2022 (6) TMI 217 - AT - Customs

Exemption from CVD - Classification of imported goods - Iron Ore (fines) or Iron Ore (concentrate) - Whether the process of crushing and screening undertaken on the Iron Ore after it was mined at Carajas Para Brazil and its subsequent blending at Oman with 5-10% iron ore concentrate would result in the goods imported being classifiable under CTI 2601 11 50 as Iron Ore concentrate as against CTI 2601 11 31 for Iron Ore fines? - benefit of the exemption from payment of CVD at Serial. No. 56 of notification available to the imported goods or not - burden on the appellant to establish its entitlement to exemption under the notification dated 17.3.2012 or the said burden had shifted on the Department since the benefit of the exemption had been extended not only at the time of clearance of the imported goods but also at the time of finalisation of the provisional assessment? HELD THAT - In the instant case both the show cause notice as also the impugned order after extracting the pictorial representation from the global website of Vale International have categorically asserted that the mined ore at Carajas Para Brazil underwent two preparatory processes mainly crushing and screening at Carajas Para Brazil before shipment of the same. It is evident from the aforesaid pictorial representation of the stage-wise extraction process of Iron Ores that there are total of 11 stages involved from the extraction of the ore from the Carajas Mine to its shipment from Brazil. These sequential stages are titled in the pictorial representation as Infrastructure Extraction Transport Crushing Conveyor Belt Screening Stockyard Recovery Loading Rotary car dumpers and Shipment. Out of these 11 stages only 2 stages deal with physically preparing the ore for shipment which are crushing and screening. In the process of crushing the ore which has been mined and is in the shape of a boulder/uneven blocks of upto 15 meters is crushed using a primary crusher into smaller size - The pictorial representation records that Vale has 17 production lines at its screening site where the crushed ore is sorted basis the size of the crushed ore. It needs to be noticed that both the show cause notice and the impugned order have in passing contended that processes beyond crushing and screening have been undertaken on the Iron Ore at Carajas Para Brazil. However no evidence has been led to even suggest let alone prove that other processing had taken place at Carajas Para Brazil. The burden to prove that processes beyond crushing and screening had been carried out was on the Revenue but it failed to establish. It is therefore not possible to accept the said contention of the Revenue. Whether Iron Ore Carajas Sohar supplied from Oman which is a blend of Iron Ore Carajas and Iron Ore concentrate in which the proportion of Iron Ore Carajas is 90-95% and that of Iron Ore concentrate is 5-10% is a concentrate or not? - HELD THAT - The process of blending/mixing undertaken at Oman is a physical process where iron ore fines from the Carajas mines are mixed with iron ore concentrates from the Southeastern System in the ratio of 90-95% of iron ore fines from Carajas and 5-10% of Iron Ore concentrate. In this process there is no removal of part or whole of the foreign matter and therefore the same cannot be said to be a special treatment resulting in the ore becoming a concentrate. This apart the blend of iron ore fines (90-95%) with iron ore concentrate (5-10%) would by applying Note 3(b) to the General Rules of Interpretation to the Import Tariff be classified as iron ore fines as the essential character to the mixture is derived from the iron ore fines. The impugned order however holds that Vale International was using water for removal of impurities. This finding has been arrived at by an incorrect extrapolation of the pictorial representation in the impugned order. It needs to be noted that the show cause notice had not made any reference to the aforesaid pictorial extract from the website. It is on the bases of the incorrect pictorial representation that the impugned order holds that at Cajaras Vale was using several equipment such as filters pumps thickeners magnetic separators floatation column for removal of impurities. It is evident from the website of Vale that conventionally where the ore is of a low grade the use of water and equipment such as filters pumps thickeners magnetic separators floatation column in addition to crushers and screens is envisaged. There can be no basis to impute any certainty that alumina to silica ratio would always be greater than 1 in case of natural ores. The appellant had in the reply demonstrated that naturally occurring high grade iron ores even in India at the Bacheli and Bailadila of NMDC have the alumina to silica ratio less than 1. The impugned order as also the evidence relied in support of the same have not disputed this position. The report of Dr. Rathod could not therefore have been relied upon to hold that what had been imported by the appellant was Iron ore that had been concentrated. The contents of the letter dated 28.04.2016 of Shri D.K. Swamy Administrative Officer in the Indian Bureau of Mines are contrary to the opinion of the Ministry of Mines as communicated of the Circular dated 17.02.2012. The process of crushing and screening undertaken on the Iron Ore after they have been mined at Carajas Brazil and subsequent blending at Oman with 5-10% iron ore concentrate would result in classification of the goods imported under CTI 2601 11 31 as Iron Ore fines and would consequently be entitled to the benefit of exemption from payment of CVD under the notification dated 17.03.2012. Appeal allowed.

