TaxTMI 
TaxTMI 
2016 (4) TMI 602
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....ged in mining of iron ore at their mines located at Jajank, Distt. Keonjhar, Odissa. On blasting of the mine faces, large boulders and fines are generated. The iron ore boulders of bigger sizes are collected with the help of excavators and brought to the crusher plant. In the said crusher plant the boulders are crushed into different sizes of 5-18 mm, 10-30/40 mm and iron ore fines of 0-10 mm are also generated. After crushing it is screened at the screening plant where the iron ores of different sizes are segregated. Alleging that by the aforesaid processes ores are converted into concentrate, as per chapter note 4 Chapter 26 of CETA,1985 inserted w.e.f. 1.3.2011, hence the said processes amount to manufacture, two show cause cum demand notices were issued for the period from March, 2011 to September, 2012 demanding duty of Rs. 206,32,99,768/-. On adjudication, the demands were confirmed and penalty of equivalent amount had been imposed. 3. In Appeal No.Ex.Ap.71397/13 the appellant M/s Rungta Sons Pvt. Ltd. are engaged in the mining of iron ore at their mines at Oraghat, Sanindapur. The processes carried out by them are similar to the one mentioned above. The appellant was also....
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....or the material period. Seven periodical demand notices were issued for recovery of duty amounting to Rs. 117,38,20,898/- for the period from March, 2011 to September, 2014. On adjudication, the demands were confirmed with imposition of equivalent penalty on the Appellant. 7. Shri Kartik Kurmy, ld.Adv. appearing for M/s. Rungta Mines Ltd. and M/s.Rungta Sons (P) Ltd. has submitted that the appellant are engaged in mining and sales of iron ore lumps/fines for more than two decades. The iron ore produced by the appellant from these mines are having ferrous (Fe) content 55% to 65%. These are high grade iron ore, hence does not require any concentration. He has submitted that the appellant filed returns under the Mines & Mineral (Regulation & Development) Act, 1957 showing the production and sale of iron ore lumps/fines. As per the said returns, which are accepted by the mining authorities, the production of concentrate is nil. Explaining the process ld.Adv. has submitted that on blasting first Run of Mines (ROM) are obtained which then transported to crushing and screening plant inside the mining area where the same are crushed and screened to required sizes. It is further submitte....
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....t remove foreign matter nor these are special treatment. It is his contention that without removal of foreign matters (i.e.without enrichment of ferrous content), there cannot be any concentration. Concentrates are goods of intensified strength as per HSN explanatory notes, upgradation of ferrous content that too by special treatment is sine qua non for determination of whether the process is concentration or not. 7.5. Referring to the clarification dated 25.1.2012 issued by Ministry of Mines, Govt. of India, he has submitted that in the said letter it has been clarified that no special treatment is involved in crushing and screening of run of mines (ROM) to lumps and fines and lumps and fines are naturally occurring forms of ore. The process of crushing and screening of ore to different sizes of lumps and fines without further process of beneficiation in the grade of ores does not amount to producing concentrate. It is his submission that the said clarification has been endorsed by CBEC by its circular No.332/1/2012-TRU dated 17.2.2012. The CBEC has clarified that the levy of excise duty is attracted only in cases where the product meets the definition of concentrate as per HSN....
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....2(SC) = 1983 (13) ELT 1542(SC) he has submitted that unless the ore is roasted or treated with any chemical it cannot be considered as processes. The said decision was followed in Indian Hard Metals(P) Ltd. Vs. UOI 1978 (2) ELT J 667 (667). 8.1 He has further submitted that for application of chapter note 4 of chapter 26, the ore must be subjected to the process of concentration, therefore, the appellant could not be said to be producing concentrates in terms of the HSN as construed by the Hon'ble Supreme Court in the aforesaid cases. Further, he has submitted that in view of the tariff heading of Mines and Mineral (Development and Regulations) Act, 1956 provides that iron ore lumps, iron ore fines and concentrates are distinct commodities known to market and are subjected to different rate of royalty which indicates that the appellants are not manufacturer of concentrates. Further, he has referred to the clarification issued by the Ministry of Minerals by its circular dated 25.1.2012 wherein it is stated that unless the beneficiation process is carried out it cannot be construed as a manufacturer of concentrates. He has submitted that the meaning of concentration has not be....
