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2015 (10) TMI 1288 - SUPREME COURT

2015 (10) TMI 1288 - SUPREME COURT - 2015 (324) E.L.T. 656 (SC) - 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 .....

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or 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 m .....

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manufacture of Ferro-Alloys is Roasted Molybdenum Ore/Concentrate. The assessee has been regularly importing the aforesaid material i.e. Roasted Molybdenum Ore/Concentrate (hereinafter referred to as the 'Ore Concentrate'). 2. It is not in dispute that the import of Ore Concentrate is, otherwise, subject to additional duty of custom i.e. countervailing duty (CVD) in addition to normal custom duty. However, vide Notification No. 4/2006-CE dated March 01, 2011, which is a general exemptio .....

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9; imported by the assessee is eligible for complete exemption from payment of additional duty of custom/CVD under Notification No.4/2006-CE dated March 01, 2006. The answer to the aforesaid question would depend upon the answer to another incidental question, namely, whether the 'Ore Concentrate' imported by the assessee can be treated as 'Ores' mentioned in Notification No.4/2006. To put it otherwise, whether Molybdenum Ore after it undergoes the process of being roasted and co .....

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o the Department, the Directorate of Revenue Intelligence (DRI) received some information indicating that the assessee was misdeclaring the product as 'Molybdenum Ore' or 'Roasted Molybdenum Ore' and on that basis, seeking benefit of exemption under Notification No.4/2006-CE. According to them, Roasted Molybdenum Ore was, in fact, Ore Concentrate which was different from 'Ores' and, therefore, benefit of said Notification No.4/2006-CE was not available to the assessee. Ba .....

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9;Molybdenum Sulfide (MoS2) Roasted. Samples of the products under importation were drawn and sent for chemical examination to Chemical Examiner, CRCL, Vadodara. On that basis, the goods/consignment was seized on September 26, 2011 under the provisions of Section 110 of the Customs Act, 1962 on the reasonable plea that they are liable to confiscation under Section 111 of the said Act. 5. Statement of Shri Babu Khandelwal, Partner of the assessee-firm was recorded under Section 108 of the Customs .....

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ybdenum Ore as per the description given in the invoices. He also agreed with the test reports given by the Chemical Examiner. As regards CVD exemption under Notification 4/2006-CE, Shri Khandelwal stated that since ores include concentrates, he had claimed the exemption. He also agreed to pay the CVD involved in respect of the imports made under the aforesaid Bills of Entry. The seized goods valued at ₹ 6,12,60,943/- were released provisionally to the assessee on execution of a bond for t .....

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e dated March 09, 2012 to the assessee proposing to confiscate 59,000 kgs. of Roasted Molybdenum Ore Concentrate seized on September 26, 2011 valued at ₹ 6,12,61,048/- and 275000 kgs. of the said goods valued at ₹ 28,57,49,418/- imported earlier under 14 Bills of Entry, under the provisions of Sections 111(d) and 111(m) of the Customs Act, 1962. The notice also proposed to demand differential duty amounting to ₹ 66,61,664/- on the seized goods and ₹ 3,10,73,035/- on the g .....

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h an option to redeem the same on payment of fine of ₹ 1 crore under Section 125 of the said Act and those imported earlier was liable for confiscation under the same provisions in respect of which differential duty demand of ₹ 66,61,664/- and ₹ 3,10,73,035/- were confirmed by denying the benefit of CVD exemption along with interest under Section 28AA of the Customs Act. A penalty of equivalent amount was also imposed on the assessee under Section 114A of the said Act. 8. Afore .....

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tting aside the imposition of redemption fine under Section 125 and penalty under Section 112(a)/114A of the Customs Act. The outcome of the appeal is summed up in para 8, which reads as under: 8. To sum up, we uphold the duty demand and interest thereon under the provisions of Sections 28 of the Customs Act along with interest thereon under Section 28AA. However, we set aside the confiscation of the goods under Section 111 of the said Act and imposition of redemption fine under Section 125 and .....

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revalent at the material time and it exempted 'Ore' vide Sl. No.10 of the said notification from payment of excise duty. There also the adjudicating authority had taken the view that after the Molybdenum Ore was subjected to the process of Concentratic and Roasting it had become a different product, namely, Molybdenum Oxide and did not remain 'Ore' and, therefore, was not entitled to the benefit of exemption notification which applied only to the commodity 'Ore'. In an ap .....

