2024 (2) TMI 737 - AT - Customs

Refund claim/recovery of differential duty, along with applicable interest - import of Ores being in conformity with description corresponding to tariff item 2601 1119 or not - ineligibility for exemption extended to ores by notification issued under section 25 of Customs Act, 1962 - finalization of two provisional assessments under section 18 of Customs Act, 1962 upheld - HELD THAT - It needs noting that the decision in M/S RUNGTA MINES LTD, M/S RUNGTA SONS PVT LTD, M/S SAIL, M/S KAMAL JEET SING AHLUWALIA, M/S ODISHA MINING CORPORATION LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX, BBSR-II 2016 (4) TMI 602 - CESTAT KOLKATA pertained to determination of liability of duties of central excise on ascertainment of impugned process as amounting to manufacture which has no bearing on a levy concerned with goods crossing the frontiers and, particularly, when attributed to deeming fiction that finds place, through a note, in chapter 26 of Schedule to Central Excise Tariff Act, 1985. The source actual or fictional - of the liability, intended as the objective of Central Excise Act, 1944, is not material to duty that emanates from the authority of section 3(1) of Central Excise Tariff Act, 1975 prescribing levy, equivalent that of duty of excise chargeable, solely for being akin to goods emerging from manufacturing process; the process of emergence, whether in domestic production or activity overseas, is, of itself, irrelevant to the charging of this duty and rate thereof. To the extent that there is no variance in tax rates at the eight , or tariff item , level, the corresponding descriptions make for distinction without difference. Therein lies the nub a tax policy that admits of tax preferences among the enumerations within a sub-heading which is bereft of methodology either inherent or insinuated to isolate and distinguish fails to communicate the intent and offers, thereby, little scope for judicial determination from having to steer clear of intervention in tax policy. It cannot, therefore, be conceived that the tax collection or assessment machinery have been endowed with competence to portray, or arrogate, such intent. In the absence of strict construction of executive empowerment, the potential for discrimination and discard of twin principles, constancy and continuity, of tax administration is rife. The lower authorities had not, in the absence of any other ground for distinguishment, ventured in either or both of those directions. Notwithstanding the conclusion of more sophistication inhering in the impugned goods, the assessable value was left untouched; not was any attempt made to establish that the goods were not lumps - it is inferred that the process by which ores becomes concentrates should make for finer form with high, and well above the base of 65 per cent, content that is designated as the threshold of the highest category of ores incorporated in the Tariff. It is the absence of such evaluation with unwarranted reliance on inapplicable Explanatory Notes that outrightly jeopardizes the findings in the impugned order. No attempt was made to appreciate the process, if any, by which the impugned goods reached the Fe content therein or conformity to any prescription attending upon the segregation, as well as differentiation by rates of duty, of ores and concentrates for levy of duties of central excise. Instead, a theoretical exposition of the nature of activities that the supplier claimed, in the public domain, to be proficient in was presumed, and speculatively so, as extending to the impugned goods without alluding to cause for arriving at such conclusion. The lower authorities have not conformed to the approved manner of arriving at classification of the impugned goods and that the impugned order must be set aside. The classification adopted by the appellant is not incorrect and, thence, eligibility for exemption from additional duty of customs follows. Appeal allowed.

Summary

Issues Involved:
1. Classification of imported goods as 'iron ore' or 'iron ore concentrate'.
2. Eligibility for exemption from additional duty of customs.

Summary:

Issue 1: Classification of Imported Goods
The appellant, a manufacturer of 'sponge iron', 'mild steel (MS) billets', and 'TMT bars', imported 'iron ore lump' from South Africa. The customs authorities reclassified the imported goods from tariff item 2601 1119 ('iron ore') to tariff item 2601 1150 ('iron ore concentrate'), leading to the recovery of differential duty and applicable interest. The authorities based this reclassification on the processes undertaken at the supplier's end, including 'crushing' and 'screening', which they argued rendered the goods as 'concentrates'. The appellant contested this reclassification, arguing that the imported goods were 'ores' and not 'concentrates', as certified by the supplier.

Issue 2: Eligibility for Exemption from Additional Duty of Customs
The appellant claimed exemption from additional duty of customs under notification no. 12/2012-CE dated 17th March 2012, applicable to 'ores'. The customs authorities denied this exemption based on the reclassification of the goods as 'concentrates', which were not covered by the exemption. The appellant argued that the processes described by the supplier did not constitute 'beneficiation' and that the goods should be classified as 'ores', thus eligible for the exemption.

Judgment Details:
The tribunal noted that the customs authorities did not follow the proper procedural rigour for reclassification. The tribunal emphasized that the burden of proof for reclassification lies with the Revenue, as established in the Supreme Court decisions in HPL Chemicals v. Commissioner of Central Excise and Hindustan Ferodo Ltd v. Commissioner of Central Excise. The tribunal found that the authorities failed to provide adequate evidence for reclassification and did not issue a show cause notice setting out a case for the alternative tariff item.

The tribunal also highlighted that the definitions and distinctions between 'ores' and 'concentrates' in various authoritative texts and circulars were not appropriately applied by the lower authorities. The tribunal observed that the Explanatory Notes to the Harmonized System of Nomenclature (HSN) and the circulars from the Central Board of Excise & Customs (CBEC) indicated that 'concentrates' involve special treatments beyond 'crushing' and 'screening', which were not established in this case.

The tribunal concluded that the lower authorities did not conform to the approved manner of arriving at the classification of the imported goods. The classification adopted by the appellant was found to be correct, and consequently, the eligibility for exemption from additional duty of customs followed. The appeals were allowed, and the impugned order was set aside.

Conclusion:
The tribunal set aside the impugned order, allowing the appellant's classification of the imported goods as 'iron ore' and granting eligibility for exemption from additional duty of customs. The appeals were allowed, and the order was pronounced in the open court on 13/02/2024.