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....respondent has failed to conduct any test or analysis to show the contrary. 9.1. He has further submitted that license for mining activity has been granted to the appellant by the state authorities. The iron or is excavated/mined from the earth. After removing iron ore lumps from earth, the lumps are so huge that it cannot be transported by any means of transportation. So, the lumps are broken down to make it transportable and while doing so there is no change in the quantity or grade of the iron ore. He has submitted that the issue is covered by the decision of the Hon'ble Supreme Court in the case of CCE v. SAIL. Further he has submitted that iron ore lumps and iron ore concentrates are different and distinct excisable goods and physical transition from one to another is a necessary process to be called process amounting to concentration. The clarification dated 17.2.2012 issued by the Joint Secretary, Govt. of India, Ministry of Finance are mandatory and to be strictly followed by the adjudicating authority. He has submitted that iron ore obtained in the mining activities are exempted in view of the exemption Notification04/2006 CE dated 01.3.2006 as amended by Notificati....
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....ication issued by the Ministry of Mines, it would be clear that excise duty is leviable only when a part or all of the foreign matters contained in the ores are removed by special treatment either because such foreign matter may hamper subsequent metallurgical operation or with a view to economical transport. It is his contention that no special treatment is involved in the crushing and screening of ore and "ore would meet the definition of concentrate as per HSN notes only when a part or all the foreign matter removed". It is his contention that there is no allegation that the appellant has subjected the mined ore to any of the special treatment such as milling, hydraulic separation, magnetic separation, floatation and concentrate thickening, hence the order is being contrary to the clarification of Board, bad in law. In support, he has referred to the decision of Hon'ble Supreme Court in the case of Dhiren Chemical Industries vs. CCE, Vadodara - 2002 (139) ELT 3 (SC) and 2002 (143) ELT 9 (SC). 10.3 Further, he has submitted that it is well-settled proposition of law that a fiscal legislation has to be construed strictly and one has to look merely at what is said in the rel....
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....ning conducted on the ores has definitely led to the manufacture of concentrates from ores, even if such processes have been conducted only for the purpose of economic transportation of the ores. 11.2. Further, reiterating the orders of the adjudicating authority submitted that after insertion of chapter note 4 to chapter 26, now there is no confusion on the issue of levy of duty on 'concentrates'. In its Circular dated 17.2.2012 issued by CBEC, it has been clarified by the Board after taking into consideration the opinion expressed by the Ministry of Mines, in its Office Memorandum dated 25.1.2012 that excise duty is attracted only in cases whether the products meets the definition of concentration as per HSN notes i.e. ores which have had part or all of the foreign matter removed by special treatment either because such foreign matter may hamper subsequent metallurgical operations or with a view to economical transport. Therefore, it can be understood from the said clarification that to convert ores into concentration of the processes, necessarily for all the process of beneficiation need not be carried out; even if few processes mentioned in the HSN notes, like crushi....
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....ese are crushed and thereafter crushed ores are screened. 12.1 It is his contention that during crushing and screening, the foreign matters get removed, thus rendering the ores suitable for metallurgical operations as well as for economical transportation. He submits that these resultant ores become concentrates falling under tariff item No.26011150 in view of the chapter note 4 inserted to chapter 26 of CETA, 1985 w.e.f. 01.03.2011 laying down that the process of conversion of ores into concentrates would amount to manufacture. Also, the Board has clarified by issuing Circular dated 17.02.2012 that resultant product becomes concentrates as per HSN notes and accordingly liable to duty. He has contended that even though the appellant admits that crushing and screening are special treatments within the meaning of HSN notes in the reply to the show cause notice, but simultaneously claims that these two processes alone do not convert ores into concentrates and concentrate would emerge only when the metal content in the ore is enhanced. 12.2 Referring to the meaning of 'ore' contained in note 2, and newly inserted chapter note 4 of chapter 26 of CETA, 1985, HSN notes and B....
