TaxTMI 
TaxTMI 
1984 (11) TMI 326
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....assified the goods under Heading No. 25.01/32(3) and charged duty at 60%+15% ad valorem. The said order was challenged before the Appellate Collector of Customs, Bombay, who, by his impugned order No. S/49-51/79R, dated 3-5-1980, allowed the appeal and ordered the assessment of the goods to duty at 40%+5% ad valorem under heading No. 26.01(1) of the C.T.A. 1975 read with Notification No. 128/Customs dated 2-8-1976. The Government of India, after perusing the records of the case, were tentatively of the view that the goods in question were correctly assessable under Heading No. 25.01/32(3) of the C.T.A., 1975. In this view of the matter, the Government of India proposed to set aside the order-in-appeal passed by the Appellate Collector and restore the Assistant Collector's order. Pursuant to this, the Government of India issued a show cause rtetice dated 5-9-1981 to J.K. Batteries under Section 131(3) of the Customs Act, 1962. 2. The dispute involved in the other Appeal No. 578/82-C is similar. M/s. Union Carbide, Calcutta imported Battery Grade Manganese Dioxide from Moanda Mine, Gabon. The Customs Authorities classified the goods under Heading 25.01/32(3) of the C.T.A., 19....
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....tro-negative to zinc. The characteristics which make a particular grade of manganese ore fit for use directly in the manufacture of dry cell battery, which have not been finally spelt out include crystal structure, surface area, pore size distribution, shape and size of the particles, electrical conductivity, surface condition, etc. These characteristics are not available in all run-of-mine (ROM) manganese ore and, therefore, highly selective mining and strict quality control is required to ensure that the product is fit for use in dry cell manufacture. (iii) The battery grade manganese dioxide is priced considerably higher than the chemical grade. (iv) The purport of Chapter Note 2 to Chapter 26 of C.T.A, 1975 would appear to be that if mineral ore or metallurgical ore actually used in metallurgical industry had other uses which are non-metallurgical even then the metallic ore would fall under Chapter 26. However, Battery grade ore is a distinct grade used for battery manufacture and not for metallurgical purposes. Accordingly and in view of the specific entry under Heading No. 25.01/32(3), namely, "Battery Grade Manganese Dioxide" the goods would fall under that h....
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....ithin Chapter 26. (iii) The explanatory notes to the Customs Co-operation Council Nomen clature (C.C.C.N.) make it clear beyond doubt that battery grade MnO2 falls under heading 25.32 of the CCCN. This was the classification shown in the compendium of classification opinions too. Though there is no exact correspondence between the C.C.C.N. and the C.T.A , 1975, there can be no doubt about the correct classification of the subject goods under the latter, viz. 25.01/32(3). (iv) Referring to technical authorities, it was stated that battery grade MnO2 was different from metallurgical MnO2 ore. Reliance was placed on the book "Materials Survey". The former had to possess certain characteristics which were not required for the latter. Several other books were also relied upon to which we shall be adverting elsewhere. It was submitted that the distinguishing features of battery grade MnO2 ore were its chemical composition, crystal structure, processing, selective mining, pricing, etc. (v) The Supreme Court decision in the M.M.T.C. case-AIR 1972 SC 2551-was not applicable to the present case. In that case, the question was whether Wolfram ore concentrates were "ore....
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....ses not normal to metallurgical industry. (iv) In answering the question to which mineralogical species the subject goods belonged, the commercial grading (relied upon by the Departmental Representative) which depend upon the end-use was not relevant but the mineralogical classification. This position was conceded even in the show cause notice. Note 2 (Supra) did not talk of trade classification. Relying upon technical authorities (to which we shall advert elsewhere), it was submitted that the Moanda ore belonged to the mineralogical species known as manganite, pyrolusite, cryptomelane nsutitc and lithiophorite though the ore might be battery grade. Once the goods were identified to belong to one or more mineralogical species, it would make no difference to its classification if it was used for manufacture of dry batteries. (v) Moanda battery grade MnO2 ore was selected from the run of the mill (R.O.M.) ore and subjected to certain physical processes like crushing, washing and tabling-leading to a concentration of 83-85% MnO2. These are processes normal-not alien-to the mining industry. Of 2 million tonnes of the R.O.M. ore, only about 70,000 tonnes were fit for bat....
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....d by heading 26.01 and to show cause notice deserved to be vacated. 9. Miss Anjali Behl, Counsel for J.K. Batteries, adopted the arguments in the Union Carbide case. In reply, Shri Sundar Rajan submitted that - (i) Absence of any acid test to distinguish battery grade ore was no impediment to classification which would depend on trade understanding. (ii) The price factor, the fact that rich (80-85%) MnO2 concentrate was not necessary for extraction of metal, the fact the battery grade ore was the result of selective mining all militated against classification under heading 26.01. (iii) Though there was no dispute about the mineraiogical species of the battery grade ore, the point to note was that it was not "actually used for extraction of metals." These words were construed in (61 )-ITR-1966-154, in the case of D.M. Wadhwana v. Commissioner of Income-tax, West Bengal. In that case, the Calcutta High Court was construing the meaning of the word "actual" in explanation 2 to section 24(1) of the Indian Income Tax Act, 1922. The Court said that the word "actual" means "real" as opposed to "theoretical and probable." The words "even if, they are intended....
