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2023 (10) TMI 1003
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....nt from the record that the above product has also been cleared in the domestic market under the very same classification under the Central Excise Tariff (CET) since 1986. In fact, copy of invoices placed on record supports the above claim. 1.2 Similar to its earlier exports, the assessee filed two shipping bills both dated 02.03.2013, for export of Upgraded Beneficiated Ilmenite (Synthetic Rutile) under CTH 2823. The Revenue, however, not accepting the above classification of these goods, sought to classify the same under CTH 2614 00 20. 1.3 Not satisfied with the reply filed by the assessee for the re-classification by the Revenue, the Assistant Commissioner of Customs, Tuticorin vide Order-in-Original No. 575/2013 classified the goods under export under Tariff Item No. 2624 00 20, as proposed. It appears from the record that the appellant-assessee preferred an appeal before the first appellate authority against the said reclassification by the adjudicating authority and the first appellate authority vide Order-in-Appeal No. 47/2013 (TTN) dated 17.05.2013, accepted the classification made by the assessee thereby setting aside the re-classification proposed and confirmed by ....
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.... furnace at a high temperature of about 900°C using coke or charcoal, during which oxides from the above ore would combine with the Carbon in the charcoal and thus Carbon Dioxide mixture gets liberated, thereby leaving the Ilmenite concentrate. (iv) The roasted ore is thereafter charged to a digester wherein Leaching process takes place, with Hydrochloric Acid of about 30 to 31% concentrate. The said leaching process is repeated multiple times under high-pressure and temperature until the iron content drops from 33-35% to 2.5%, and hence this process of leaching is treated as the most crucial step/process whereby the Iron [Fe] content in the said Ilmenite ore [FeTiO3] is converted into Ferric Chloride [FeCl3], thereby leaving Titanium Dioxide [TiO2] of the highest possible purity and moisture. (v) Typically, 'Rutile' would mean a molecular structure having tetragonal shape, as given below: - (vi) Rutiles are generally of two types, namely, natural Rutile and synthetic Rutile and the common difference is in their molecular structure. If the molecular structure is tetragonal in the natural state of the mineral, then they are natural Rutiles. If the tetr....
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.... species actually used in the metallurgical industry for extraction of the metals of Section XIV or XV, of mercury or of the metals of heading 28.44, even if they are intended for non-metallurgical purposes, and (B) Have not been submitted to processes not normal to the metallurgical industry. The term "ores" applies to metalliferous 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 headings 26.01 to 26.17, 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 headings 26.01 to 26.17 may have been submitted include physical, physiochemical or chemical operations, provided they are normal to the prep....
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...., 38.24) The heading further excludes: (a) Natural titanium dioxide (rutile, anatase, brookite), an ore (heading 26.14). (b) Orthotitanic acid [Ti(OH)4] and metatitanic acid [TiO(OH)2] (heading 28.25)." 5.5 Referring to the above, Ld. Advocate contended that the concentrates of ores obtained by treatments, other than calcining or roasting, which alter the chemical composition or crystallographic structure of the basic ore are generally classified under Chapter 28; the Ilmenite ore in the present case that are purchased/procured, are subjected to both physical and chemical processes during the conversion from Ore to synthetic Rutile; the chemical formula of mineral ore is FeTiO3 and its crystal structure is hexagonal. The synthetic Rutile that is finally exported, is identified with the chemical formula TiO2 and its crystal/molecular structure is tetragonal. 5.6 Our attention was drawn to the following test reports of the experts, wherein it has been opined that there is a chemical as well as crystallographic change in the impugned product, and the same occurs after the process of leaching, which happens at the digesters: - Sl.No. Name of the Organizati....
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....13 (Tri. - Del.)] 6.1 Per contra, Ld. Assistant Commissioner relied upon the findings of the lower authorities. He would also submit that: - (i) As per the principles underlying the classification, the impugned goods should be classified under CTH 2614 only since the description of the declared goods was mentioned as "Upgraded Beneficiated Ilmenite (Synthetic Rutile) TiO2 95% Min." by the assessee itself. (ii) The process of leaching carried out only reflects that there was an increase in the concentration of TiO2 and thereby resulting in the reduced FeO content. (iii) Even the final product is claimed to have 95% of Titanium and 5% of impurities. This indicates that the Titanium is not fully separated from the Ore. (iv) The description itself therefore clearly indicates that Ilmenite still contains TiO2 and not pure TiO2. (v) The test report of the Department of Earth Science, Pondicherry University referred to by the Commissioner (Appeals) was not available with the adjudicating authority. (vi) Moreover, the logic behind the conclusion is not forthcoming from the report of Pondicherry University, as to how the university co....
