected to physical, physico-chemical or chemical operations which are normal to the preparation of the ores for extraction of the metal then the resultant is concentrate. It is their further argument that the physical or physico-chemical operations mentioned in the said explanation of concentrates under the HSN include, crushing, grinding, magnetic separation, gravimetric separation, floatation, screening, grading agglomeration of powders etc. . It is the contention of the revenue that on application of any one or more of the processes, which would result in removing a part or all of the foreign matter, so as to make it fit for metallurgical operation or economical for transport, would result into concentrates.
15.22 The appellants on the other hand fervently argued that unless the process of benefication is undertaken on the ores, the resultant cannot be called as concentrates. In support, reliance has been placed on the letter issued by the Ministry of Mines dated 25.01.2012. The Ministry of Mines in the said letter has opined as follows:-
3. In this regard it is informed that the term Concentrate applies to ores which have had part or all the foreign matter removed by special treatments including gravitational, magnetic and other special techniques, whereas there is no special treatment involved in crushing and screening of Run-of-Mine (ROM) to Lumps and Fines. Specifically, the grade of ore is substantially improved through the process of beneficiation. The end products can be termed as concentrate while lumps and fines are naturally occurring forms of ore. The process of crushing and screening of ore to give different sized lumps and fines without any beneficiation in the grade of ore does not amount to producing concentrate. For this purpose excise levied on lumps and fines generated through process of crushing and screening is not valid. Till beneficiation of grade is there, iron ore lumps or fines produced by crushing and screening do not classify as a concentratefor levy of excise duty.
15.23 Relying on the said opinion of the Ministry of Mines, the Ld. Advocates for the Appellants argued that the special treatment referred to in the HSN definitely indicates to the process of beneficiation. It is their plea that the process of crushing and screening of ores to a definite size without any beneficiation of the ore would not result into producing concentrates. Further, it is their contention that under the Mines and Minerals(Regulation and Development Act),1957 and the Rules made thereunder, royalty is charged on lumps, fines and concentrates. Since in their case no royalty had been paid on concentrates, therefore, no concentrate is manufactured by them.
15.24 In the backdrop of above rival arguments, it is necessary to consider the implication of the new Chapter Note 4 which has been inserted in Chapter 26 w.e.f. 01.03.2011. In the said Chapter Note, it has been laid down that process of converting ores into concentrates shall amount to manufacture. The meaning of ores has been laid down in Chapter 2 of the said Chapter 26. The term concentrate is applicable to ores which are made free from impurities through the application of certain processes by which part or all of the foreign matters are removed for the reason that such foreign matter might hamper subsequent metallurgical operations or such foreign matter would not help in economical transport. The ld. Advocates for the appellants laid emphasis on the word special treatment employed in the said meaning of concentrates. It is their contention that since special treatment has not been defined under the Tariff or HSN, therefore special treatment refers to the process of beneficiation.