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....the Tribunal has held that crushing and grinding do not convert ores into concentrates. 14. The ld.AR Shri A.Roy, appearing for the Revenue in response to the arguments advanced on behalf of M/s SAIL more or less subscribed to the stand taken by the revenue in other appeals, however made an attempt to distinguish the judgement of this Tribunal in their own case submitting that the said judgements cannot be considered as applicable to the facts of the present case in view of the change in legal position after insertion of chapter note 4 to chapter 26 of CETA, 1985 and the judgement of the Hon'ble Supreme Court in the case of Star Industries vs. Commissioner of Customs(Imports), Raigad - 2015 (324) ELT 656(SC). 15. Heard the learned Advocates for the respective Appellants and representatives of the Revenue at length and perused the records. 15.1 The principal issue needs to be addressed in these appeals is: whether processes of crushing, grinding, screening and in some cases washing of 'iron ores' result into 'iron ore concentrates' and becomes 'manufacture' in view of chapter note 4 to chapter 26 of CETA,1985 inserted w.e.f 01.03.2011,accordingly....
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....ding of both the tariff headings, it is clear that in the year 2005-06, the tariff entry becomes more elaborative and 'iron ore concentrate' is assigned a separate tariff sub-heading, namely, 26011150. 15.5 The contention of the Revenue is that w.e.f. 01.03.2011, the chapter note 4 has been added to chapter 26 which reads as follows:- "4. In relation to products of this Chapter, the process of converting ores into concentrates shall amount to "manufacture". 15.6 It is the Revenue's argument that application of the processes of crushing, grinding, screening and washing to ores converts it into concentrates and becomes 'manufacture' w.e.f 01.3.2011, which activities were earlier held by this Tribunal as not amounting to 'manufacture'. It is vehemently opposed by the Appellants submitting that the processes of crushing, grinding, screening of ores would not make the resultant as 'concentrates' unless some special treatment, like the process of benefication is carried out on the 'ores' to improve the Fe content so as to call the resultant as 'iron ore concentrates' and the Tribunal in both these cases observed that applicatio....
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.... "There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances made in the setting of the facts of a particular case." 13. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper. 14. The following words of Lord Denning in the matter of applying precedents have become locus classicus: "Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive.'' *** *** *** "Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else y....
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....to the metallurgical industries are excluded from ores. Thus, ores which have been subjected to special treatment go out of the scope of ores. No such special treatment is carried out in the present case. 9. The Apex Court has held in the case of Hyderabad Industries and Ors. v. Union of India & Ors. that no manufacture of a new or distinct commodity takes place on account of the processes of separation of naturally occurring asbestos from asbestos rocks. In the earlier case of Minerals & Metals Trading Corporation of India Ltd., the Apex Court held that the separating of wolfram ore concentrate from the rock to make it usable ore is a process of selective mining. It is not a manufacturing process. The important test according to the Apex Court is that the chemical structure of the ore should remain the same. Thus, the principle of law is clear that basic operations carried out to produce usable ore would not amount to manufacture of a new product. In the instant case, the appellants are carrying out certain physical and mechanical processes to separate mineral sands from ordinary sea shore sand. At the end of the processes, the mineral sands do not undergo any transformation. T....
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.... levy of Central Excise duty. It is settled law that the activity or process in order to amount to "manufacture" must lead to emergence of a new commercial product, different from the one with which the process started. In the landmark judgment in the case of U.O.I. v. Delhi Cloth & General Mills, 1977 (1) E.L.T. (J 199) (S.C.), the Apex Court has held that manufacture is generally understood to mean as "bringing into existence a new substance" and does not mean merely "to produce some change in a substance." The Court has held that "... something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use." The Supreme Court has laid down a two fold test for determining whether the process is that of manufacture in J.G. Glass Industries Ltd. v. U.O.I., 1998 (97) E.L.T. 5 (S.C.) as under: "First, whether by the said process a different commercial commodity comes into existence or whether the identity of the original commodity ceases to exist; Secondly, whether the commodity which was already in existence will serve no purpose but for the said process. In other words, whether the commodity, which wa....
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...., distinct name having separate physical, chemical composition or characteristic." Similar views were expressed in the case of Seth Liladhar Biyani & Sons v. CCE Jaipur, 2001 (129) E.L.T. 423 (T) relied upon by the learned Advocate. In view of this we hold that the processes undertaken by the Respondents do not result in the manufacture of a different commercial commodity. Hence no Central Excise duty is leviable. Accordingly, all the appeals are rejected. 15.11 It is vehemently argued on behalf of the Appellants that the processes narrated in the said decision of this Tribunal remained unchanged and the Tribunal considering such processes has held that Ores subjecting to process of crushing, grinding, screening and washing with a view to remove foreign materials would not result into concentrate, therefore, no manufacturing process involved and accordingly, duty is not leviable on resultant concentrate. It is their further contention that even after insertion of Chapter Note 4 to Chapter 26 since the processes employed to ore do not result into concentrate, therefore, the said Chapter Note 4 is not applicable to their case. 15.12.The Revenue on the other hand argued that the....
