2016 (4) TMI 601 - AT - Central Excise

Manufacture - washing, magnetic separation, gravity separation to remove unwanted matters on sand ores - whether various processes undertaken by the Appellant result into manufacture in view of chapter note 4 to chapter 26 of CETA,1985 inserted w.e.f 01.03.2011,accordingly leviable to duty CETA, 1985? - Held that - The processes carried out by the Appellant are also included in explaining the term concentration under HSN. It is laid down that the physical or physico-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. iIdown by the Hon ble Supreme Court in a catena of cases including in the case of Commissioner of Customs & Central Excise, Goa vs. Phill Corporation Ltd. (2008 (2) TMI 3 - Supreme Court of India) that for classification of the manufactured goods, HSN is a safe guide. Therefore, since the processes undertaken by the appellant like washing, magnetic separation, gravity separation to remove unwanted matters on sand 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 Ore concentrate is dutiable. There is a significant difference 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 . Thus the processes carried out on sand Ores result into conversion of ores to concentrate accordingly manufacture under clause (ii) of section 2(f) read with Chapter Note 4 to chapter 26 of CETA,1985 . The eligibility of benefit of exemption notification 63/ 95 CE dt.16.03.95 be examined by the adjudicating authority.

Summary

Issues Involved:
1. Whether the processes undertaken by the appellant result in the manufacture of concentrates from ores.
2. Classification of Silliminite and Garnet under the Central Excise Tariff Act, 1985.
3. Eligibility for exemption under Notification No. 63/95-CE dated 16.03.1995.

Detailed Analysis:

1. Whether the processes undertaken by the appellant result in the manufacture of concentrates from ores:

The appellant is engaged in the separation of various minerals from beach sand and claimed that their processes do not amount to manufacturing concentrates. They relied on previous Tribunal decisions in their favor, arguing that similar processes were not considered manufacturing. However, the Revenue argued that Chapter Note 4 to Chapter 26 of CETA, 1985, which was inserted on 01.03.2011, creates a legal fiction that converting ores into concentrates amounts to manufacture.

The Tribunal analyzed the processes described by the appellant, which include washing, magnetic separation, and gravity separation, and concluded that these processes fall under the definition of "concentration" as per the Harmonized System of Nomenclature (HSN). The Tribunal emphasized that the processes result in the removal of unwanted materials, making the ores fit for metallurgical operations or economical transport, thus qualifying as concentrates. Therefore, the Tribunal held that the processes undertaken by the appellant amount to manufacture under Section 2(f)(ii) of the Central Excise Act, 1944, in view of Chapter Note 4 to Chapter 26 of CETA, 1985, and the resultant concentrates are dutiable.

2. Classification of Silliminite and Garnet under the Central Excise Tariff Act, 1985:

The appellant argued that Silliminite and Garnet are directly covered under Chapter Sub-headings 25085032 and 25132030 of CETA, respectively, attracting nil rate of duty. However, the Tribunal found that while Chapter 25 covers mineral products in their crude state or which have been washed, ores of various minerals are covered under Chapter 26. The Tribunal observed that Chapter 26 does not exclude products of Chapter 2508 and 2513, thus rejecting the appellant's plea that the impugned products are exempt under Chapter 25.

3. Eligibility for exemption under Notification No. 63/95-CE dated 16.03.1995:

The appellant claimed that their goods are exempt from excise duty under Notification No. 63/95-CE, which exempts goods manufactured in a mine. The Tribunal noted that the appellant had produced a certificate dated 28.08.2014 from the Secretary to the Government of India, which was not available during the adjudication. The Tribunal directed the Commissioner to consider the appellant's request afresh regarding their eligibility for the exemption under the said notification. The Tribunal acknowledged that a similar exemption was granted to the appellant's other unit at Chavara, Kolam, and the order was accepted by the department.

Conclusion:

The Tribunal concluded that:
(i) The processes carried out on sand ores result in the conversion of ores into concentrates, amounting to manufacture under Section 2(f)(ii) read with Chapter Note 4 to Chapter 26 of CETA, 1985.
(ii) The eligibility for the benefit of exemption under Notification No. 63/95-CE dated 16.03.1995 should be examined by the adjudicating authority.

The appeal was remanded to the adjudicating authority for the limited purpose of examining the eligibility for the exemption notification and determining the liability thereafter.