15.25 In our view, the processes mentioned under the definition of beneficiation are also included in explaining the term concentration under HSN. It is laid down that the physical or physico-chemical operations include crushing, grinding, magnetic separation, gravimetric separation, floatation, screening etc. which are normal to the preparation of the ores for the extraction of metals. While explaining the meaning of concentration, it is also mentioned that ores are seldom marketed before preparation for subsequent metallurgical operations. Hence, the Ores are to be subjected to special treatment. The Revenue had argued that all the processes narrated under the category of beneficiation or under the HSN need not be applied on the extracted Ore; even if by the application of few processes as enumerated under the scope of beneficiation, with an objective for removal of impurities or for economical transportation, definitely, covered under the scope of concentration. We find force in the contention of the Revenue. There has been no serious argument nor any contradiction of the fact that after carrying out the process of crushing, grinding, washing, grading with the particular size, the treated Ores are not made fit to be used directly for metallurgical operations. In our opinion, there is no necessity to examine whether by employing such processes, the Fe every content of the Ores has improved or the relevancy of all the processes categorised under the benefication method, become necessary for ores of having Fe content 40% or 60%. Neither, in our opinion, it is relevant to adopt the meaning of concentration and Levy of royalty under the Mines and Minerals(Regulation and Development Act),1957 and the Rules made thereunder to arrive at the conclusion that processes resulted into manufacture and the resultant product is iron Ore concentrate and chargeable duty. On the contrary, it is safe and prudent to look into the meaning of the concentrate in the HSN than to Mines and Minerals(Regulation and Development Act),1957 and the Rules made thereunder in view of the principle laid down by the Honble Supreme Court in a catena of cases including in the case of Commissioner of Customs & Central Excise, Goa vs. Phill Corporation Ltd. 2008 (223) ELT 9(SC) that for classification of the manufactured goods, HSN is a safe guide. Therefore, since the processes undertaken by the appellant on ores, and the resultant satisfies the meaning of concentrate as explained in the HSN, hence in our considered opinion, it should be considered as manufacture as per Sec.2(f)(ii) of CEA,1944 in view of the chapter note 2 of Chapter 26 of CETA,1985 and the resultant Iron Ore concentrate is dutiable. There is a significant difference between clause(i) and clause(ii) of the definition of manufacture laid down under sec.2(f) of CEA,1944. The processes which are considered not manufacture in the ordinary sense under clause (i), if mentioned in the relevant Section or chapters of CETA,1985 as amounting to manufacture, such processes will fall under the definition of manufacture.
15.26 Needless to emphasize, the Honble Apex Court in S.D. Fines Chemicals case 1995 (77) ELT 49 has laid down that if a process is declared as amounting to manufacture under the relevant Chapter Notes or Tariff Heading then applicability of the test of emergence of new and distinct commodity having different use and character after the processes applied to a commodity becomes irrelevant. Their Lordships at para 13 of the order observed as:-
13.?The decisions aforesaid make it clear that the definition of the expression `manufacture under Section 2(f) of the Act is not confined to the natural meaning of the expression `manufacture but is an expansive definition. Certain processes, which may not have otherwise amounted to manufacture, are also brought within the purview of and placed within the ambit of the said definition by the Parliament. Not only processes which are incidental and ancillary to the completion of manufactured product but also those processes as are specified in relation to any goods in the section or chapter notes of the Schedule to the Central Excise Tariff Act, 1985 are also brought within the ambit of the definition. 15.27 In the case of O.K Play (India) Ltd. Vs. Commissioner of C.Ex.,New Delhi 2005 (180) ELT 291(SC), the question came up before the Honble Supreme Court was whether powdering of Low Density polyethylene(LDPE) and High Density polyethylene granules(HDPE) into moulding powder manufacture in view of note 6(b) of chapter 39 of CETA,1985. In that context, emphasising the relevance of cl(ii) of Sec.2(f) of CEA,1944, their Lordships observed as:
11.?Section 2(f) contains two clauses and instead of setting out the activities in respect of different tariff items, Clause (ii) simply states that any process, which is specified in section/chapter notes of the Schedule to the Tariff Act shall amount to manufacture. Under Clause (ii), the Legislature intended to levy excise duty on activities that do not result in any new commodity. In other words, if a process is declared as amounting to manufacture in the section or chapter notes, it would come within the definition of manufacture under Section 2(f) and such process would become liable to excise duty. The effect of this definition is that excise duty can be levied on activities which do not result in the production of a new commodity or where the raw material does not undergo such a transformation as to loose its original identity.
12.?At this stage, we quote Note 6 to Chapter 39 of the 1985 Act which reads as under :
6(a).?In heading Nos. 39.01 to 39.14, the expression primary forms applies only to the following forms :-
(i) Liquids and pastes, including dispersions (emulsions and suspensions) and solutions;
(ii) Blocks of irregular shape, lumps, powders (including moulding powders), granules, flakes and similar bulk forms.
