TaxTMI 
TaxTMI 
2016 (4) TMI 601
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....en by the appellant comprises of dredging of beach sand. Dredged sand is taken to the beach washing plant (i.e. wet concentrator) where washing through a series of spiral separators, exploit the differences in mineral specific gravity. In the process, "heavies" (i.e. sand containing the specified minerals which is heavier than quartz) are separated from the quartz and the quartz (also known as gangue) is discarded/removed. Also, in the process, two types of concentrates i.e. Concentrate A and B containing 92% of heavy mineral mainly, Ileminite, Rutile, Zircon, Monazite and a part of Silliminite with Garnet and Concentrate B containing about 50% heavy minerals, mostly, Silliminite and Garnet are obtained respectively. Concentrates are passed through the High Heavy Upgradation Plant whereby conducting minerals like Ileminite, Rutile are separated from the non-conducting minerals i.e. Garnet, Silliminite, Monazite and Zircon. Thereafter, the individual minerals are subjected to magnetic separation to separate each other. 2.3 After insertion of Chapter Note 4 to Chapter 26 of CETA, 1985, two show cause cum demand notices dated 16.03.2012 and 22.08.2012 were issued to the appellant a....
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....o remove foreign materials from ores (gangue) increase the Fe content (i.e. iron content), hence such process would qualify as concentrates as defined in explanatory notes of HSN and liable to duty. The Tribunal at para 7 of the judgment observed that removing of foreign matters would not, in the present case, bring into existence a new and different article having distinctive name, character or use. The use of iron ore after the process undertaken by the assessee remains same i.e. to be used in metallurgical industry or the extraction of metal. The Tribunal relied upon its decision reported in Indian Rare Earths case(supra) and observed that at the end of the processes, the mineral sands do not undergo any transformation, they remain in the same condition in which they remained along with ordinary sand on the sea beach. No upgradation or augmentation of their purity takes place. The chemical structure of the ore remain the same. The processes are not any special treatment which would take the ores out of the stage of plain and simple ores. Accordingly, it is held that the processes undertaken by the assessee do not result in the manufacture of different commercial commodity. The....
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....t supplied by IREL OSCOM and the individual mineral supplied by them per se. Illeminite, Rutile, Zircon, Silliminete and Garnet present in the feed (raw sand samples) are ores/minerals and they remain same in terms of mineral phase, shape, colour an size even after individual separation from feed sample. Illeminite, rutile, zircon, silliminite and garnet are ores/minerals. (vi) National Centre for Earth Science and Studies and their certificate dated 24.6.2014 describes the separated minerals as ores/minerals but not concentrates. (vii) Certificate dated 11.7.2014 from Atomic Minerals Directorate for exploration and research states that based on petrographic studies, XRF and XRD analysis of seven samples received from OSCOM, it is clafified that there is no change in mineralogy or morphology of the minerals present in raw sand, HUS output and samples of individual minerals per se that even after individual separation they remain as ore/mineral that the processes carried out by M/s.IREL involved physical separation of minerals and do not bring about upgradation of purity of minerals per se. In other words the final product Illeminite, rutile and zircon are ore an....
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....ttled principle of law that the onus to claim classification of a particular item under a particular entry, is on the department. To support this proposition they have relied upon the following case laws:- (a) Hindusthan Ferodo Ltd.v.CCE-1997 (89) ELT 16(SC) (b) Nanya Imports & Exports Enterprises v. CC - 2006(197)ELT 154(SC) (c) CCE v. Calcutta Steel Industries - 1989 (39) ELT 175 (SC) 3.10 It is their submission that in the present case 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. 3.11 It is submitted that this Tribunal in case of M/s.Classic Mecrotech Pvt.Ltd. reported in 2012 (285) ELT 418(Tri-Ahmeadabad) had an occasion to consider Chapter Note 4 of Chapter 26 and held that since the department has not rebutted any opinion produced by the importer in the said case, the item imported was an ore. 3.12 The Appellants submits that in the case of Silliminite and Garnet, the same are directly covered under Chapter Sub-heading 25085032 and 25132030 of CETA....
