2024 (3) TMI 1372 - AT - Central Excise

Gold bars manufactured from gold concentrate qualify for nil excise duty under Notification 5/2006-CE exemption

M/s. Hutti Gold Mines Company Limited, Shri. Dr. V. Chandrasekhar I.A.S, Ex-Managing Director, Shri D.Y. Venkatesh Versus Commissioner of Central Excise and Customs, Belgaum

The CESTAT Bangalore allowed the appeal regarding exemption under Notification 5/2006-CE for gold bars manufactured at Hutti. The tribunal held that ... Exemption under Notification 5/2006- CE dated 01.03.2006 (Sl.No.21) - gold bars manufactured in the factory at Hutti - classification of gold bar manufactured in their factory under tariff heading 71081200 of the First Schedule to the Central Excise tariff Act, 1985 - recovery of Excise duty with penalty - invocation of Extended period of limitation. Admissibility of the benefit of the Notification No.5/2006-CE dated 01.03.2006 - HELD THAT:- A simple reading of the said Notification conveys that the primary gold when converted with the aid of power from any form of gold, be eligible to ‘Nil’ rate of duty of goods falling under Chapter 71 of Central Excise Tariff Act, 1985. There is no dispute about the end product i.e., ‘dore bar’ manufactured by the appellant satisfy the meaning of ‘primary gold’ provided in the said Notification. The entry 21 of the said Notification No.05/2006-CE dt. 01.03.2006 has been amended by Notification No.25/201-CE dated 01.04.2011 and the Appellant discharged duty from 01.04.2011 to 31.12.2011, which has been appropriated in the impugned order. The dispute centres around the interpretation of the expression conversion ‘from any form of gold’ to primary gold i.e., ‘dore bars’ as was in the said entry at Sl. No.21 till 31.03.2011. In the impugned order, it is observed that ‘any form of gold’ would mean gold in its original form, that is, it should be in existence before its conversion into another form of gold i.e. ‘dore bars’. Applying the common parlance test, the Revenue has argued that the old ornaments of gold, articles of gold, other primary form of gold like ornaments, pellets, etc., is ‘gold in any form’. It is an age-old practice to make new ornaments from old/broken ornaments; and for making new ornaments, old articles are melted to obtain specific form of gold or that the same could be used again in making new articles. In the said process, existing gold is transformed into another form by melting the same and there is no emergence of altogether a new item on conversion. Thus, it is the intention of the Government to exempt primary gold obtained/ manufactured from any other existing form of gold. The Commissioner has held that any form of gold refers to metallic gold. Whether extracting gold from the stage of ‘anode slime’ satisfy the expression conversion of any form of gold to primary gold of the Notification No.06/2000-C.E. dated 01.03.2000? - HELD THAT:- The starting point in the present case is gold ore, which has been subjected to both physical and chemical processes to obtain gold concentrate, which is later subjected to further process by which gold powder is obtained. The said gold powder taken to the melting refinery section and mixing the concentrate with other chemicals and heating up to 1200 centigrade, impurities are separated and gold is obtained in the form of buttons after cooling. The purity of gold buttons smelted from table concentrate and that from the gold precipitate powder vary in quality. The buttons obtained from both the processes are melted together to eliminate further impurities and homogenous gold dore bars are manufactured having gold content of 90-92% purity - The objective is to consider exemption of final products, i.e., primary gold in the form of dore bars resulted from conversion of any form of gold, which in the present case is the gold powder/concentrate. Consequently, the Appellant are eligible to the benefit of the Sl. No. 21 of the exemption Notification No. 05/2006 CE dt.01.3.2006 till it has been amended by Notification 25/2011CE dt.24.3.2011. Since the appellants succeeds on merits, the other issues of limitation and imposition of penalty becomes academic, hence not dealt with. The impugned order set aside - appeal allowed. Issues Involved:1. Eligibility for exemption under Notification No. 5/2006-CE for gold dore bars.2. Interpretation of 'any form of gold' under the said Notification.3. Classification of gold dore bars under the appropriate tariff heading.4. Applicability of extended period of limitation for demand.5. Imposition of penalties on the appellants.Detailed Analysis:1. Eligibility for Exemption under Notification No. 5/2006-CE:The core issue was whether the appellants were entitled to the benefit of Sl. No. 21 of exemption Notification No. 5/2006-CE for the gold dore bars manufactured during the period from 01.01.2007 to 31.03.2011. The appellants argued that the term 'any form of gold' should include gold precipitate/concentrate, which is derived from gold ore, thus qualifying for the exemption. They relied heavily on precedents, particularly the Supreme Court's decision in the Hindalco Industries case, which interpreted similar terms in favor of the assessee. The Tribunal agreed with the appellants, finding that the conversion process from gold ore to gold dore bars through various stages, including gold powder, aligns with the exemption criteria. The Tribunal concluded that the appellants were eligible for the exemption up to the amendment by Notification No. 25/2011-CE.2. Interpretation of 'Any Form of Gold':The Tribunal examined whether 'any form of gold' could include gold ore or concentrate. The Revenue contended that the phrase referred to metallic forms of gold, such as ornaments or articles. However, the Tribunal, drawing from the Supreme Court's interpretation in the Hindalco Industries case, held that intermediate products like gold mud or concentrate, which are processed into primary gold, should be considered 'any form of gold.' Thus, the appellants' process of converting gold ore into dore bars was deemed a conversion from one form of gold to another, qualifying for the exemption.3. Classification of Gold Dore Bars:The Commissioner had classified the gold dore bars under tariff heading 7108 1200 as 'unwrought forms of gold.' The appellants argued for classification under 7108 1300 as 'semi-manufactured forms.' The Tribunal found that the classification issue was not material in deciding the exemption benefit under Sl. No. 21 of Notification No. 5/2006-CE. However, it acknowledged that the dore bars, resulting from extensive processing, could be considered semi-manufactured forms.4. Applicability of Extended Period of Limitation:The appellants challenged the invocation of the extended period of limitation, arguing that the demand was time-barred for the period prior to January 2010. They contended that the department was aware of their manufacturing activities and that the issue was purely legal. The Tribunal, having decided the case on merits in favor of the appellants, did not delve into the limitation issue, rendering it academic.5. Imposition of Penalties:The penalties imposed under Section 11AC of the Central Excise Act and Rule 26 of the Central Excise Rules were contested. The appellants argued that there was no evidence of intent to evade duty, and the individuals penalized were not involved in the physical removal of goods. The Tribunal, having allowed the appeal on merits, found the penalty issue moot and did not address it further.Conclusion:The Tribunal set aside the impugned order, allowing the appeals with consequential relief as per law, based on the merits of the case and the interpretation of the exemption notification. The decision underscored the broader interpretation of 'any form of gold' to include intermediate forms like gold concentrate or mud, aligning with the Supreme Court's precedent.