(b)?Notwithstanding anything contained in Note 3 to this Chapter, heading Nos. 39.01 to 39.14 shall also include primary forms obtained from conversion of another primary form, falling under the same heading, and such-conversion shall amount to manufacture.
13.?Reading Note 6(b), it is clear that blocks and powders are two different primary forms and if the block is pulverized into powder, the activity would amount to manufacture in terms of Clause (ii) of Section 2(f). By the very language of Note 6, conversion from granules into moulding powder would result in manufacture. Therefore, as a consequence of the new definition of manufacture in terms of Section 2(f), the activities which otherwise do not amount to manufacture can now be treated as manufacture and made liable to duty. 15.28 These judgements are later followed in the case of Commissioner of Customs & Central Excise, Goa vs. Phill Corporation Ltd. 2008 (223) ELT 9(SC), wherein their Lordships observed as follows:-
25.?The learned Additional Solicitor General contended that the deeming provision of Section 2(f) (ii) was squarely raised at all levels of the proceedings. In the show cause notice, Section 2(f) has been invoked. Similarly, in the order in original, the Commissioner has categorically relied upon Chapter Note 3 of Chapter 20 and Section 2(f)(ii) and referred to various documents to strengthen his case. The learned Additional Solicitor General has also submitted that the Constitution Bench judgment of this court in Delhi Cloth and General Mills (supra) is not applicable in the instant case as the deeming provisions of section 2(f)(ii) were not at all enacted during the relevant period. Section 2(f)(ii) was incorporated/substituted in the Central Excise Act with effect from 28-2-1986 vide MF (DR) Notification No. 10 of 1986-Central Excise dated 5-2-1986.
26.?It was submitted by the learned Additional Solicitor General that the judgment of the Delhi Cloth and General Mills (supra) was rendered on 12-10-1962 much before enactment of the deeming provisions of Section 2(f)(ii). In these circumstances, this judgment can be of no avail to the respondent assessee.
27.?The learned Additional Solicitor General further submitted that the learned tribunal in the impugned judgment has not at all considered the effect of section 2(f)(ii) of Chapter Note 3 of Chapter 20. He also contended that the Sales Tax judgments relied upon by the tribunal in the impugned judgment are not at all relevant in deciding the issues in the present case. According to him, the tribunal has not considered the issue of classification. According to his submission, in view of the HSN notes and the judgment of this court in Amrit Agro Industries (supra), the classification of the products in question ought to be made only under Chapter 20.
28.?We have heard the learned counsel for the parties at length and carefully analysed the judgments cited at the Bar. The Central Excise Tariff Act is broadly based on the system of classification from the International Convention called the Brussels Convention on the Harmonised Commodity Description and Coding System (Harmonised System of Nomenclature) with necessary modifications. HSN contains a list of all the possible goods that are traded (including animals, human hair etc.) and as such the mention of an item has got nothing to do whether it is manufactured and taxable or not.
29.?In a number of cases, this court has clearly enunciated that the HSN is a safeguide for the purpose of deciding issues of classification. In the present case, the HSN explanatory notes to Chapter 20 categorically state that the products in question are so included in Chapter 20. The HSN explanatory notes to Chapter 20 also categorically state that its products are excluded from Chapter 8 as they fall in Chapter 20. In this view of the matter, the classification of the products in question have to be made under Chapter 20.
30.?The legal position has been clearly crystallized in S.D. Fine Chemicals Pvt. Ltd. (supra) and other judgments of this court that certain processes which may not otherwise amount to manufacture have been deemed to be manufacture by the Parliament under section 2(f)(ii). Relevant portion of this judgment has already been extracted in the preceding paragraphs.