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....h Laboratory (CSIR), confirms that while the raw beach sand contains the discreet particles of the impugned minerals along with quartz(quartz 74.85%, Silliminite 3.46%, Elleminite 9.18%, Rutile 1.15% and Zircon 0.88%, Garent 6.65% of the sand beach), the quartz which is a major constituent in the raw sand is removed by the process undertaken by the appellant which makes the separated minerals fit for subsequent metallurgical operations and to facilitate their transportation. As such the process undertaken by the Appellant results into emergence of the concentrates from the ore (raw sand beach). In view of this, the said process amounts to manufacture as per chapter note 4 to chapter 26. 4.4The term "special treatments" to which the ores are subjected to get the concentrates are not defined. However, it is observed that various processes to which the goods falling under chapter 2601 to 2617 are subjected to are mentioned in the HSN explanatory notes such as physical, physico-chemical or chemical operations namely crushing, grinding, magnetic separation, gravi-metric separation, flotation, screening grading, agglomeration of powder (e.g. by sintering or pelleting) into grains, bal....
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....y accepted that the Ld. Adjudicating authority has allowed the benefit of exemption Notification No.63/95 CE dt.16.03.1995 to the assessee. The said Order has been accepted by the department as well as the assesse. 4.9As regards the contention of the appellant that they are eligible for exemption under Notification No.63/95-CE dated 16.3.1995, since the goods have been manufactured in the mines, it is his contention that before the adjudicating authority the appellant could not produce a certificate signed by the Secretary to the Central Govt. as required under the said notification and therefore their claims for the exemption under Notfn.No.63/95-CE was not considered by the adjudicating authority. Now since, the certificate has been produced he has no objection in remanding the case for verification of the said certificate by the ld.Commissioner. 5. Heard both sides and perused the records. The core issue involved in the present case for determination is: whether various processes undertaken by the Appellant result into manufacture in view of chapter note 4 to chapter 26 of CETA,1985 inserted w.e.f 01.03.2011,accordingly leviable to duty CETA, 1985. 5.2 The contention ad....
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....erved as: "11.Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of Courts are neither to be read as Euclids theorems nor as provisions of the statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of Courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes. In London Graving Dock Co. Ltd. v. Horton (1951 AC 737 at p. 761), Lord Mac Dermot observed : "The matter cannot, of course, be settled merely by treating the ipsissima vertra of Willes, J as though they were part of an Act of Parliament and applying the rules of interpretation appropriate thereto. This is not to detract from the great weight to be given to the language actu....
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....ning 20% are brought to the Mineral Separation Plant by pumping the slurry through pipe. There the individual minerals are separated by processes like drying, electro-static separation, magnetic separation and gravity separations. The final recovery of minerals is less than 10% of the sand dredged from the sea of shore. The department sought to levy duty on these minerals considering the process of extraction of such minerals amounts to manufacture as defined under Section 2(f) of Central Excise Act, 1944. Considering the findings of the Commissioner, the argument advanced by both sides and the case laws on the subject, the Tribunal recorded its finding as follows:- "8.It is clear from the facts of the case that mineral sands freely occurred on sea beach along with ordinary sand. Most of the sand on the sea beach is ordinary sand only. Mineral sands constitute less than 10% of the total quantity of sand on the sea beach dredged out by the appellants. Sand as it occurs on the sea shore cannot be called mineral ores. Such sand is also not bought and sold as mineral ores. The processes carried out by the appellants lead to separation of valuable rare mineral sands from the or....
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....ervation, the Appellant has argued that the Tribunal has held in their case that removal of foreign materials from the sand Ores does not result into concentrates and accordingly no "manufacture" is involved, consequently no duty is leviable on such mineral sands extracted by employing the processes listed in the said order. 5.8 The next decision on which heavy reliance was placed is CCE vs. SAIL. In that case the mined Ores were subjected to the process of crushing, grinding, screening and washing. This Tribunal referring to the HSN Explanatory Notes, following its earlier decision in Indian Rare Earth Ltd.s case and other materials recorded as:- "6. We have considered the submissions of both the sides. Heading 26.01 of the Central Excise Tariff applies to "Iron Ore and concentrates, including roasted iron by rites." The Revenue wants to levy duty on the ground that the mined iron ore is subjected to crushing, grinding, screening and washing and it becomes iron ore concentrate which is covered by Heading 26.01 of the Tariff. The Revenue has placed heavy reliance on the Explanatory Notes of HSN according to which the term concentrates applies to ores which have had p....