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....Supreme Court, this Tribunal concluded that the process undertaken by M/s.SAIL to remove extraneous unwanted material from the ore and as such is devoid of gangue which adheres to the blasted ores and rejected the contention of the Revenue that the constituent of the final product are distinctly different from that of the blasted ore. Further, it is observed that on account of the processes undertaken by M/s.SAIL, no new and different article has emerged on which Central Excise duty could be levied and collected. Referring to the meaning of concentrate as in HSN this Tribunal observed that mere removal of foreign matters would not bring into existence a new and different article having a distinctive name, character or use. The use of iron ore as mined or after the process undertaken by M/s.SAIL remains the same, that is, to be used in metallurgical industry for the extraction of metals and finally they observed that the process undertaken by M/s.SAIL do not result of manufacture of different commercial commodity hence no Central Excise duty is leviable. 15.15 A careful reading of the aforesaid decisions, we do not find anywhere in these judgements this Tribunal has held that aft....
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....liferous minerals associated with the substances in which they occur and with which they are extracted from the mine; it also applies to native metals in their gangue (e.g. metalliferous sands). Ores are seldom marketed before "preparation" for subsequent metallurgical operations. The most important preparatory processes are those aimed at concentrating the ores. For the purposes of the present heading, the term "concentrates" applies to ores which have had part or all of the foreign matter removed by special treatments, either because such foreign matter might hamper subsequent metallurgical operations or with a view to economical transport. Processes to which products of this heading may have been submitted include physical, physico-chemical or chemical operations, provided that they are normal to the preparation of the ores for the extraction of metal. With the exception of changes resulting from calcinations, roasting or firing (with or without agglomeration), such operations must not alter the chemical composition of the basic compound which furnishes the desired metal. The physical or physico-chemical operations include crushing, grinding, magnetic separation, gra....
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....15.21 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 HSN include, crushing, grinding, magnetic separation, gravimetric separation, floatation, screening, grading agglomeration of powders etc. . It is the contention of the revenue that on application of any one or more of the processes, which would result in removing a part or all of the foreign matter, so as to make it fit for metallurgical operation or economical for transport, would result into concentrates. 15.22 The appellants on the other hand fervently argued that unless the process of benefication is undertaken on the ores, the resultant cannot be called as concentrates. In support, reliance has been placed on the letter issued by the Ministry of Mines dated 25.01.2012. The Ministry of Mines in the said letter "has opine....
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....Advocates for the appellants laid emphasis on the word 'special treatment' employed in the said meaning of concentrates. It is their contention that since special treatment has not been defined under the Tariff or HSN, therefore special treatment refers to the process of beneficiation. 15.25 In our view, the processes mentioned under the definition of beneficiation are also included in explaining the term "concentration" under HSN. It is laid down that the physical or physico-chemical operations include crushing, grinding, magnetic separation, gravimetric separation, floatation, screening etc. which are normal to the preparation of the ores for the extraction of metals. While explaining the meaning of concentration, it is also mentioned that ores are seldom marketed before preparation for subsequent metallurgical operations. Hence, the Ores are to be subjected to special treatment. The Revenue had argued that all the processes narrated under the category of beneficiation or under the HSN need not be applied on the extracted Ore; even if by the application of few processes as enumerated under the scope of 'beneficiation', with an objective for removal of impuritie....
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....mounting to manufacture under the relevant Chapter Notes or Tariff Heading then applicability of the test of emergence of new and distinct commodity having different use and character after the processes applied to a commodity becomes irrelevant. Their Lordships at para 13 of the order observed as:- "13. The decisions aforesaid make it clear that the definition of the expression `manufacture' under Section 2(f) of the Act is not confined to the natural meaning of the expression `manufacture' but is an expansive definition. Certain processes, which may not have otherwise amounted to manufacture, are also brought within the purview of and placed within the ambit of the said definition by the Parliament. Not only processes which are incidental and ancillary to the completion of manufactured product but also those processes as are specified in relation to any goods in the section or chapter notes of the Schedule to the Central Excise Tariff Act, 1985 are also brought within the ambit of the definition. ............" 15.27 In the case of O.K Play (India) Ltd. Vs. Commissioner of C.Ex.,New Delhi 2005 (180) ELT 291(SC), the question came up before the Hon'ble Supreme Cou....