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....(processed) and Ilmenite unprocessed falling under CTH 26140020 and 26140010 respectively. In the instant case, the dispute is between CTH 2614 and 2823. There was also no reference to any chemical process resulting in the change of chemical composition or crystallographic structure in the said case of M/s. V. V. Minerals, unlike in their case. 7.5 With regard to the reliance on the website of Kerala Minerals, he would contend the same has to be ignored since a third-party website cannot outweigh the expert opinion obtained from reputed Government testing houses like CSIR, BARC and Pondicherry University. 8. We have heard the rival contentions, we have perused the orders of lower authorities, and we have also carefully considered test reports/certificates issued by the various organisations. 9. After hearing both sides, we find that the only issue that is to be decided by us is: whether the item exported by the assessee namely "Upgraded Beneficiated Ilmenite (Synthetic Rutile) TiO2 95% Min. Moisture 0.5% Max." is classifiable under CTH 2614 as contended by the Revenue, or CTH 2823 as declared by the exporter-assessee? 10. At the foremost, it is essential to understand t....
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....ted the fact of crystallography change between the raw Ilmenite Ore and the final product. In any case, therefore, we find that it is the HSN Explanatory Notes which guide us to the most appropriate classification, especially where scientific facts are involved. 15.1 We find it relevant to have a re-look into the Explanatory Notes (General Notes) of Chapter 26 and the heading 26.14 of the HSN, which are reproduced below: - "Headings 26.01 to 26.07 are limited to metallic ores and concentrates which: (C) Are of mineralogical species actually used in the metallurgical industry for extraction of the metals of Section XIV or XV, of mercury or of the metals of heading 28.44, even if they are intended for non-metallurgical purposes, and (D) Have not been submitted to processes not normal to the metallurgical industry. The term "ores" applies to metalliferous 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 impo....
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....uring chemical process of "Leaching" in the digesters and not during calcining or roasting. In its support, they have furnished test reports of experts in the field which are not disputed or doubted by the Revenue. 15.3 On the other hand, the stand of the Revenue is only that the said change canvassed by the assessee occurred only during calcining/roasting. But we do not see any documentary evidence placed in support of this argument other than the website of Kerala Minerals. Other than this, nothing is placed on record to indicate as to in which context was the website found useful. Also, nothing is forthcoming as to investigation/analysis, if any, carried out by any concerned who uploaded in the website. Hence, the alleged reference also tantamount to mere allegation, without any basis or any stuff. For this reason, the same does not take anyone anywhere. 16.1 At this juncture, we find it appropriate to look at the test report dated 14.08.2014 of CSIR. For the sake of convenience, the same is reproduced hereinbelow: - Sl.No. DCW Sample Code Sample details Minerals identified by XRD Chemical formula of mineral present Crystal structure of mineral present ....
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.... 2 Ilmenite Raw ore DCW-2 Ilmenite Ti: 44.46+/-0.24 Fe: 53.05+/-0.20 See Annexure-2 3 Reduced ore (Roaster outlet) DCW-3 Ilmenite Ti: 44.61+/-0.24 Fe: 52.79+/-0.20 See Annexure-3 4 Leached ore (Digester outlet) DCW-4 Rutile Ti: 95.98+/-0.40 Fe: 2.20+/-0.06 See Annexure-4 5 Synthetic Rutile (Calciner outlet) Finished product DCW-5 Rutile Ti: 95.98+/-0.40 Fe: 2.20+/-0.06 See Annexure-5 16.5 From the above, it is clear that Ilmenite got converted into synthetic Rutile due to the leaching process, bringing out chemical / structural changes. 17. It is relevant at this juncture to reproduce the whole process involved for converting raw Ilmenite Ore into synthetic Rutile, as explained by the assessee; the same is available in the record placed before us, which is part of the reply to the Show Cause Notice (reply dated 06.03.2013):- "We purchase Ilmenite Ore falling under Chapter 2614 from M/s. Indian Rare Earths Limited and also import the same. We are manufacturing upgraded beneficiated ilmenite synthetic rutile TiO2 95% in our Factory since 1970 and exporting through Tuticorin Port by adopting the follo....
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....ile containing 95% titanium dioxide is a manufactured synthetic product and is not an ore as confirmed by the central excise registration and the customs lab report in the earlier instances. Further, we would like to differentiate the two viz. Ilmenite in its raw form as such and our Synthetic Rutile. In case of Ilmenite which is rightly classifiable under 26140010, the composition of the material Ilmenite is Titanium with 54% + Iron and the balance with some other impurities. The composition of Titanium and Iron is such that it cannot be physically separated as it is a crystal structure. Unless we use a chemical process of leaching without which the product Titanium cannot be separated. In the case of Synthetic Rutile, the composition of the material is only Titanium with 95% + other permitted impurities which accounts for about 5%. Thus the two products are totally different from the points of its composition, its readiness to use for other final products. Further, the ultimate manufacturer who would like to use only Titanium dioxide with 95% and not the Ilmenite. The two products are so different that one is not an alternative/or supplement to the other warrant....
