1.1 The respondents imported a consignment of molybdenum concentrates claiming the same to be falling under Chapter 26 of the Customs Tariff.
The goods have been described in the statement of facts as under: The goods in question are molybdenum ore "molybednite"(MoS2) which has been subjected to the process of concentrate and roasting and has as such become an oxide of molybdenum namely molybdic oxide...
Goods attracted both basic customs duty as well as CVD (additional duty of customs) levied under Section 3(1) of the Customs Tariff Act, 1975.
There is no dispute on the basic customs duty leviable on the imported goods. The only dispute is with reference of levy of CVD. For determing the levy of CVD under Section 3 of the Customs Tariff Act, it deemed manufacturer in India is to be considered and thereafter the rate of the Central Excise Duty leviable thereon determined. This position has been settled by the decision of the Constitution Bench of the Supreme Court in Hyderabad Industries v. UOI relevant portion from the judgment is extracted below: 1.1 The words "if produced of manufactured in India" does not mean that the like article should be actually produced or manufactured in India. As per the explanation if an imported article is one which has been manufactured or produced then it must be presumed, for the purpose of Section 3(1), that such article can likewise be manufactured or produced in India. For the purpose of attracting additional duty under Section 3 on the import of a manufactured or produced article the actual manufacture or production of a like article in India is not necessary. As observed by this Court in Thermax Private Limited v. Collector of Customs, Bombay that Section 3(1) of the Customs Tariff Act "specifically mandates that the CVD will be equal to the excise duty for the time being leviable on a like article if produced or manufactured in India. In other words, we have to forget that the goods are imported, imagine that the importer had manufactured the goods in India and determine the amount of excise duty that he would have been called upon to pay in that event." To our mind the genesis of Section 3(1) of Customs Tariff Act has been brought out in the aforesaid observations of this Court, namely, for the purpose of saying what amount, if any, of additional duty is leviable under Section 3(1) of the Customs Tariff Act, it has to be imagined that the articles imported had been manufactured or produced in India and then to see what amount of excise duty was leviable thereon.
From the above, two implications follow (i) if the process by which concentrate obtained does not amount to manufacture in India, then the imported concentrate would also not be subjected to countervailing duty. (ii) if the goods are manufactured or produced in India, are exempted or at NIL rate of duty due to any excise exemption notification, the imported goods would be subjected to nil rate of CV duty.
1.2 The term "concentrate" and "Ore" as per Kirk-Othmer's Encyclopedia of Chemical Technology, Vol. 16, Page 315 is extracted below: Concentrate an action to intensify in strength or purity by the removal of valueless or unneeded constituents, i.e., separation of ore or metal from its containing rock or earth. The concentration of ores always proceeds by steps or stages. Liberation of mineral values is often the initial step. Concentrate also means a product of concentration i.e. enriched ore after removal of waste in a beneficiation mill.
Ore. A mineral or aggregate of minerals from which a valuable constituent, especially a metal, can be recovered at a profit.
In view of the above term "concentrate" is to be understood as nothing but enriched and prepared ore.
1.3 In Minerals and Metals Trading Corporation of India Ltd. v. UOI , the assessee had imported Wolfram concentrate having minimum 65% as Tungsten Oxide. The assessee contended that Wolfram concentrate is an Ore and therefore classifiable under Item 26. In that context, the Supreme Court held as under: The separating of wolfram ore from the rock to make it usable ore is a process of selective mining. It is not a manufacturing process.
The important test is that the chemical structure of the ore should remain the same. Whether the ore imported is in powder or granule form is wholly immaterial. What has been to be seen is what is meant in international trade and in the market by wolfram ore containing 60% ore more WO3. On that there is a preponderation weight of authority both of exports and books and of writings on the subject which show that wolfram ore when detached and taken out from the rock in which it is embedded either by crushing the rock and sorting out pieces of wolfram or by washing or magnetic separation and other similar and necessary process it becomes a concentrate but does not cease to be ore. Unless the ore is roasted or treated with any chemical it cannot be classed as processed.