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y to understand the reason which prevailed with the CESTAT to record the finding that Concentrate is to be understood as nothing but enriched and prepared ore meaning thereby it remains the same product, namely, 'Ores' even after the aforesaid processing of Roasting. Before discussing this order and to understand the implication thereof in an appropriate manner, it is necessary to point out the tariff entries and all relevant provisions of the exemption notification. 10. Chapter 26 of th .....

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on of mercury, of the metals of heading 2844 or of the metals of Section XIV or XV, even if they are intended for non-metallurgical purposes. Headings 2601 to 2617 do not, however, include minerals which have been submitted to processes not normal to the metallurgical industry. 11. There was an amendment in the said Chapter in the year 2011, whereby, inter alia, Chapter Note 4 was added, which reads as under: 4. In relation to products of this Chapter, the process of converting ores into concent .....

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ued in exercise of powers conferred upon the Central Government by sub-section (1) of Section 5A of the Central Excise Act in the public interest, thereby exempting excisable goods of the description specified in column (3) of the table below read with the relevant List appended hereto. Item 3 thereof reads as under: S. No. Chapter or heading or sub-heading or tariff item of the First Schedule Description of excisable goods Rate Condition No. 4. 2601 to 2617 Ores Nil - We would like to point out .....

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when this decision was rendered in December, 2006. 15. It is settled position that for the purpose of determining the levy of CVD under Section 3 of the Customs Tariff Act, it is to be deemed that the product that was imported was manufactured in India and thereafter rate of central excise duty leviable thereupon is to be determined. That duty becomes the CVD i.e. the additional duty on the import of the item. This position stands settled by the Constitution Bench judgment of this Court in Hyder .....

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The Tribunal in Hindustan Gas case held that roasting of an ore, to obtain concentrate, does not amount to manufacture, especially because of the reason that roasting is a process by which impurities in the ore are removed and the recoverable content of metal oxide is enhanced. The Tribunal also held that the product in question attracted 'Nil' duty as it was covered by exemption notification because of the reason that Ore and Concentrate are one and the same and hence entitled to the ex .....

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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. 17. Having regard to the aforesaid definitions, the Tribunal opined that the term Concentrate has to be understood as nothing but enriched and prepared ore. The Tribunal, thereafter, relied up .....

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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 fr .....

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not amount to manufacture, as it only removed the impurities and the recoverable content of metal oxide is enhanced thereby. Thus, ore and concentrate are one and the same as concentrate remains ore and only impurities were removed therefrom. Again, referring to the judgment of this Court in MMTC (supra), the Tribunal made the following observations: ...Therefore, 'Ore' is genus and 'Concentrate' is species. Therefore, under Central Excise exempting ore concentrates of ores woul .....

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lding 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 species. Therefore, separate mention of 'ore' and 'concentrate' in Heading 26.03 ipsofacto will not imply they are different. Therefore, term 'or .....

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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 inasmuch as the imported concentrate had not been subjected to process not normal to the metallurgical industry. The department, in fact, has stated in the ground of appeal that by virtue of Note 2 to Chapter 26, the goods have been classified under Headin .....

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by the genus ore and concentrate was only a specie of this genus. This process did not amount to any manufacture and, therefore, no new item, commercially known, come into existence. 21. Mr. Adhyaru, learned senior counsel appearing for the Revenue submitted that the aforesaid decision was rendered in the context of unamended Chapter 26 and this was before the addition of Chapter Note 4. He pointed out that judgment in MMTC was also of the same vintage. According to him, addition of Note 4 to Ch .....

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erting ores into concentrate as 'manufacture'. He, thus, was emphatic in his submission that now conversion of ore into concentrate was treated as manufacture and, therefore, the concentrate could not be treated as same product as ore and it had transformed into an altogether different product. On that basis, he proceeded to build up his case by submitting that Tariff Item 2601 which describes the goods as 'iron ores and concentrates, including roasted iron pyrite' clearly treate .....

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argued that when the Tariff Entry 2613 mentioned ores and concentrates but the exemption notification exempted only 'ores' with conspicuous absence of concentrate, such an exemption notification was to be given strict interpretation and even if two views were possible, the view which favours the Revenue had to be preferred while interpreting exemption notification. 22. On this basis, grounding his plea on Chapter note 4, he made a passionate plea that the impugned decision in appeal took .....