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....." 15.28 These judgements are later followed in the case of Commissioner of Customs & Central Excise, Goa vs. Phill Corporation Ltd. 2008 (223) ELT 9(SC), wherein their Lordships observed as follows:- "25. The learned Additional Solicitor General contended that the deeming provision of Section 2(f) (ii) was squarely raised at all levels of the proceedings. In the show cause notice, Section 2(f) has been invoked. Similarly, in the order in original, the Commissioner has categorically relied upon Chapter Note 3 of Chapter 20 and Section 2(f)(ii) and referred to various documents to strengthen his case. The learned Additional Solicitor General has also submitted that the Constitution Bench judgment of this court in Delhi Cloth and General Mills (supra) is not applicable in the instant case as the deeming provisions of section 2(f)(ii) were not at all enacted during the relevant period. Section 2(f)(ii) was incorporated/substituted in the Central Excise Act with effect from 28-2-1986 vide MF (DR) Notification No. 10 of 1986-Central Excise dated 5-2-1986. 26. It was submitted by the learned Additional Solicitor General that the judgment of the Delhi Cloth and General Mills (sup....
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.... have to make serious endeavour to ascertain spirits and intention of the Parliament in enacting these provisions and once the legislative intention is properly gathered, then the bounden duty and obligation of the courts is to decide the cases in consonance with the legislative intention of the Parliament." 15.29 The said Chapter Note 2 to Chapter 26 inserted from 01.03.2011 has been recently considered by the Hon'ble Supreme Court in Star Industries Vs Commissioner of Customs(Imports), Raigad 2015 (324) ELT 656, while considering the eligibility of Notification 4/2006, wherein their Lordships observed as:- "28. According to us, it is very clear from the reading of the judgment in Hindustan Gas case that basic and the common thread which runs throughout the decision is that subjecting ore to the process of roasting does not amount to manufacture. This very basis gets knocked off with the amendment carried out in the year 2011 with the insertion of Note 4. Note 4 now categorically mentions that the process of converting ores into concentrates would amount to 'manufacture'. Therefore, it cannot now be argued that roasting of ores and converting the same into concen....
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....if they are intended for non-metallurgical purposes. As per this note, metals of Section XV would be included in the term 'ores'. However, after the insertion of Chapter Note 4, these two Notes, namely, Note 2 and Note 4 have to be read harmoniously. If we accept the submission of the learned counsel for the assessee predicated on Note 2, then Note 4 even after its conscious inclusion, would be rendered otiose which cannot be countenanced. Therefore, Note 2, when seen along with Note 4, has to govern itself in limited territory. On the basis of deeming fiction created by Note 4, once we arrive at the conclusion that process of roasting of Ore amounts to manufacture and it creates a different product known as Concentrate, for the purpose of exemption notification, which exempts only 'Ores' it is not possible to hold that Concentrate will still be covered by the exemption notification. Therefore, harmonious construction of Note 2 and Note 4 would lead us to hold that in those cases when Note 4 applies and Ores becomes a different product, it ceases to be Ores. 31. We, thus, are of the opinion that in the impugned judgment, the Tribunal has rightly arrived at the co....
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....ent assigning different sub-headings. Therefore, in absence of an increase in the Fe content by benefication or any other method, if there cannot be a manufacturing process, the chapter note 4 inserted with effect from 01.3. 2011 defeat the very purposes and becomes otiose. Such a situation, in our opinion, cannot be the intention of the legislature. Therefore, in our considered opinion application of processes of crushing, grinding, screening and washing and grading of iron ore, converts it into iron ore concentrates and accordingly in view of the chapter note 4 of chapter 26 becomes manufacture and leviable to Excise duty. 15.31 The other issue raised by all the appellants, except the Appellant M/s Odisha Mining Corporation is that since the processes on ores have been carried out in the premises declared as mines, and they are governed under the Mines Act, therefore, the benefit of exemption notification 63/95 CE dt.16.03.1995 is applicable to them. However, all the appellants fairly accepted that this issue of exemption was not raised before the adjudicating authority and the claim has been advanced for the first time before this Tribunal. Ld. Special Counsel and other repre....