By TIOL News Service

KOLKATA, MAR 30, 2016: THE appellant,a manufacturer of Iron Oxide, Synthetic Rutile, Titanium Di-Oxide Sludge and Thorium Nitrate, on which they discharge duty, is also engaged in separation of various minerals like Ileminite, Sillimenite, Rutile, Zircon and Garnet [Ch. 26] from the beach sand which they clear without payment of duty.

After insertion of Chapter Note 4 to Chapter 26 of CETA, 1985, which reads - 4. In relation to products of this chapter, the process of converting ores into concentrates shall amount to "manufacture", two show cause cum demand notices dated 16.03.2012 and 22.08.2012 were issued to the appellant alleging that the appellant has manufactured the concentrates of ores and cleared the same without payment of CE duty of Rs.19,46,91,408/-.

The demands were confirmed along with interest leading to the present appeal before the CESTAT.

It is submitted that for the period prior to 01.3.2011, Tribunal in their own case 2002-TIOL-485-CESTAT-KOL had held that the processes/activity carried out by the Appellant did not amount to manufacture and the ore sand used as raw materials by the Appellant remained ore (of minerals) and did not bring into existence any concentrates. Moreover, there has been no change in the process of mineral separation. It is also emphasized that reliance on chapter note 4 of chapter 26 is misplaced as the basic raw material for the appellants is beach sand covered under CSH25059000 of CETA. It is their submission that since Note 4 is inserted to chapter 26, the same will not be applicable when the raw material processed by the Appellant is covered by Chapter 25. Various test reports and the technical opinions indicating that mineral separated from sand beach are ores and not concentrates were also submitted; that it is a settled principle of law that the onus to claim classification of a particular item under a particular entry, is on the department; that except for the bald assertions, the department has not been able to rebut factual submissions made by the Appellants or the findings of the test reports produced by the appellants to substantiate that what they cleared is not a concentrate. Without prejudice to the aforesaid submissions it is also submitted that under Notification No.63 of 1995 dated 16.3.1995 as amended, all goods other than following under heading 2701, 2702, 2703, 2704 and 2706 are exempted from excise duty when manufactured in a mine. It is submitted that the activity that appellants carried out is indeed in a mine as certified by Govt.of India, Ministry of Labour, Director General of Mines Safety and a certificate dated 28.8.2014 from the Secretary to the Ministry of Labour and Employment, Govt.of India has been produced before the Bench. The appellant clarified that the said certificate could not be produced before the Adjudicating authority.

The counsel for the Revenue supported the order of the adjudicating authority.

The Bench observed that in neither of the cases relied upon by the appellant viz. Indian Rare Earths 2002-TIOL-485-CESTAT-KOL & SAIL 2002-TIOL-499-CESTAT-KOL, Tribunal has held that after application of processes viz. washing, magnetic separation, gravimetric separation, in the first case and crushing, grinding, washing, grading etc. on ores in the second case, the resultant is not 'concentrate', hence not amounting to manufacture. Inasmuch as in both the cases, the Tribunal had 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 and which the Tribunal had 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.

However, in the present case, consequent upon insertion of chapter note 4 to chapter 26 read with the Board Circular 332/1/2012-TRU dated 17.02.2012 and the meaning of ‘Ores' given in chapter note 2 and definition of ‘concentrates' explained in the HSN, the Bench concluded that the processes carried out by the Appellant are also included in explaining the term "concentration" under HSN and, therefore, the processes undertaken by the appellant like washing, magnetic separation, gravity separation to remove unwanted matters on sand ores, should be considered as "manufacture" as per Sec.2(f)(ii) of CEA,1944 read with the chapter note 4 inserted w.e.f 01.03.2011 and is leviable to CE duty.

On the submission of the appellant that Silliminite and Garnet are directly covered by chapter heading 25085032 and 25132030 of the CETA respectively attracting nil rate of excise duty, the Bench noted that while chapter 25 covers mineral products which are in the crude state or which have been washed, ores of various minerals are covered under chapter 26; that while chapter 26 excludes the products of chapter 2517 and 2519 no such exclusion is provided in case of chapter 2508 and 2513 and, therefore, the plea taken by the appellant that the impugned products being classifiable under chapter 25 are exempt was negated.

In the matter of the alternate submission that the goods manufactured are exempted from payment of duty under Notf. No.63/95-CE dated 16.3.1995 since the goods have been manufactured in the mines, the Bench observed that a certificate dated 28.8.2014 of the Secretary to the Govt. of India had been produced and, therefore, directed the Commissioner to consider the request of the appellant afresh.

Conclusion:

(i) the processes carried out on sand Ores result into conversion of ores to concentrate; accordingly is manufacture under clause (ii) of section 2(f) read with Chapter Note 4 to chapter 26 of CETA,1985

(ii) the eligibility of benefit of exemption notification 63/95 CE dt.16.03.95 be examined by the adjudicating authority.

The matter was remanded.

(See 2016-TIOL-744-CESTAT-KOL)