Following this judgment, in Hyderabad Industries v. UOI , the Hon'ble Supreme Court has held as follows: We are satisfied upon the material placed before us, as indicated in the judgment under appeal quoted above, that all that the appellants in Civil Appeal 1354 of 1980 do is to separate the asbestos fibre from the rock in which it is embedded by manual and mechanical means. The asbestos fibre that is so removed from the parent rock is in every respect the asbestos fibre that is so removed from the parent rock is in every respect the asbestos that was embedded in it. No process of manufacture can be said to have been employed by the appellants nor is a new or a distinct commodity realised therefrom.CCE v. Tata Iron and Steel Co. Ltd. held that washing coal to reduce ash is not a manufacturing process. In CCE v. SAIL , the Tribunal held that removal of foreign materials from iron ore by the process of crushing, grinding, screening and washing and to concentrate such ores do not result in the manufacture of different commercial commodity. In Indian Rare Earths Ltd. v. CCE , the assessee dredged sand from a sea beach, the sand slurry was thereafter subjected to spiraling and as a result the heavier minerals were separated. By this process, about 80% of the lighter sand was being eliminated and the remaining 20% was brought to the Mineral Separation Plant by pumping the slurry through pipe, the individual minerals were separated then by processes like drying electro-static separation, magnetic separation and gravity separations, final recovery of minerals was less than 10% of the sand dredged from the sea of shore, Revenues contention was that the minerals so recovered by above process were not "ores but were instead "concentrates" that "Concentrates" are different from "ores" Revenue relied upon the fact that the purity in the "concentrates" was of very high level, content that the minerals so obtained ceased to be "ores" However their plea was not upheld. The tribunal held that the process carried out by the assessee would not amount to manufacture.
The relevant portion of the decision is extracted below:Hyderabad Industries and Ors. v. Union of India and Ors. That no manufacture of a new or distinct commodity takes place on account of the process 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. They remain in the same condition in which they remained along with ordinary sand on the sea beach. No up-gradation or augmentation of their purity takes place. The chemical structure of the ore remained the same. The processes are not any special treatments which would take the ores out of the stage of plain and simple ores.
Therefore it has to be found that the roasting of an ore, to obtain concentrate, does not amount to manufacture, especially roasting when such roasting would be a process by which impurities in the ore are removed and the recoverable content of metal as metal oxide is enhanced. Hence such process would not amount to process of manufacture under the excise law. In Hyderabad Industries case 1999 (108) ELT 321 (SC), the Supreme Court held as under: 17...The observation in Khandelwal Metal & Engineering Works case which seems to suggest that even if no process of manufacture or production has taken place the imported articles can still be subjected to the levy of additional duty does not appear to be correct in as much as the measure for levy of additional duty is the quantum of excise duty leviable on a similar article under the Excise Act. Duty under the Excise Act can be levied, as had been held earlier, if the article has come into existence as a result of production or manufacture. In other words when articles which are not produced or manufactured cannot be subjected to levy of excise duty then on the import of like articles no additional duty can be levied under the Customs Tariff Act. The levy of additional duty being with a view to provide for counter balancing the excise duty leviable, we are clearly of the opinion that additional duty can be levied only if on a like article excise duty could be levied. The decision in Khandelwal Engineering Works case to the extent it takes a contrary view, does not appear to lay down the correct law.
Similarly, following law laid down in CCE v. TISCO will apply: ... The learned Counsel for the appellant tried to argue that the duty leviable under Section 3 of the Customs Tariff Act is a countervailing duty which is levied merely on the import of goods and no other consideration should come into picture. This contention is totally without any merit. In any case, it stands concluded against the appellants as per the decision of this Court in Hyderabad Industries case (supra). Similar argument raised on behalf of the Revenue in the said case was repelled by the Constitution Bench in the said judgment.
Hence, no CV duty is imposable on the concentrate imported by the respondents.
1.4 Examining the plea, Ore and concentrate are one and the same and hence entitled for exemption under Sl. No. 10 of 5/98-CE, it is found.
