Customs, Excise and Gold Tribunal - Calcutta
Indian Rare Earths Ltd. vs Commissioner Of Central Excise, Bbsr-I on 27 September, 2001
Equivalent citations: 2002(139)ELT352(TRI-KOLKATA)
JUDGMENT
C.N.B. Nair
1. M/s. Indian Rare Earths Ltd., Orissa is a Cental Government Public Sector Undertaking Unit. They separate valuable mineral stands from the sand available on sea beach. Rare minerals so separated by them are Ilmenite, Rutile, zircon, Sillimanite, Garnet and Monazite. The impugned order has demanded duty on them under Chapter 26 of the Central Excise Tariff. The present appeal challenges the levy.
2. The process carried out by the appellants are that the sand is dredged from the sea beach and the 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.
3. The findings of the Commissioner with regard to the excisibility of goods is as under:-
"3. The most important question which arises in this regard, whether the assessee had manufactured concentrates of Rutile, Zircon, Garnet, Sillimanite and Ilmenite. There is no definition of "Concentrates" in Cental Excise Tariff. It is a settled law that if the Central Excise Tariff does not define any term, resort can be had to H.S.N. Explanatory Notes. Hon'ble Supreme Court in the case cited in 1995 (77) ELT 23 (SC) and 1997 (91) ELT 13 (SC) held that any dispute relating to Tariff classification, must as far as possible, be resolved with reference to the nomenclature indicated by the H.S.N. unless there be an express, different intention indicated by the Central Excise Tariff Act, 1985 itself. In other words, H.S.N. is to be relied upon for ascertaining the correct meaning of any expression used in the Tariff. The term "concentrate" has been explained in details in H.S.N. Explanatory Note (Chapter 26, page 203). The relevant portion is extracted as under:
Ores and seldom marketed before 'preparation' for subsequent metallurgical operations. The most important preparatory processes are those aimed at concentrating the ores. For the purposes of heading 26.01 to 26.17, 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 headings 26.01 to 26.17 may have been submitted include physical, physico-chemical or chemical operations, provided they are normal to the preparation of the ores for extraction of metal. With the exception of changes resulting from calcination, 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, gravi-metric separation, flotation, screening, grading, agglomeration of powder (e.g. by sintering or pelleting) into grains, balls or briquettes (whether or not with the addition of small quantities of binders), drying, calcination, roasting to oxides or magnetise the ore, etc. (but not roasting for purposes of sulphating, chloridating, etc.)'.
4. From the above definition, it is clear that any process viz., physical, physico-chemical or chemical operation which are normal to the preparation of the ores for the extraction of metal or which removes foreign matter by special treatments even with a view to economical transport, could be considered as "concentrates". In fact, the definition of concentrates under H.S.N. is quite wide enough to include the processes undertaken by the assessee within its ambit. The assessee has admitted that apart from removal of gangue materials, in their mineral separation plant using concentration upgradation system and by utilising difference in physical properties, namely electrical conductivity, magnetic susceptibility, surface characteristics and specific gravity etc., the product is separated out and the purity of the minerals is achieved. The aforesaid process would come within the definition of concentrates been manufacturing concentrates of Rutile, Zircon, Garnet, Sillimanite and Ilmenite. As the products are concentrates falling under Chapter 26 of Central excise Tariff, appropriate Central Excise Duty leviable at the rate of 10% Adv. is to be paid by the assessee on the clearance of the aforesaid products.
5. The contention of the assessee that the impugned goods are ores, cannot be accepted in view of the reasons mentioned above."
4. During the hearing of the case, it has been submitted on behalf of the appellants that the processes carried out by them are only to separate the mineral sands of Ilmenite, Rutile, Zircon etc. from ordinary sand occuring on sea beach. The process carried out are only physical and mechanical separation processes. At the end of the processes, the separated mineral sand had the same form and properties as they had while existing along with ordinary sand in the beach. No upgradation of purity of the mineral sands takes plea during the processes. They have also contended that the mineral sands remained at the ore stage at the end of the processes i.e. the conditions in which they occured along with ordinary sand. It has also been stressed that no upgration or augmentation of their purity takes place as a result of the processes. At the end of processes, the mineral sands continued to be only in the ore stage and did not become concentrated ore. It has been submitted that according to note 2 of Chapter 26, the mineral sands in question have to be treated as ores if they have not been subjected to processes not normal to the metallurgical industry. The appellants have submitted that the processes carried out by them are not of the special treatment category.
5. The appellants have also submitted that the goods are known and bought and sold in the commercial parlance as ore sands only. They have pointed out that the goods are ordered by the buyers as "ores", "sands" and they are sold as "Rutile sand" etc. It is their contention that going by the test of commercial parlance the goods should be treated only as ores and that no new goods have been brought into existence by the appellants.
6. The appellants have also contended that in the light of the decisions of the Hon'ble Supreme Court in the case of Minerals & Metals Trading Corporation of India Ltd. v. Union of India and Ors. reported in 1989 (25) ECR 278 (S.C.) and in the case of Hyderabad Industries Ltd. v. Anr. Etc. v. Union of India reported in 1995 (60) ECR 4 (SC), it has to be held that the processes carried out by the appellants do not lead to the mergence of new goods which are liable to Central Excise duty.
7. As against the aforesaid contention of the appellants, ld. SDR submitted that what is relevant for the decision is not the natural of the processes carried out but whether, as a matter of fact, concentrated ores have come into existence. He pointed out that the adjudicating authority has clearly come to the finding that the processes carried out by the appellants have led to the emergence of very high purity minerals. He referred to the observation in the order that the purity of goods in question, at the end of the processes was as under:-
1) Ilemenite : 97.5%
2) Rutile : 96.5%
3) Zircon : 97.0%
4) Garnet : 94.0% The ld. DR also pointed out the Commissioner's finding that removal of foreign materials have led to the manufacture of ore concentrates cannot be faulted in any way.
8. It is clear from the facts of the case that mineral sands freely occured 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 beensubjected 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 and Ors. that no manufacture of a new or distinct commodity takes place on account of the processes of separation of naturally occuring 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 the Apex Court is that the chemical structure of the ore should remain the same. Thus, the principle of law is clear that basic operation 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 miner 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 M/s. Indian Rare Earths Ltd. is allowed, with consequential relief, if any.
(Pronounced)