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.... has been rescinded by Notification No. 19/96-C.E., dated 23-7-1996. We find ourselves unable to agree with the Revenue that on account of the processes undertaken by the Respondents, a new and different article has emerged on which Central Excise duty can be levied and collected. Even according to HSN the term concentrates applies to ores which have had part or all of the foreign matters removed either because such foreign matter might hamper subsequent metallurgical operations or with a view to economical transport. In our view, removing of foreign matters would not, in the present matter, bring into existence a new and different article having a distinctive name, character or use. The use of iron ore as mined or iron ore after the process undertaken by the respondents remains same that is to be used in metallurgical industry for the extraction of metals. In Indian Rare Earths case, supra, the Appellants were removing gangue materials from the sand. It has been held by this Tribunal that "at the end of the processes, the mineral sands do not undergo any transformation. They remain the same condition in which they remained along with ordinary sand on the sea beach. No upgradatio....
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.... Hyderabad Industries Ltd. & Anr. Etc. v. Union of India - 1995 (78) ELT 641 on the meaning and concept of manufacture. Recording reasons at para 9 this Tribunal has held that the principle of law laid down in these two decisions is clear to come to the conclusion that the basic operations carried out to produce usable ore would not amount to manufacture as no new product having distinct name use and character emerged. Proceeding further this Tribunal observed that physical and mechanical process carried out to separate mineral sands from ordinary sea-shore sands no transformation occur to mineral sands and the sand remained in the same content along with ordinary sand on the sea beach; also no upgradation or augmentation of their purity takes place. The chemical structure of the ore remained the same. Finally, the Tribunal reached at the conclusion that no special treatments were applied whereby the ores were taken out of the stage of plain and simple ores. 5.12. More or less similar line of interpretation and observation has been recorded by this Tribunal in M/s. SAIL's case. The Tribunal referring to the Tariff Heading 26.01 as was in force prior to 2005-06 observed that in....
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....eferring to the principles in relation to concept of "manufacture" laid down by the Honble Supreme Court, 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 as prescribed under section 2(f)(i) of CEA,1944. Thus, the claim of the appellant that the issue now raised has been decided in the aforesaid two cases does not carry weight and accordingly does not impress us. Consequently, it is necessary to examine the issues raised in the present appeals de hors the observations made in the aforesaid decisions of this Tribunal. 5.14 In order to find an answer, whether application of processes to sand Ores results into "Ore concentrate" it is necessary to understand the meaning of the words, namely, ores & concentrates. 5.15 The ores has been defined under chapter note 2 of Chapter 26 of CETA,1985 which reads as follows:- "2. For the purposes of headings 2601 to 2617, the term "ores" means minerals of mineralogical species actually used in the metallurgical industry for the extraction of mercury, of the m....
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....on Metallurgy. "beneficiation [MET] Improving the chemical or physical properties of an ore so that metal can be recovered at a profit. Also known as mineral dressing." 5.18 After introduction of the chapter note 4 to chapter 26, the Board has issued Circular bearing No.332/1/2012-TRU dated 17.02.2012. In the said Circular at para 3, it is clarified as :- "3. Hence, it is clarified that the levy of excise duty is attracted only in cases where the product meets the definition of concentrate as per HSN Notes, that is, ores which have had part or all the foreign matter removed by special treatments either because such foreign matter may hamper subsequent metallurgical operations or with a view to economical transport." 5.19 Both sides heavily relied on the meaning of 'concentrate' prescribed under the HSN. It is Revenue's argument that when the ores are subjected to physical, physico-chemical or chemical operations which are normal to the preparation of the ores for extraction of the metal then the resultant is concentrate. It is their further argument that the physical or physico-chemical operations mentioned in the said explanation of concentrates under the H....
