TaxTMI 
TaxTMI 
2026 (7) TMI 84
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....n Rules, 1960. 2.1 The iron ore raised from the appellant's mine is high-grade ore which requires no concentration. The ore is classifiable as iron ore lumps and fines under sub-headings 26011110/26011120/26011149 of the Central Excise Tariff and is unconditionally exempt as "ores" under Notification No. 4/2006-CE dated 01.03.2006 (Sl. No. 4) and, on supersession, under Notification No. 12/2012-CE dated 17.03.2012 (Sl. No. 56). 2.2 The actual field operations at the mine, namely: (i) raising/excavation of the iron ore and (ii) crushing and screening thereof, were carried out not by the Appellant but by an independent contractor, M/s Sun Ispat Pvt. Ltd., under a Work Order dated 01.02.2010 (Exhibit A) at the rates of Rs. 150/MT (raising) and Rs. 225/MT (crushing & screening). The contractor rendered these activities as a taxable service and raised invoices charging Service Tax thereon, which was duly borne and discharged. The charges so paid are reflected in the Appellant's ledgers (Exhibit B) and the corresponding service-tax invoices are at Exhibit C. 2.3 The iron-ore raising process, in substance, comprises: drilling and blasting of the ore body to o....
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....iginal No.BSR-EXCUS-002-COM-01915-16 dated 04.03.2016, the learned Commissioner, without accepting the said submissions, confirmed the entire demand of Rs 8,50,65,540/- under the proviso to Section 11A(1)/11A(4) along with interest under Section 11AB/11AA, and imposed an equal penalty of Rs 8,50,65,540/- under Section 11AC read with Rule 25 of the Central Excise Rules, 2002, holding that any process rendering iron ore fit for use/transport amounts to manufacture under Chapter Note 4 and that the exemption for "ores" was unavailable. 2.8 Aggrieved with the said order, the appellant is before us. 3. The ld.Counsel for the appellant submits that the issue is no longer res integra, the identical issue having been decided in favour of similarly placed assessees by this Tribunal, including in respect of the very same Bhubaneswar-II Commissionerate, and the said decision having been affirmed by the Hon'ble Supreme Court. 3.1 At the outset, it is submitted that the activity carried out by the Appellant is confined to the raising of iron ore and its crushing and screening, i.e. mere size reduction and segregation of the ore, and does not amount to 'manufacture' of '....
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....e Bhubaneswar Zone itself and after consulting the Ministry of Mines, which clarifies that crushing and screening are mere preparatory processes, and that conversion of an ore into a concentrate requires further special treatments such as milling, hydraulic separation, magnetic separation, flotation and concentrate thickening, none of which is carried out by the Appellant, as established hereinabove. It therefore follows that the iron ore lumps and fines raised by the Appellant, having been subjected only to crushing and screening, do not answer the description of 'concentrate', and the deeming fiction in Chapter Note 4 to Chapter 26, which operates only upon "the process of converting ores into concentrates", is not attracted. 3.3 It is further submitted that the issue is no longer res integra, inasmuch as this Hon'ble Tribunal has, on identical facts, held that the activity of crushing and screening of iron ore does not amount to manufacture. In this regard, he relies on the decision of this Tribunal in the case of M/s Odisha Mining Corporation Ltd. v. Commissioner of Central Excise, Customs & Service Tax, Bhubaneswar-II [Final Order No. 77196/2025 dated 05.08.2025....
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....ployed upon the ore into manufacture. Unless and until it is shown that the ore has been converted into a concentrate by the removal of part or all of the foreign matter through special treatment, the fiction is not attracted at all. 3.7 It is further submitted that where the Department alleges that the ore has been converted into a concentrate by processes going beyond crushing and screening, the burden of proving such processes, and the consequent removal of foreign matter, lies squarely upon the Department. This Hon'ble Tribunal has so held in M/s Khatau Narbheram& Co. (supra) and in M/s Amba River Coke Ltd. (supra). In the present case, the Department has led no evidence whatsoever to establish that the Appellant has employed any process of milling, hydraulic separation, magnetic separation, flotation or concentrate thickening; it is not even the case of the Department that the Appellant possesses any beneficiation or concentration plant; the statutory returns filed by the Appellant under the MMDR Act, 1957 reflect the production of Ore; and the Ministry of Mines, vide its Office Memorandum dated 25.01.2012, has itself clarified that the crushing and screening of Run-of-....
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....ed upon by this Hon'ble Tribunal both in M/s Odisha Mining Corporation Ltd. (supra) and in M/s KhatauNarbheram& Co. (supra) in holding that crushing and screening do not amount to manufacture. 3.10 It is further submitted that one and the same activity cannot, in law, be simultaneously a taxable "service" for the purpose of levy of Service Tax and "manufacture" of excisable goods for the purpose of levy of Central Excise duty. The Revenue, having treated the said activity as a service and collected Service Tax thereon, cannot be permitted to approbate and reprobate by now treating the self-same activity as the manufacture of concentrate so as to levy excise duty upon a contradictory premise. The demand is liable to be set aside on this ground as well. He submits that the product of the appellant continues to be "iron ore" (lumps and fines) classifiable under subheadings 26011110/26011120/26011149 and exempt as "ores", no new and distinct commercial commodity having come into existence. 3.11 It is submitted that Note 2 to Chapter 26 defines "ores" to mean minerals of mineralogical species actually used in the metallurgical industry for the extraction of metals, and exclude....