31.?In deciding the cases of this nature, the courts have to make serious endeavour to ascertain spirits and intention of the Parliament in enacting these provisions and once the legislative intention is properly gathered, then the bounden duty and obligation of the courts is to decide the cases in consonance with the legislative intention of the Parliament. 15.29 The said Chapter Note 2 to Chapter 26 inserted from 01.03.2011 has been recently considered by the Honble Supreme Court in Star Industries Vs Commissioner of Customs(Imports), Raigad 2015 (324) ELT 656, while considering the eligibility of Notification 4/2006, wherein their Lordships observed as:-
28.?According to us, it is very clear from the reading of the judgment in Hindustan Gas case that basic and the common thread which runs throughout the decision is that subjecting ore to the process of roasting does not amount to manufacture. This very basis gets knocked off with the amendment carried out in the year 2011 with the insertion of Note 4. Note 4 now categorically mentions that the process of converting ores into concentrates would amount to manufacture. Therefore, it cannot now be argued that roasting of ores and converting the same into concentrates would not be manufacture. For the same reason, the judgment in MMTC becomes inapplicable and reliance upon Kirk-Othmers Encyclopedia becomes irrelevant. With the addition of Note 4, a legal friction is created treating the process of converting ores into concentrates as manufacture. Once this is treated as manufacture, all the consequences thereof, as intended for creating such a legal friction, would automatically follow. Following shall be the inevitable implications :
(a) It is to be treated that Molybdenum Ore is different from concentrate. That is inherent in treating the process as manufacture inasmuch as manufacture results in a different commodity from the earlier one. Section 2(f) defines this term as under :
manufacture includes any process, -
(i) incidental or ancillary to the completion of a manufactured product;
(ii) which is specified in relation to any goods in the Section or Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture; or
(iii) which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer.
(b) The purpose of treating concentrate as manufactured product out of ores is to make concentrates as liable for excise duty. Otherwise, there was no reason to deem the process of converting ores into concentrates as manufacture.
29.?Once the aforesaid legal repercussions are taken note of, as a fortiori, it becomes obvious that Notification No. 4/2006-C.E. which exempts only ores would not include within itself concentrates also because of the reason that after the insertion of Note 4, concentrate is to be treated as a different product than ores, in law for the purposes of products of Chapter 26.
30.?This brings us to the effect of Chapter Note 2 which is retained even after insertion of Chapter Note 4. No doubt, as per Chapter Note 2, ores means minerals of mineralogical species actually used in the metallurgical industry for the extraction of mercury, of the metals of Heading 2844 or of the metals of Section XIV or XV, even if they are intended for non-metallurgical purposes. As per this note, metals of Section XV would be included in the term ores. However, after the insertion of Chapter Note 4, these two Notes, namely, Note 2 and Note 4 have to be read harmoniously. If we accept the submission of the learned counsel for the assessee predicated on Note 2, then Note 4 even after its conscious inclusion, would be rendered otiose which cannot be countenanced. Therefore, Note 2, when seen along with Note 4, has to govern itself in limited territory. On the basis of deeming fiction created by Note 4, once we arrive at the conclusion that process of roasting of Ore amounts to manufacture and it creates a different product known as Concentrate, for the purpose of exemption notification, which exempts only Ores it is not possible to hold that Concentrate will still be covered by the exemption notification. Therefore, harmonious construction of Note 2 and Note 4 would lead us to hold that in those cases when Note 4 applies and Ores becomes a different product, it ceases to be Ores.