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....re would still contain foreign matters in the form of FeO and Fe2O3, but it cannot be denied that by application of various processes on the Ore sand the unwanted matters like quartz etc. are discarded and the treated Ores are not made fit to be used for metallurgical operations. In our opinion, there is no necessity to examine whether by employing such processes, the content/purity of the Ores has improved or other wise as opined in the various test reports of different laboratories. On the contrary, it is safe and prudent to look into the meaning of the concentrate in the HSN in view of the principle laid down by the Hon'ble Supreme Court in a catena of cases including in the case of Commissioner of Customs & Central Excise, Goa vs. Phill Corporation Ltd. 2008 (223) ELT 9(SC) that for classification of the manufactured goods, HSN is a safe guide. Therefore, since the processes undertaken by the appellant like washing, magnetic separation, gravity separation to remove unwanted matters on sand ores, and the resultant satisfies the meaning of 'concentrate' as explained in the HSN, hence in our considered opinion, it should be considered as 'manufacture' as per Sec.2(f)(ii) of CEA,19....
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....er Clause (ii), the Legislature intended to levy excise duty on activities that do not result in any new commodity. In other words, if a process is declared as amounting to manufacture in the section or chapter notes, it would come within the definition of manufacture under Section 2(f) and such process would become liable to excise duty. The effect of this definition is that excise duty can be levied on activities which do not result in the production of a new commodity or where the raw material does not undergo such a transformation as to loose its original identity. 12.At this stage, we quote Note 6 to Chapter 39 of the 1985 Act which reads as under : "In heading Nos.?6(a). 39.01 to 39.14, the expression primary forms applies only to the following forms :- (i) Liquids and pastes, including dispersions (emulsions and suspensions) and solutions; (ii) Blocks of irregular shape, lumps, powders (including moulding powders), granules, flakes and similar bulk forms. Notwithstanding anything contained in?(b) Note 3 to this Chapter, heading Nos. 39.01 to 39.14 shall also include primary forms obtained from conversion of another primary f....
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.... present case. According to him, the tribunal has not considered the issue of classification. According to his submission, in view of the HSN notes and the judgment of this court in Amrit Agro Industries (supra), the classification of the products in question ought to be made only under Chapter 20. 28.We have heard the learned counsel for the parties at length and carefully analysed the judgments cited at the Bar. The Central Excise Tariff Act is broadly based on the system of classification from the International Convention called the Brussels Convention on the Harmonised Commodity Description and Coding System (Harmonised System of Nomenclature) with necessary modifications. HSN contains a list of all the possible goods that are traded (including animals, human hair etc.) and as such the mention of an item has got nothing to do whether it is manufactured and taxable or not. 29.In a number of cases, this court has clearly enunciated that the HSN is a safeguide for the purpose of deciding issues of classification. In the present case, the HSN explanatory notes to Chapter 20 categorically state that the products in question are so included in Chapter 20. The HSN e....
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.... is different from concentrate. That is inherent in treating the process as "manufacture" inasmuch as manufacture results in a different commodity from the earlier one. Section 2(f) defines this term as under : "manufacture" includes any process, - (i) incidental or ancillary to the completion of a manufactured product; (ii) which is specified in relation to any goods in the Section or Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture; or (iii) which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer." (b) The purpose of treating concentrate as manufactured product out of ores is to make concentrates as liable for excise duty. Otherwise, there was no reason to deem the process of converting ores into concentrates as manufacture. 29. Once the aforesaid legal repercussions are taken note of, a....
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.... ores, concentrates automatically falls outside the purview of said notification. It is rightly argued by the learned senior counsel for the Revenue that exemption notifications are to be construed strictly and even if there is some doubt, benefit thereof shall not enure to the assessee but would be given to the Revenue. This principle of strict construction of exemption notification is now deeply ingrained in various judgments of this Court taking this view consistently." 5.27 A cumulative reading of the ratios of the above judgements, the chapter note 4 of chapter 26 and the relevant tariff entry, makes the legislative intention and object clear that the processes which on application on ores held by the courts/tribunal earlier as not amounting to manufacture, by virtue of the chapter note, a legal fiction has been created bringing such processes into the fold of the definition of manufacture, which otherwise in common parlance would not be considered as manufacture. The contention of the appellant that unless the content of Ores improves, the resultant cannot be called as a concentrates and accordingly the physical/mechanical processes carried out by them like washing, ma....