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en provided. For example, in the case of Iron ore, separate sub-headings have been provided for iron ore lumps, iron ore fines and iron ore concentrates. From the above structure, it is clear that the use of the expression 'ores and concentrates' and provision of separate sub-headings of ores and concentrates wherever necessary, implies that the legislature consciously made a distinction between 'ores' on the one hand and 'concentrates' on the other. The preposition and b .....

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read as vice versa to give effect to the manifest intention of the Legislature as disclosed from the context. (Ishwar Singh Bindra v. State of U.P., AIR 1968 SC 360, p. 363 : (1980) 1 SCC 158; R.S. Nayak v. A.R. Antulay (1984) 2 SCC 183, pp. 224, 225 : AIR 1984 SC 684; M. Satyanarayana v. State of Karnataka (1986) 2 SCC 512, p. 515 : AIR 1986 SC 1162). As stated by SCRUTTON L.J.: You do sometimes read 'or' as 'and' in a statute. But you do not do it unless you are obliged becaus .....

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rted to, unless some other part of the same statute or the clear intention of it requires that to be done. (Mersey Docks and Harbour Board v. Henderson Bros. (1888) 13 AC 595 (HL) p. 603. See further, Puran Singh v. State of M.P., AIR 1965 SC 1583 p. 1584, (para 5); Municipal Corporation of Delhi v. Tek Chand Bhatia, supra. But if the literal reading of the words is less favourable to the subject provided that the intention of the legislature is otherwise quite clear. [A.G. v. Beauchamp (1920) 1 .....

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ble conclusion that can be reached is that the legislature intended to treat 'ores' and 'concentrates' distinctly and differently. Otherwise, there was no need for the legislature to employ these two terms with a conjunctive 'and' in between. If one treats ores and concentrates synonymously, as argued by the learned counsel for the appellant, that would render the term concentrate redundant which is not permissible. 23. He also impressed upon this Court to keep in mind th .....

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ecie and, therefore, even if it is now to be treated as 'manufacture', still for the purpose of applying exemption notification concentrate would still be covered by umbrella term, 'ore' of which it was a specie. He reiterated that roasting of ore was only to remove impurities so that it could be used in the manufacture of Ferro-Alloys. He also argued that even 'roasted ore' was in Chapter Heading 26 and the process, as defined in the technical dictionaries, makes it only .....

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red the impugned decision as erroneous. He also argued that the basic principle enshrined in MMTC judgment, namely, ore is genus and concentrate is specie, still remains valid even after the addition of Chapter Note 4. 25. We have thoughtfully considered the respective arguments of counsel for both the parties. 26. Before we discuss these arguments and arrive at a particular conclusion, we would like to recapitulate the salient features of the case about which there is no dispute: (a) The assess .....

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lybdenum Ores and Concentrate'. (c) The goods imported by the assessee were not Molybdenum Ores in original form as mined. They had admittedly undergone the process of roasting and after the roasting, they are known as 'concentrates'. Even the assessee has described these goods as 'Roasted Molybdenum Ore Concentrate.' (d) Chapter Note 4 treats the aforesaid process of roasting Ores into Concentrate as 'manufacture'. 27. On the aforesaid facts, case of the assessee was .....

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he decision in M/s. Hindustan Gas and Industries Ltd. case. The entire decision proceeds on the basis that roasting of an ore to obtain concentrate does not amount to manufacture specially when roasting is a process by which impurities in the ore are removed and the recoverable content of metal oxide is enhanced. In support, reference was made to Kirk-Othmer's Encyclopedia of Chemical Technology. Likewise, in MMTC case as well, which was relied upon by the Tribunal, this Court had held that .....

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clear from the reading of the judgment in Hindustan Gas case that basic and the common thread which runs throughout the decision is that subjecting ore to the process of roasting does not amount to manufacture. This very basis gets knocked off with the amendment carried out in the year 2011 with the insertion of Note 4. Note 4 now categorically mentions that the process of converting ores into concentrates would amount to 'manufacture'. Therefore, it cannot now be argued that roasting o .....

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the inevitable implications: (a) It is to be treated that Molybdenum Ore is different from concentrate. That is inherent in treating the process as 'manufacture' inasmuch as manufacture results in a different commodity from the earlier one. Section 2(f) defines this term as under: manufacture includes any process,- (i) incidental or ancillary to the completion of a manufactured product; (ii) which is specified in relation to any goods in the Section or Chapter notes of the First Schedule .....

