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Moil Limited V/S CCE & ST, Jabalpur

    Excise Appeal Nos. 51137 of 2017 (Arising out of order-in-original No. 12/COMMR/JBP.CEX/2017 dated 30.03.2017 passed by the Commissioner, Central Excise, Customs and Service Tax, Jabalpur) and Final Order No. 50263/2018

    Decided On, 19 January 2018

    At, Customs Excise Service Tax Appellate Tribunal New Delhi

    By, THE HONORABLE JUSTICE: DR. SATISH CHANDRA (PRESIDENT) & THE HONORABLE JUSTICE: V. PADMANABHAN
    By, MEMBER

    For Petitioner: Gopal Jain, Senior. Advocate, Devashish Bharuka, Jaya Bharuka, Anu Tyagi, Pooja S. Kapoor, S.N. Kapoor and Arun Jain, Advocates And For Respondents: M.R. Sharma, AR



Judgment Text


1. The appeal is against the order-in-original No. 12/2017 dated 30.03.2017. The appellant is engaged in mining and sale of manganese ore. Central Excise duty was imposed on various types of ores in the Budget of 2011. The Chapter Note 4 to Chapter 26 of the First Schedule to the Central Excise Tariff Act, 1985 reads as follows:

"In relation to products of this chapter, the process of converting ores into concentrates shall amount to manufacture."
2. The appellant was processing the manganese ore in their factory in their beneficiation plant, wherein various processes such as crushing, screening, sorting by hydraulic machines and washing with high pressure water was performed by machines. By these processors, extraneous material like clay, gangue etc. were removed and the concentration of manganese ore was improved. The Department was of the view that in the light of Chapter Note 4 to Chapter 26, the processes carried out by the appellant resulted in the manufacture of ore concentrate and the same amounts to manufacture. Accordingly, the adjudicating authority held that the appellant was liable to payment of Central Excise duty on such ore concentrate. Vide the impugned order, Central Excise duty and cess were demanded to the extent of Rs. 1.44 crore covering the period March, 2011 to December, 2015. The adjudicating authority further demanded payment of interest and imposed pe

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nalty of an equal amount. Aggrieved by the impugned order, the present appeal has been filed.

3. With the above background, we heard Sh. Gopal Jain, Ld. Sr. Advocate for the appellant and Sh. M.R. Sharma, Ld. AR for the Revenue.

4. Ld. Counsel for the appellant summarised the grounds of appeal as follows:

(i) By the processes undertaken by the appellant, manganese ore is not being converted to manganese ore concentrate and hence the mischief of Chapter 4 is not incurred by the appellant and hence there is no justification for demand of Central Excise duty.

(ii) He referred to the CBEC Circular No. 332/1/2012 dated 17.02.2012 which clarified the circumstances in which the end product can be termed as "concentrate" for purposes of charging duty in terms of Chapter Note 4. He submitted that the circular has clarified that the term "concentrate" applies to ores which have had part or all of foreign matter removed by special treatment. He contended that the processes carried out by the appellant cannot be described as special treatment and hence, the appellant has not manufactured ore concentrate and no duty will be liable to pay.

(iii) He also referred to HSN Note to Chapter 26 which says that Chapter Note 4 will be applicable only in cases where the process was undertaken resulting in removal of foreign matter by special treatment. (iv) He relied on the decision of the Tribunal in the case of M/s. Jain Mines and Minerals (India) Ltd. vs. CCE & ST, Jabalpur, Final Order No. 57214/2017 dated 10.10.2017 wherein the Tribunal has decided an identical issue in favour of the appellant, holding that no duty will be payable.

(vi) He also referred to the Apex Court decision in the case of the appellant Manganese Ore India Limited vs. State of Madhya Pradesh and Others : (2017) 1 SCC 81. The Apex Court in the above case has observed that during the processing undertaken by the appellant, only removal of impurities is carried out and no chemical process is carried out.

(v) Alternatively, the appellant claimed the benefit of Notification No. 63/1995 dated 16.03.1995 (as amended) which grants exemption to manufacturing process carried out within the mine as defined under Section 2(j) of the Mines Act. He added that the processes carried out by the appellant were undertaken within the mines and hence they will be entitled to the benefit of the above notification. He, however, admitted that the alternate plea was not raised before the adjudicating authority.

(vi) He also argued that the demand was hit by time bar.

(vii) Lastly, he relied on the Tribunal decision in the case of Rungta Mines vs. CCE : 2016 (338) ELT 454 (Tri. Kol) in which the Tribunal, in similar circumstances had set aside the penalty imposed.

5. Ld. AR appearing for the Revenue justified the impugned order. He argued that the Chapter Note 4 to Chapter 26 is incurred in the circumstances of the present case, since the processes carried out by the appellant result in enriched ore which are to be considered as "ore concentrate". He further submitted that the Tribunal in the case of Rungta Mines (supra) has held in identical circumstances that the processes carried out are to be considered as those falling within Chapter Note 4. Accordingly, he submitted that the impugned order may be upheld.