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....e been submitted to processes not normal to the metallurgical industry". 12. The appellant's contention is that the battery grade MnO2 ore imported by the Respondents falls under heading 25.01/32(3) whereas the Respondents contend the correct classification is under heading 26.01(1). 13. During the course of the arguments, it emerged that there was agreement between the appellant and the Respondents on certain points. They are :- (i) The imported goods are "ore". (ii) The imported goods are also an "ore concentrate". (iii) The imported goods are "ore", belonging to certain known minera-logical species. 14. Against this background, let us examine the requirements of heading 26.01 read with Chapter Note 2. They are - (i) The goods should be a "metallic ore" or concentrate; (ii) To be a "metallic ore" for the purpose of the heading, the goods should be minerals of mineralogical species actually used in the metallurgical industry for the extraction of metals, even if, they are intended for non-metallurgical purposes; (iii) The goods should not, however, be minerals which have been submitted to processes not normal ....
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....specific entry in the CTA, 1975-heading 25.01/32(3)-is wide enough to cover the imported goods. 20. In the above context,an important thing to note is, as Shri Ravindra Narain has stated, that heading 25.01/32 covers, inter alia, mineral substances but only those not elsewhere specified. Therefore, the first thing to see is whether the imported goods fall within the scope of Chapter 26. 21. As we have already seen, it is an undisputed position that the imported goods are ores of known mineralogical species. Shri Sunder Rajan, however, contends that the species to which the goods belong are not used in the metallurgical industry for the extraction of manganese metal but for manufacture of dry batteries and, for that reason, the goods are excluded from heading 26.01. He relied on the publication "Manganese Moanda Gabon" by Comilog (Compagnie Miniere do l'Ogooue), the supplier of the goods. This describes at length the geographical and historical background of the Moanda mine in Gabon, Africa. The Moanda mine reserves are estimated to be over 200 million tons of run-of-mine(ROM) ore. The ROM ore is made up principally of MnO2. Describing the mining process, the book sa....
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....ve material can be used. The underlying principle of the battery operation is that zinc metal at the anode is consumed by oxidation, using part of the oxygen in the manganese dioxide cathode to provide electricity." The literature says that at Moanda, it is exceptional for a mine of this size to be able to "select" more than 5% of ROM ore for use as a depolariser in dry cells : "Ores with high electrical reactivity and as low metallic impurities as possible are selected from the ore body, then crushed to 1 mm, concentrated to a final product containing a minimum of 81.5% manganese dioxide, MnO2. The laboratory at Moanda ascertains that proper areas are selected and mined. Then it implements daily chemical controls and checks electrical reactivity by making dry-cell batteries 'D' size and controlling their yield. Thorough blending is assured to offer a perfectly homogenized manganese dioxide with low impurities and regular electrical properties. From 1965 till today the Moanda ore has reached a reputation in the trade thanks to its excellent overall properties such as battery activity, low heavy-metal impurities, high dioxide content and its reliability of supply. Wit....
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.... 2 to Chapter 26 of the CTA, 1975. As we have already noted, it is common ground that the goods are "ore", belonging to known mineralogical species. (We are, therefore, refraining from entering into a discussion on the not inconsiderable arguments addressed by Shri Ravinder Narain in support of these contentions). Shri Sunder Rajan contends that the mineralogical species to which battery grade Mn02 belongs are not normally used in the metallurgy industry for extraction of metal. This argument is based on the fact that only about 5% of Moanda ROM ore is suitable for use in manufacture of dry batteries. The trade and industry recognise the battery grade ore as distinct and different from the metallurgical grade, as borne out by technical literature, the Indian Standard Specification, the United States Stockpile Specifications, etc. However, the position which emerges from the authorities placed before us is that it is not so much the mineralogical species that determines whether a given MnO2 ore is suitable for manufacture of dry batteries. We have already noted from the Comilog literature itself that, at Moanda, the battery grade ore comes from the same ore-body from which metallurg....
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....tallurgical ore (as in the present cases) and is not used in extraction of metal but for a non-melallurgical purpose : manufacture of dry batteries. 26. Thus, the imported goods would not appear to fall under heading No. 26.01 of the C.T.A. 1975 as a "metallic ore". It is an agreed position that the goods are ore concentrates. Shri Ravinder Narain has argued that Note 2 to Chapter 26 defines only "Metallic ores" and not concentrates. Therefore, even if the present goods are held to be not "metallic ores", they should be held to be concentrates covered by the heading. This contention, in our view, has no force. It is obvious that the concentrates specified in the heading are concentrates of metallic ores". And, if a given product is not a "metallic ore" because of Note 2, the concentrates of that ore also would not come within the heading. Now, battery grade MnO2 is a mineral substance and it is not specified anywhere other than in Chapter 25 [Heading 25.01/32(3)]. It is not specified in terms in Chapter 26. Nor does it get covered by the general description "metallic ores not elsewhere specified" in heading 26.01(1) because it does not conform to Note 2 to Chapter 26. 27....
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.... the goods warranting a different classification. 31. We shall now refer to the decisions cited before us. The decisions cited by Shri Sunder Rajan in support of his submission that the specific heading 25.01/32(3) should be preferred to the general heading 26.01/(1) do not need to be referred to and discussed by us. It is a well settled proposition of law that the specific should prevail over the general. 32. In the M.M.T.C. case reported in AIR 1972 S.C. 2551 the question before the Supreme Court was whether Wolfram Ore concentrate (65% WOs) fell within Item 26 of the First Schedule to the 1934 Tariff Act as a metallic ore as the assessee contended or under Item 87 ("all other articles not elsewhere specified") as contended by the Department. The Court held that the ore concentrate containing 65% WO3 (as against the ore as mined containing 0.5% to 2% and, in some cases, 7%WO3) was only ore of the merchantable quality and known comcnercialy as such. Further, in that case, the ore concentrate was admittedly imported for the extraction of metal which is not so in the case before as. More importantly, unlike the 1934 Act, the Customs Tariff Act, 1975 has its own schem....