The competing entries considered by the Supreme Court in MMTC v. UOI are extracted below:---------------------------------------------------------Item Name of Article Nature of Standard rateNo. Duty of duty---------------------------------------------------------(1) (2) (3) (4)----------------------------------------------------------MINERAL PRODUCTS26.
Metallic ores all X Free X sorts except ochres-----------------------------------------------------------70(7) Cobalt chromium tungsten Free magnesium and all other------------------------------------------------------------SECTION XXII (ARTICLES NOT OTHERWISE SPECIFIED)87.
All other articles not Revenue 60% advalorem otherwise specified The department classified the Wolfram concentrate under the residuary Item 87. The department contended that "Ore" covered by Item 26 is confined to articles in as mined condition and concentration of ore is a manufacturing process and hence Tariff Item 26 does not cover concentrate. The Supreme Court hold that Wolframite concentrate containing 65% of tungsten oxide is a tungsten ore, covered by description of the words "Ores" appearing in TI 26. It rejected the contention of the Revenue that concentrates will not fall within the scope of the word "ores" appearing in Item No. 26. Therefore 'Ore' is genus and 'Concentrate' is species. Therefore, under Central Excise exempting ore concentrates of ores would also be exempted. Sl.No. 10 of Notification No. 5/98-CE grants unconditional exemption to ores falling under Heading 26.01 to 26.17. Applying the decision of the Supreme Court in MMTC's case, the expression 'ores' in the Notification will include 'concentrates' also. The mention of ores and concentrates separately in Heading 26.03 does not go against the above arguments.
Even when an entry does not mention concentrate but refer only to ore, the Supreme Court in MMTC case holding that concentrate will be classified as ores will therefore, applying same principle while construing the word 'ore' appearing in the Notification No. 5/98 will call for coverage of the concentrate. It is clear from the judgment of Supreme Court in MMTC's case, that 'ore' is genus and concentrate a "specis". Therefore, separate mention of 'ore' and 'concentrate' in Heading 26.03 ipsofacto will not imply they are different. Therefore, term 'ore' covered by Notification No. 5/98 can apply to 'concentrate' also.
1.5 HSN Explanatory Notes and the technical literature, also support the view of 'Ore' to include 'concentrate'. In view of the definition of "ores" contained in Note 2 of Chapter 26 also, the concentrate is eligible for exemption.
For the purposes of heading Nos. 26.01 to 26.17, the terms "Ores" means minerals of mineralogical species actually used in the metallurgical industry for the extraction of mercury, of the metals of heading No. 28.44 or of the metals of Section XIV to XV, even if they are intended for non-metallurgical purposes. Heading Nos. 26.10 to 26.17 do not, however, include minerals which have been submitted to processes not normal to the metallurgical industry.
The use of the imported goods is for recovery of metal. Thus, the primary condition of Note 2 of Chapter 26 viz. the imported goods are used for the metals of Section XV, is satisfied. The second condition of Note 2 of Chapter 26 is also satisfied in as much as the imported concentrate had not been subjected to process not normal to the metallurgical Industry. The department, in fact, has stated in the grounds of appeal that by virtue of note 2 to Chapter 26, the goods have been classified under heading 2613.10. Therefore, concentrate in question when it satisfies & is covered under term 'ore' as given in Chapter Note 2. The above definition of 'ore' mentioned in Note 2 of Chapter 26 will also apply to appearing in S.No. 10 of Notification No.5/98-CE.1.6 Short levy under Section 28 cannot be raised without challenging the assessment in the bill of entry. The Supreme Court in Priya Blue Industries-Pritya Blue Industries Ltd. v. Commissioner has held that an importer is not entitled to a refund, if assessment on the Bill of Entry are not challenged. The ratio of the said decision will apply to the present case in as much as no differential duty can be demanded from the noticees, without the department challenging the assessment in the Bill of Entry. The Tribunal in the case of Wipro Ltd. v. CC, Chennai (Final Order dated 17.5.2005) has held that department cannot demand duty without challenging the assessment made in the Bill of Entry.