6. We have heard both sides and perused the record.

7. The manganese ore is mined in the Balaghat mine. Such ore is transferred to the beneficiation plant of the appellant wherein several processes are undertaken to make the ore saleable and to improve the quality of the ore which will facilitate better recovery of the metal i.e. manganese. The processes undertaken include crushing, screening, sorting to remove rock, washing mechanically to remove waste material like clay etc. The dispute in the present case is with reference to the Chapter Note 4 to Chapter 26, whether such processes are to be considered as converting ores into concentrates. If the answer is in the affirmative, the processes are to be considered as those amounting to "manufacture" within the definition in Section 2(f) of the Central Excise Act, 1944 and consequently excise duty will be payable. The adjudicating authority has taken the view that such processes are covered by the above Chapter Note and has demanded the Central Excise duty.

8. The adjudicating authority in para 81.7 of the impugned order has observed that the processes like washing, high pressure washing, separating low manganese content ore, separating dust, gangue, sand clay, etc. results in manganese concentrate of different grades. He has considered such treatment to be special treatments which will result in manganese ore to manganese ore concentrate. In this connection, CBEC had issued Circular No. 332/1/2012-TRU dated 17.02.2012 whose operating part is reproduced below:

"A reference has been received from Bhuwaneswar Zone seeking clarification on the issue of whether "iron ore lumps and fines" are dutiable as "concentrates when subjected to crushing, screening, sizing or washing etc".

2. In Budget 2011, a Not was inserted in Chapter 26 of the First Schedule to the Central Excise Tariff to deem the process of converting "Ores" into "Concentrates" as a process amounting to manufacture. Both ores and concentrates are classifiable under chapter 26 and while the term 'Ore' is defined in Note 2 of the said chapter, the term 'concentrate' is not. HSN Explanatory Note spell out the scope of the term 'Concentrate' as under:

"For the purposes of headings 2601-2617, 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 may hamper subsequent metallurgical operations or with a view to economical transport".

From the above definition, it is clear that removal 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 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, flotation & concentrate thickening have to be undertaken for ores to be converted to 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 treatment either because such foreign matter may hamper subsequent metallurgical operation or with a view to economical transport".

9. Both sides have referred to the Tribunal decision in the case of Rungta Mines Limited where the Tribunal has elaborately examined the dutiability of ore concentrate, in relation to Chapter 4 as well as CBEC clarification. In the above decision, the Tribunal observed as follows:

"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 physic-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 impurities or for economical transportation, definitely, covered under the scope "concentration". We find force in the contention of the Revenue. There has been no serious argument nor any contradiction of the fact that after carrying out the process of crushing, grinding, washing, grading with the particular size, the treated Ores are not made fit to be used directly every content of the Ores has improved or the relevancy of all the processes categorised under the beneficiation method, become necessary for ores of having Fe content 40% or 60%. Neither, in our opinion, it is relevant to adopt the meaning of concentration any Levy of royalty under the Mines and Minerals (Regulation and Development Act), 1957 and the Rules made thereunder to arrive at the conclusion that processes resulted into manufacture and the resultant product is "iron Ore concentrate" and chargeable duty. On the contrary, it is safe and prudent to look into the meaning of the concentrate in the HSN than to Mines and Minerals (Regulation and Development Act), 1957 and the Rules made thereunder 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 v. 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 on 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, 1944 in view of the Chapter Note 2 of Chapter 26 of CETA, 1985 and the resultant Iron Ore concentrate is dutiable. There is a significant different between clause (i) and clause (ii) of the definition of 'manufacture' laid down under Sec. 2(f) of CEA, 1944. The processes which are considered not manufacture in the ordinary sense under clause (i), if mentioned in the relevant Section or chapters of CETA, 1985 as amounting to manufacture, such processes will fall under the definition of "manufacture".
It is seen that the Tribunal in the above case has held that, processes which are very similar to those undertaken by the appellant, have been held to be covered by the Chapter Note 4 and the resultant goods are liable to Central Excise duty. We are of the view that above decision of the Tribunal is applicable to the present facts of the case and hence, we conclude that the processes undertaken by the appellant will incur the mischief of Chapter 4 and Excise duty will be payable by the appellant. However, we note that the Tribunal has set aside the penalty. By following the same, in the present case too, the penalty imposed on the appellant is set aside.

10. The appellant has relied in the case of Jain Mines and Minerals (India) Limited (supra) wherein it is claimed that the Tribunal has taken the view that Chapter Note 4 will not be applicable in that case since no special processes were undertaken. But we note that the decision does not discuss any detail about the nature of the processes carried out by the appellant in that case. Hence, we are unable to extend the benefit of the decision to the present case.

11. The appellant has also argued that the demand is hit by time bar. Further, they have claimed alternately the benefit of Notification No. 63/1995 dated 16.03.1995 (as amended). Since such benefit has not been claimed before the adjudicating authority, we are of the view that the matter is required to be remanded to the adjudicating authority to consider the same in the facts and circumstances of the present case. Since we are remanding the matter, the issue of time bar also will be decided in the denovo proceedings by the adjudicating authority, in the light of the arguments advanced by the appellant.

12. In view of the above discussions, the following order is passed:

To sum up: (i) the processes of crushing, grinding, screening, grading of iron ore as stated under the appeal result into "manufacture" of "iron ore concentrate" under clause (ii) of Section 2(f) read with Chapter Note 4 to Chapter 26 and classifiable under Chapter sub-heading 2601 11 50 of CETA, 1985 (ii) the eligibility of benefit of exemption Notification No. 63/95-CE dated 16.03.95 to be examined by the adjudicating authority; (iii) no penalty is imposable on the appellant.
13. With the above observations, the matter is remanded to the adjudicating authority for denovo decision after extending an effective hearing
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