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....20. It would evidently fall under Chapter 28. The Department's argument that upgraded Ilmenite under 2614 00 20 is nothing but synthetic rutile, is fallacious. We also note that in Para 3.5 it is mentioned that synthetic rutile is classified under rutile (2614 00 31). In the same Para 3.5 under sub-para (ii), it is stated that synthetic rutile will not be classified under 2614 00 31. Here again we find contradiction in the grounds of appeal. Assuming that the Department's argument is that only upgraded Ilmenite which is synthetic rutile is classifiable under 2614 00 20, the argument is self-defeating because rutile clearly falls under 2614 00 31, 2614 00 39 and 2614 00 90 in the tariff and no distinction is made between naturally occurring rutile and synthetic rutile in the Heading for Rutile." (Emphasis supplied) 19.2 In the case of M/s. C.S. Zircon Products Pvt. Ltd. (supra), the co-ordinate Delhi Bench has held as under: - "3.1 After carefully considering the submissions of both the sides, we, for the reasons given below, are of the view that the product, in question, is correctly classifiable under Heading 28.25. .... (3) As per HSN explan....
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....ubmission of the Learned Counsel for the Respondent is correct that when the Revenue challenges the classification made by the assessees, the onus is on the Revenue to establish that the item in question falls in taxing category as claimed by them. The burden is on the Revenue to adduce proper evidence to show that the goods are classifiable under a different heading than that claimed by the assessee. The finding of fact as recorded by CESTAT gets reinforced by the policy condition attached to the sub-heading 1209.99.00 of the Import Policy which specifically states - 'import of pomegranate seeds will be free'. Without any doubt, subheading 1209.99.00 in the Import Policy correlates to sub-heading 1209.99 to Chapter 12 of the HSN. The contention of the Revenue that the Import Policy is in the nature of delegated legislation albeit correct, would not make any difference in the context of the present case as the policy condition in the Export/Import Policy specifically includes pomegranate seeds - as 'anardana' under sub-heading 1209.99.00, whereas the Schedule to the Customs Tariff Act, 1975 merely reproduces the Heading and the sub-heading of the HSN, without specifically including....
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....e core element of determinative factor has to be gone into which is the first and essential step. Whereas, the classification appears to have been made on incorrect assumptions, which is not as per law. 22.1 At paragraph 8 of the Order-in-Original, the adjudicating authority has extracted HSN Explanatory notes and at page 8 of the OIO, the following paragraph of the said note which is extracted, is relevant. "Concentrates of ores obtained by treatments, other than calcining or roasting, which alter the chemical composition or crystallographic structure of the basic ore are excluded (generally Chapter 28). Also excluded are more or less pure products obtained by repeated physical changes (fractional crystallization, sublimation, etc., even if there has been no change in the chemical composition of the basic ore." From the above paragraph in the said Notes, we find that the same provides for an exception in the form of exclusion to the general applicability for a product to be classified under Chapter 26. 22.2 The adjudicating authority has reproduced what is perhaps downloaded from the website of Kerala Minerals & Metals Ltd. at pages 10 and 11 of the Order-in-Orig....
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....alysis for which they are well known, and hence, unless an effort is made to obtain contrary reports from similarly placed Government agencies and place on record, these reports of BARC and CSIR need to be accepted and acted upon. 26.1 At paragraph 15, page 12 of the Order-in-Original, the adjudicating authority refers to the amendment in 2005, thereafter places on record that a speaking order was issued on 31.12.2012 by classifying the goods under 2614. There is also a reference that in 2009, there was uncertainty, consequent to which samples were drawn and the goods were allowed to be cleared by classifying under Chapter 28 after execution of an undertaking; and no final decision has been taken. That means, despite the change in 2005, and from 2005 to 2009, the classification under Chapter 28 was never disputed. Even after this 'small-time' dispute in 2009, the classification remained not disputed until 2012/13. 26.2 Even in 2009, although apparently a dispute was made, yet as admitted by the original authority himself, no final decision has been taken and perhaps the stalemate continues till date. When the Revenue does not act, that should not be allowed to be causing undu....
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....al processes which has resulted in the final product, with a different molecular structure. There is also an observation that the chemical and crystallographic structure of change has occurred only after the process of leaching. 29.2 There is also an observation by the first appellate authority, after looking into the records, that the assessee had exported Buff Color Titanium Dioxide, Rutile grade (Isotox) through shipping bill dated 05.04.2012, which was classified by the Department under Chapter 28, thereby allowing drawback. Admittedly, the impurity content was much higher, as could be seen from paragraph 3 of the Order-in-Appeal dated 17.05.2013. 29.3 Against this, the same Department has sought to reclassify under Chapter 26, even though the product in question had lesser impurity. There is also a categorical observation by the first appellate authority that the lower authority did not bring on record any chemical test report of the impugned goods to justify its classification under CTH 2614. 30. In view of above discussions, we are of the view that the goods in question are synthetic Rutile which merit classification only under CTH 2823 and hence, the stand of the a....