31.?We, thus, are of the opinion that in the impugned judgment, the Tribunal has rightly arrived at the conclusion that by virtue of Note 4, concentrate has to be necessarily treated as different from ores which is deemed as manufactured product after Molybdenum Ores underwent the process of roasting. Once we keep in mind that conversion of ores into concentrate is considered as manufacture and, therefore, becomes liable for central excise levy, exemption Notification No. 4/2006-C.E. is to be interpreted in this light as the Legislature has intended to treat ores and concentrates as two distinct items and Notification No. 4/2006-C.E. exempts only ores, concentrates automatically falls outside the purview of said notification. It is rightly argued by the learned senior counsel for the Revenue that exemption notifications are to be construed strictly and even if there is some doubt, benefit thereof shall not enure to the assessee but would be given to the Revenue. This principle of strict construction of exemption notification is now deeply ingrained in various judgments of this Court taking this view consistently. 15.30 A cumulative reading of the ratios of the above judgements, the chapter note 4 of chapter 26 and the relevant tariff entry, makes the legislative intention and object clear that the processes which on application on ores held by the courts/tribunal earlier as not amounting to manufacture, by virtue of the chapter note, a legal fiction has been created bringing such processes into the fold of the definition of manufacture, which otherwise in common parlance would not be considered as manufacture. The contention of the appellant that unless the process of benefication is applied on Ores, the resultant cannot be called as a Iron Ore concentrates and accordingly the processes of crushing, grinding, screening, grading and washing of Ores would not fall under the definition of manufacture, in our opinion, is the result of misunderstanding and incorrect interpretation of the relevant tariff entry, the chapter note 4 and clause (ii) of Sec.2(f) of CEA,1944. In view of the judgements of this Tribunal if on application of processes on Ores its Fe content increases and its use, commercial identity and character is different from the ore then the resultant would be considered as manufactured and accordingly dutiable. The broad and detail tariff entry has been introduced with effect from 200506 classifying ores having different Fe content assigning different sub-headings. Therefore, in absence of an increase in the Fe content by benefication or any other method, if there cannot be a manufacturing process, the chapter note 4 inserted with effect from 01.3. 2011 defeat the very purposes and becomes otiose. Such a situation, in our opinion, cannot be the intention of the legislature. Therefore, in our considered opinion application of processes of crushing, grinding, screening and washing and grading of iron ore, converts it into iron ore concentrates and accordingly in view of the chapter note 4 of chapter 26 becomes manufacture and leviable to Excise duty.
15.31 The other issue raised by all the appellants, except the Appellant M/s Odisha Mining Corporation is that since the processes on ores have been carried out in the premises declared as mines, and they are governed under the Mines Act, therefore, the benefit of exemption notification 63/95 CE dt.16.03.1995 is applicable to them. However, all the appellants fairly accepted that this issue of exemption was not raised before the adjudicating authority and the claim has been advanced for the first time before this Tribunal. Ld. Special Counsel and other representatives appearing for the revenue have not raised objection to the said claim, but submitted that since the issue was not raised before the Commissioner, therefore, no finding has been recorded by the Commissioner on the fact of eligibility of the said notification. Thus, the matters need to be remanded to the adjudicating Commissioner for considering the said claim.
15.32 We find that besides, confirmation of duty the ld. Commissioner has also imposed penalty on the respective appellants under section 11AC of CEA,1944. In our opinion, since the issue involved is an interpretation of law, and the demands are for normal period, therefore, imposition of penalty is unjustified and unwarranted.
15.33 To sum up: (i) the processes of crushing, grinding, screening, grading of iron ore as stated under the respective Appeals result into manufacture of iron ore concentrate under clause (ii) of section 2(f) read with Chapter Note 4 to chapter 26 and classifiable under Chapter Sub-heading 26011150 of CETA,1985 (ii) the eligibility of benefit of exemption notification 63/ 95 CE dt.16.03.95 in case of all appellants except M/s Odisha Mining Corporation(Appeal No. EA-75912/15) be examined by the adjudicating authority;(iii) no penalty is imposable on any of the appellant.
15.35. In the result, all the Appeals are partly allowed to the extent of imposition of penalty and the Appeals (except Appeal No. EA-75912/15) are remanded to the Adjudicating authority only for the purpose of examination of eligibility of Notificaiton No.63/95 CE dt.16.03.1995. The duty and interest confirmed in Appeal No. EA-75912/15 is hereby upheld. Appeals disposed of as above.
(Pronounced in the open court on 29.02.2016.)
SD/ SD/
(H.K.THAKUR) (D.M.MISRA) MEMBER(TECHNICAL) MEMBER(JUDICIAL)
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Appeal No. EA-71397/13, 75367/14, 71306/13, EA-75746/14