2026 (2) TMI 1348 - AT - Customs

Deemed Manufacture of concentrates through pre-shipment washing and sizing excludes such imports from ore exemption under the notification.

Imported manganese ore consignments that underwent pre-shipment washing, removal of waste, screening, crushing and sizing were treated as concentrates ... Denial for the benefit of exemption from payment of CVD - imported ‘Manganese Ore’ lumps - Deeming provision in Chapter Note 4 to Chapter 26 - conversion of ores into concentrates - meaning of the term ‘ore’ and ‘concentrate’ - exemption under Notification No.04/2006-CE - beneficiation - strict construction of exemption notifications - onus on importer to prove eligibility for exemption - interest payable on delayed duty payment Deeming provision in Chapter Note 4 to Chapter 26 - conversion of ores into concentrates amounts to manufacture - distinction between ore and concentrate for exemption under Notification No.04/2006-CE - beneficiation - Whether the imported consignments qualified as 'Manganese Ore' entitled to exemption under Notification No.04/2006-CE or had, by virtue of pre-shipment processes (washing, removal of waste, sizing/screening/crushing), become 'Manganese Concentrates' and thus not eligible for CVD exemption. - HELD THAT: - The Tribunal found on the admitted facts that the consignments were not in Run of Mine form and that ROM ore had undergone washing, crushing, screening and sizing to meet contractual specifications. Relying on the deeming effect of Chapter Note 4 to Chapter 26 and on this Tribunal's decision in M/s Sarda Energy & Minerals Ltd & Ors [2026 (1) TMI 532 - CESTAT HYDERABAD], (which applied the Supreme Court's observations in Star Industries), the Tribunal held that conversion of ores into concentrates is treated as manufacture and that even simple physical processes which remove foreign matter and enhance suitability for metallurgical use or economical transport may result in emergence of a concentrate. The Tribunal rejected the contention that crushing/screening are always mere preparatory processes, noting that the Board circular and HSN notes do not override the statutory deeming and that where processes materially remove impurities or upgrade the ore, the product is a distinct excisable concentrate and falls outside the exemption which covers only 'ores'. Applying this principle to the admitted factual matrix, the Tribunal concluded that the imported goods were concentrates and not eligible for exemption under Notification No.04/2006-CE. [Paras 11, 12, 30, 31] The imported consignments are held to be concentrates (resulting from processes such as washing, crushing, sizing) and therefore not entitled to exemption under Notification No.04/2006-CE; the appeals on this ground are dismissed. Interest payable on delayed duty payment - Whether interest could be demanded on the confirmed duty demand. - HELD THAT: - The Tribunal observed that statutory provisions clearly require payment of interest where there is delay in payment of duty. It held that liability to pay interest arises when a duty demand is confirmed and, in the facts of the related authority relied upon, interest was held to be payable. The Tribunal therefore did not accept the appellants' contention that interest could not be demanded in the absence of a specific provision, and treated interest as payable when the demand is sustained. [Paras 13, 14] Interest on delayed payment of duty is payable in terms of the statutory provisions; the appellants remain liable for interest on the confirmed demand. Final Conclusion: Following the Tribunal's reliance on the deeming provision in Chapter Note 4 and on precedent, the impugned orders denying exemption were set aside only to the extent of being found unsustainable; the appeals are dismissed and the appellants remain liable for the confirmed duty and applicable interest. Issues: Whether imported manganese ore shipments that underwent washing, removal of waste, screening and sizing prior to shipment are 'ores' eligible for exemption under Notification No.04/2006-C.E. dated 01.03.2006 or are 'concentrates' (deemed manufactured products by virtue of Chapter Note 4 to Chapter 26) and therefore not eligible for CVD exemption.Analysis: The legal framework includes Notification No.04/2006-C.E. dated 01.03.2006 (exemption for ores), Chapter Note 4 to Chapter 26 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) which deems conversion of ores into concentrates as manufacture, HSN explanatory notes distinguishing 'ore' and 'concentrate', and Board/Central Government circulars clarifying the meaning of 'concentrates' and the role of beneficiation. The factual matrix records admitted pre-shipment processes (washing, removal of waste, crushing/sizing/screening) undertaken on run-of-mine ore to meet contractual specifications. Comparable Tribunal orders dealing with identical processes and factual situations have held that where foreign matter is removed (partly or fully) so as to make the product suitable for metallurgical purposes or economical transport, the activity falls within the scope of conversion into concentrate under the explanatory notes and the deeming provision. Post-insertion of Chapter Note 4, the legal effect is that conversion into concentrate is to be treated as manufacture for purposes of classification and levy; therefore exemption notifications applicable only to 'ores' do not extend to 'concentrates'. The presence of admitted preparatory activities and documentary evidence of such processing renders testing unnecessary for applying the deeming provision; simple physical processes that result in upgradation or removal of foreign matter can, depending on the nature and intent of the processes, produce a concentrate distinct from ore.Conclusion: The imported consignments which underwent washing, removal of waste, screening and sizing prior to shipment are to be treated as concentrates (deemed manufactured products under Chapter Note 4 to Chapter 26) and are not eligible for exemption under Notification No.04/2006-C.E. dated 01.03.2006; therefore the appeals are dismissed and the Revenue's demand confirmed.