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....ed upon an identical issue cannot be founded upon the extended period of limitation [Nizam Sugar Factory v. CCE, A.P., 2006 (197) E.L.T. 465 (SC)]. 3.15 It is further submitted that no penalty is exigible where the breach flows from a bona fide belief or where the issue is one of interpretation of law. In any event, the demand of duty itself being unsustainable, the consequential demand of interest and the imposition of penalty cannot survive. 4. The ld.A.R. for the Revenue has supported the impugned order. 5. Heard both the parties and considered the submissions. 6. We find that the issue involved in this case for consideration is whether the process of crushing and screening of iron ore undertaken by/on behalf of the Appellant amounts to "manufacture" of "iron ore concentrate" within the meaning of Chapter Note 4 to Chapter 26 of the Central Excise Tariff Act, 1985 (inserted w.e.f. 01.03.2011), so as to attract central excise duty, when the said process effects only size reduction and segregation of the iron ore and does not involve any beneficiation or special treatment removing foreign matter or enriching the ferrous content; and consequently, whether the iron ore l....
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....use (zzzy) of Section 65(105) of the Finance Act, 1994, defines the taxable service under the category of "Mining of Mineral Oil and Gas service" as the service to be provided to any person in relation to mining of mineral oil or gas. It is further seen that the mine owner ("who can be considered as service receiver") pays consideration to the service provider. Consequently, the appellant will be liable to pay service tax on the value of taxable service received by them during the period. 7. The main argument advanced on behalf of the appellant is that the activities undertaken are not to be considered as service but are rendered towards production/manufacture of excisable goods viz. Iron ore which are specified under Chapter 26 of the First Schedule to Central Excise Tariff Act and attracts excise duty, even though exempted. From the nature of the contract, it is evident that the activity carried out is one of mining of iron ore and not manufacture thereof and hence service tax is liable to be paid. The argument put for by the appellant that such activities are to be considered as manufacture of iron ore is nothing but an after thought. In any case, no excise duty has bee....
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....1. As per Technical Literature Beneficiation consists of following processes: - "1.4.2 Beneficiation Methods: (i) milling (crushing and grinding); (ii) washing; (iii) filtration; (iv) sorting; (v) sizing; (vi) gravity concentration and/or, (vii) magnetic separation and/or; (viii) flotation; and/or (ix) agglomeration (pelletizing, sintering, briquetting, or nodulizing). 12.2. We find that the Circular No.332/1/2012-TRU dated 17-02-2012 also clarified that in Concentration, processes of: (i) milling, (ii) hydraulic separation (iii) magnetic separation (iv) floatation (v) concentrate thickening are undertaken. In the present case, we find that there is no evidence available on record to conclude that the appellant has undertaken the above processes. 12.3. We also take note of the fact that the Ministry of Mines, Govt. of India vide Office Memorandum No. 1712/2012-MV dated 25-01-2012 has clarified that no special treatment is involved in Crushing & Screening of Run of Mines (ROM) to lumps and Fines and the Lumps and Fines are ....
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....5) subclause (zzzy). It is further seen from the agreement that the appellant is required to employ workmen, providing tools etc. and required to undertake mining activity of individual mines. It is also required to undertake all activities in connection with mining of iron ore and pay necessary taxes and duties. The agreement specifically lists out activities like mine development, sizing, crushing and screening of material handling etc. and other allied activities connected with mine and mining operation. It is further seen that the payment for the iron ore fines cleared by the appellant will be received by the mine owner and the appellant's dues to the extent of 95% will be paid by the Mine owner. Subclause (zzzy) of Section 65(105) of the Finance Act, 1994, defines the taxable service under the category of "Mining of Mineral Oil and Gas service" as the service to be provided to any person in relation to mining of mineral oil or gas. It is further seen that the mine owner ("who can be considered as service receiver") pays consideration to the service provider. Consequently, the appellant will be liable to pay service tax on the value of taxable service received by them during th....
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...., it is pertinent to note that the term 'concentrates' has not been defined in the First Schedule to the CETA. Hence, reference must be made to the definition of the said term given under the HSN Explanatory Notes, reproduced hereunder, for ease of reference: "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." 12. From the above, it transpires that for iron ores to be considered as concentrates, the ores must be subjected to special treatments for removal of foreign matter. The simple mechanical processes of crushing and screening-employed on the extracted iron ores which removes some of the loose materials brought along with the ore from the mines, viz. mud, dust, etc., cannot be said to be a process of concentration. 13. It is submitted that pursuant to insertion of Chapter Note 4 to Chapter 26 of the First Schedule to CETA, a representation was filed by Federation of Indian Mineral Industries dated 21.11.2011 before t....
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....l of part or all of foreign material is envisaged for conversion of ores into concentrates. Ministry of Mines have clarified that no special treatment is involved in the crushing and screening of ore and the end-product can be termed as a concentrate only when the grade of ore is sufficiently improved through beneficiation. Federation of Indian Mineral Industries have also pointed out that several processes (in addition to crushing and screening) such as milling, hydraulic separation, magnetic separation, floatation & Concentrate thickening have to be undertaken for ores to be converted into concentrate. 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 of the foreign matter removed by special treatments either because such foreign matter may hamper subsequent metallurgical operations or with a view to economical transport'." [Emphasis Supplied] 16. The Appellant humbly submits that it is a trite law that circulars issued by CBIC are binding on the Department and the Department cannot be permitted to take a stan....