2015 (10) TMI 1288 - SC - Customs

Exemption from payment of CVD - Manufacture of Ferro-Alloys - Whether the Ore Concentrate imported by the assessee is eligible for complete exemption from payment of additional duty of custom/CVD under Notification No.4/2006-CE? Appellant submits that entire exercise is Revenue neutral and assessee can avail CENVAT credit of the duty paid. Held That - Tribunal has rightly arrived at the conclusion that by virtue of Note 4, concentrate has to be necessarily treated as different from ores which is deemed as manufactured product after Molybdenum Ores underwent the process of roasting. Roasting of ores and converting the same into concentrates; process would be of manufacture - Molybdenum Ore underwent roasting and Notification No. 4/2006-CE exempts only ores ; concentrates automatically falls outside the purview of said notification. It is rightly argued by the learned senior counsel for the Revenue that exemption notifications are to be construed strictly and even if there is some doubt, benefit thereof shall not enure to the assessee but would be given to the Revenue. - Decision made in the case of IVRCL Infrastructure & Projects Ltd. v. Commissioner of Customs, Chennai 2015 (4) TMI 562 - SUPREME COURT followed Contention of Revenue is held correct - Assessee being appellant and exercise of Revenue is neutral; no need to file the appeal arises Be that as it may, if that is so, it is always open to the assessee to claim such a credit. - Decided against the assessee.

Issues Involved:
1. Eligibility of 'Roasted Molybdenum Ore Concentrate' for exemption from Countervailing Duty (CVD) under Notification No. 4/2006-CE.
2. Interpretation of 'Ores' and 'Concentrates' under the relevant tariff headings and exemption notifications.
3. Impact of Chapter Note 4 (2011 amendment) on the classification and duty exemption of 'Concentrates'.

Issue-Wise Detailed Analysis:

1. Eligibility of 'Roasted Molybdenum Ore Concentrate' for exemption from CVD under Notification No. 4/2006-CE:
The core issue was whether the 'Roasted Molybdenum Ore Concentrate' imported by the assessee could be classified as 'Ores' under Notification No. 4/2006-CE, thereby qualifying for exemption from CVD. The Notification exempts 'Ores' from excise duty, and by extension, from CVD. The Customs Department argued that 'Roasted Molybdenum Ore Concentrate' is distinct from 'Ores' and thus not eligible for the exemption.

2. Interpretation of 'Ores' and 'Concentrates' under the relevant tariff headings and exemption notifications:
The assessee contended that 'Ores' include 'Concentrates' based on the interpretation that 'Ore' is a genus and 'Concentrate' is a species. They relied on previous judgments and technical literature to argue that the process of roasting, which removes impurities, does not transform the ore into a different product. However, the Customs Department, supported by the Directorate of Revenue Intelligence (DRI), claimed that 'Roasted Molybdenum Ore Concentrate' is a different product from 'Ores' and should not be exempted from CVD.

3. Impact of Chapter Note 4 (2011 amendment) on the classification and duty exemption of 'Concentrates':
Chapter Note 4, added in 2011, states that the process of converting ores into concentrates amounts to 'manufacture'. This amendment was crucial as it introduced a legal fiction treating 'Concentrates' as a manufactured product distinct from 'Ores'. The Tribunal and the Supreme Court both acknowledged that this amendment fundamentally altered the interpretation of 'Ores' and 'Concentrates'. The Supreme Court highlighted that the process of roasting, which converts ores into concentrates, is now legally considered manufacturing, making 'Concentrates' a different product from 'Ores' for the purposes of duty exemption.

Detailed Analysis:

Eligibility of 'Roasted Molybdenum Ore Concentrate' for exemption from CVD:
The Supreme Court examined whether the 'Roasted Molybdenum Ore Concentrate' could be classified as 'Ores' under Notification No. 4/2006-CE. The assessee had been importing this material and claiming exemption from CVD, arguing that 'Ores' include 'Concentrates'. The Customs Department, however, detained the consignments and conducted chemical examinations, concluding that the product was 'Roasted Molybdenum Ore Concentrate', not 'Ores'. The Tribunal upheld the duty demand and interest but set aside the confiscation and penalties.

Interpretation of 'Ores' and 'Concentrates':
The Supreme Court referred to previous judgments, including the case of M/s. Hindustan Gas and Industries Ltd., where the Tribunal had held that roasting of an ore to obtain concentrate did not amount to manufacture and that 'Ore' and 'Concentrate' were essentially the same. However, the Supreme Court noted that this interpretation was based on the unamended Chapter 26 and did not consider the subsequent addition of Chapter Note 4.

Impact of Chapter Note 4:
The addition of Chapter Note 4 in 2011, which treats the process of converting ores into concentrates as 'manufacture', was pivotal. The Supreme Court emphasized that this amendment created a legal fiction, making 'Concentrates' a different product from 'Ores'. Consequently, the exemption under Notification No. 4/2006-CE, which applies only to 'Ores', could not be extended to 'Concentrates'. The Court reasoned that accepting the assessee's argument would render Chapter Note 4 meaningless.

Conclusion:
The Supreme Court concluded that 'Roasted Molybdenum Ore Concentrate' is distinct from 'Ores' due to the manufacturing process involved in its production. As a result, it does not qualify for exemption under Notification No. 4/2006-CE. The Court upheld the Tribunal's decision, affirming the duty demand and interest while dismissing the appeal with costs. The judgment reinforced the principle of strict interpretation of exemption notifications, emphasizing that any ambiguity should favor the Revenue.

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