Summary

Issues Involved:
1. Classification of imported iron ore fines.
2. Entitlement to exemption from Countervailing Duty (CVD).
3. Burden of proof regarding exemption eligibility.
4. Validity of the show cause notice and final order by the Principal Commissioner.

Detailed Analysis:

1. Classification of Imported Iron Ore Fines:
The core issue was whether the imported iron ore fines should be classified under Customs Tariff Item (CTI) 2601 11 50 as Iron Ore concentrate or under CTI 2601 11 31 as Iron Ore fines. The appellant argued that the iron ore fines were merely subjected to crushing and screening, which, as per the CBIC Circular dated 17.02.2012, do not constitute special treatments that convert ore into concentrate. The Tribunal referred to the Explanatory Notes to the Harmonized System of Nomenclature (HSN) and the CBIC Circular, which clarified that crushing and screening are preparatory processes and do not remove foreign matter to convert ore into concentrate. Consequently, the Tribunal concluded that the iron ore fines imported by the appellant, which underwent only crushing and screening, should be classified under CTI 2601 11 31.

2. Entitlement to Exemption from Countervailing Duty (CVD):
The appellant claimed exemption from CVD under Serial No. 56 of the notification dated 17.03.2012, which grants exemption to "ores." The Tribunal examined whether the imported goods were "ores" or "concentrates." Since the iron ore fines were not subjected to special treatments that remove foreign matter, they were classified as "ores" and thus eligible for the exemption from CVD. The Tribunal emphasized that the blending of iron ore fines with a small percentage of iron ore concentrate did not change the classification, as the essential character of the mixture was derived from the iron ore fines.

3. Burden of Proof Regarding Exemption Eligibility:
The Tribunal discussed whether the burden of proof to establish entitlement to the exemption was on the appellant or the Department. It was noted that the benefit of the exemption had been extended both at the time of clearance and finalization of the provisional assessment. The Tribunal held that the burden to prove that processes beyond crushing and screening were carried out was on the Revenue, which it failed to establish. The Tribunal found no evidence to suggest that additional processing had taken place at Carajas, Para, Brazil, beyond crushing and screening.

4. Validity of the Show Cause Notice and Final Order by the Principal Commissioner:
The show cause notice alleged that the imported goods were iron ore concentrate based on the processes undertaken at Carajas, Brazil, and subsequent blending at Oman. The Tribunal found that the notice and the final order relied on incorrect extrapolation of pictorial representations from the Vale website, which did not substantiate the claim that special treatments were undertaken. The Tribunal highlighted that the Vale website indicated dry processing without the use of water for removing impurities. The Tribunal also noted that the opinions of experts relied upon by the Department were inconsistent with the CBIC Circular and the Ministry of Mines' clarification. Consequently, the Tribunal set aside the impugned order dated 30.11.2016 by the Principal Commissioner.

Conclusion:
The Tribunal concluded that the imported iron ore fines should be classified under CTI 2601 11 31 and are entitled to the exemption from CVD under the notification dated 17.03.2012. The appeal was allowed, and the impugned order was set aside.