2025 (1) TMI 986 - AT - Central Excise

ROM manganese ore processing case remanded due to inadequate adjudication and natural justice violations

M/s Radhika Metals & Minerals Versus Commissioner of Central Tax Visakhapatnam– GST

M/s Radhika Metals & Minerals Versus Commissioner of Central Tax Visakhapatnam– GST - TMI 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:Whether the activities undertaken by the appellant, M/s Radhika Metals and Minerals, on the Run of Mine (ROM) manganese ore amount to 'manufacture' under the Central Excise Act.Whether the appellant is entitled to an exemption under Notification No. 63/95-CE if the activities are considered manufacturing.Whether the procedural aspects of sample drawal and testing adhered to the principles of natural justice, particularly in light of the denial of cross-examination of the Chemical Examiner.Whether the demand raised by the Department, which clubbed both ROM and processed ore, was justified.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Manufacturing Process DeterminationRelevant legal framework and precedents: The Department relied on the explanatory note of the Harmonized System of Nomenclature (HSN) and Chapter Note 4 to Chapter 26, which suggest that the concentration of ore through certain processes could be deemed as manufacturing.Court's interpretation and reasoning: The Tribunal examined whether the processes undertaken by the appellant, such as breaking, screening, and manual picking, resulted in a substantial change in the manganese ore, thus constituting manufacturing.Key evidence and findings: The Department's reliance on the Chemical Examiner's report, which indicated an increase in manganese content from 18.86% to 24.06%, was pivotal. The statement of the appellant's manager, despite being retracted, was also considered.Application of law to facts: The Tribunal noted that the adjudicating authority did not adequately address whether the processes changed the nature of the ore sufficiently to be considered manufacturing. The lack of cross-examination of the Chemical Examiner was deemed a denial of natural justice.Treatment of competing arguments: The appellant argued that the processes did not constitute manufacturing and challenged the procedural fairness of the sample testing. The Department maintained that the processes and evidence supported their case.Conclusions: The Tribunal found that the adjudicating authority's order was not sufficiently detailed and remanded the matter for a thorough re-examination.Issue 2: Entitlement to Exemption under Notification No. 63/95-CERelevant legal framework and precedents: The exemption under Notification No. 63/95-CE applies to certain manufacturing activities within mining areas.Court's interpretation and reasoning: The Tribunal indicated that the appellant's entitlement to this exemption was not adequately considered by the adjudicating authority.Key evidence and findings: The Tribunal noted the appellant's contention that the activities were conducted within the mining area, potentially qualifying for exemption.Application of law to facts: The Tribunal directed the adjudicating authority to examine the applicability of the exemption in light of the facts and evidence.Treatment of competing arguments: The appellant argued for exemption based on the location of activities, while the Department focused on whether the activities constituted manufacturing.Conclusions: The Tribunal remanded the issue for reconsideration, leaving the question of exemption open for determination.Issue 3: Procedural Fairness in Sample TestingRelevant legal framework and precedents: The principles of natural justice require that parties have the opportunity to challenge evidence, such as through cross-examination.Court's interpretation and reasoning: The Tribunal found that the denial of cross-examination of the Chemical Examiner constituted a breach of natural justice.Key evidence and findings: The Chemical Examiner's report was a critical piece of evidence, yet the appellant was not allowed to cross-examine the examiner.Application of law to facts: The Tribunal emphasized the need for procedural fairness and directed a re-hearing with the opportunity for cross-examination.Treatment of competing arguments: The appellant argued for procedural fairness, while the Department relied on the existing report.Conclusions: The Tribunal remanded the matter to ensure compliance with natural justice principles.Issue 4: Justification of Demand RaisedRelevant legal framework and precedents: The demand was based on the alleged manufacturing of manganese concentrate.Court's interpretation and reasoning: The Tribunal noted that the demand clubbed different categories of ore without clear justification.Key evidence and findings: The appellant contended that the demand incorrectly included non-processed ore.Application of law to facts: The Tribunal found that the adjudicating authority needed to clarify the basis for the demand.Treatment of competing arguments: The appellant challenged the demand's calculation, while the Department defended its assessment.Conclusions: The Tribunal remanded the issue for a detailed examination of the demand's basis.3. SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning:'We find that the Order is not a speaking order and has not been dealt with certain aspects which the Advocate has pointed out including the entitlement of benefit of Notification no. 63/95-CE, in the event it is held to be a manufacturing process.'Core principles established:The necessity of a detailed examination and speaking order when determining whether processes constitute manufacturing.The importance of procedural fairness, including the right to cross-examine crucial witnesses like the Chemical Examiner.The need to consider exemptions under relevant notifications when determining tax liabilities.Final determinations on each issue:The matter was remanded to the Original Adjudicating Authority for a detailed re-examination of the manufacturing determination, exemption entitlement, procedural fairness, and demand justification.The Tribunal directed that the proceedings be concluded expeditiously within three months, emphasizing the need for a speaking order.