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es is to make concentrates as liable for excise duty. Otherwise, there was no reason to deem the process of converting ores into concentrates as manufacture. 29. Once the aforesaid legal repercussions are taken note of, as a fortiori, it becomes obvious that Notification No. 4/2006-CE which exempts only ores would not include within itself 'concentrates' also because of the reason that after the insertion of Note 4, concentrate is to be treated as a different product than ores, in law fo .....

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the term 'ores'. However, after the insertion of Chapter Note 4, these two Notes, namely, Note 2 and Note 4 have to be read harmoniously. If we accept the submission of the learned counsel for the assessee predicated on Note 2, then Note 4 even after its conscious inclusion, would be rendered otiose which cannot be countenanced. Therefore, Note 2, when seen along with Note 4, has to govern itself in limited territory. On the basis of deeming fiction created by Note 4, once we arrive at .....

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the opinion that in the impugned judgment, the 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. Once we keep in mind that conversion of ores into concentrate is considered as manufacture and, therefore, becomes liable for central excise levy, exemption Notification No. 4/2006-CE is to be interpreted in this light .....

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of exemption notification is now deeply ingrained in various judgments of this Court taking this view consistently. 32. In M/s. Navopan India Ltd., Hyderabad v. Collector of Central Excise and another 1994 (73) ELT 769 (SC), this principle of interpretation of an exemption notification was summarised in the following words: We are, however, of the opinion that, on principle, the decision of the Court in Mangalore Chemicals -and in Union of India v. Wood Papers, referred to therein -represents th .....

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t go to the State. This is for the reason explained in Mangalore Chemicals and other decisions, viz., each such exception/exemption increases the tax burden on other members of the community correspondingly. Once, of course, the provision is found applicable to him, full effect must be given to it. As observed by a Constitution Bench of this Court in Hansraj Gordhandas v. H.H. Dave, (1969) 2 SCR 253 that such a Notification has to be interpreted in the light of the words employed by it and not o .....

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C) wherein this principle is reiterated in the following manner: 4. ...We have heard learned Counsel for the parties. We find that the first argument made by Shri Lakshmikumaran can be disposed of immediately. The subject matter before us is an exemption notification issued under Section 25 of the Customs Act, 1962. The interpretative notes that have been referred to by Shri Lakshmikumaran are in the Customs Tariff Act. Note 2(a) referred to by Shri Lakshmikumaran reads as follows: 2.(a) Any ref .....

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an exemption notification which is issued under Section 25 of the Customs Act. Therefore, the fact that an unassembled plant which is incomplete but which has the essential character of a complete plant is not the test to be applied in the present case. On the other hand, the applicable test would be what has been laid down in a catena of decisions. Two such decisions will suffice. In Commissioner of Customs (Imports), Mumbai v. Tullow India Operations Ltd. (2005) 13 SCC 789 = 2005 (189) E.L.T. .....

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a condition thereof may be given a liberal meaning. Similarly in G.P. Ceramics Private Limited v. Commissioner, Trade Tax, Uttar Pradesh, (2009) 2 SCC 90, this Court held: 29. It is not a well-established principle of law that whereas eligibility criteria laid down in an exemption notification are required to be construed strictly, once it is found that the applicant satisfies the same, the exemption notification should be construed liberally. [See CTT v. DSM Group of Industries, (2005) 1 SCC 6 .....

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t such plant in its entirety must be imported albeit in an unassembled form. Judged by this test, it is clear that the concurrent findings of fact of the Commissioner and the CESTAT requires no interference by the Court inasmuch as both authorities have held that a complete plant in an unassembled form has not in fact been imported... 34. The Tribunal in the impugned judgment has also examined the issue keeping in view the objective behind the levy of CVD. Such a discussion proceeds as under: It .....

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liable to customs duty equal to the excise duty for the time being leviable on a like article if produced or manufactured in India. In the notes to clauses to the Customs Tariff Bill 1975 with regard to clause 3 it was stated that Clause 3 provides for the levy of additional duty on an imported article to counter-balance the excise duty leviable on the like article made indigenously, or on the indigenous raw materials, components or ingredients which go into the making of the like indigenous ar .....

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