9911796707
TMI Blog2024 (2) TMI 737X X X X Extracts X X X X X X X X Extracts X X X X ..... n 18(3) of Customs Act, 1962, owing to ineligibility for exemption extended to 'ores' by notification issued under section 25 of Customs Act, 1962. The appellant, a manufacturer of 'sponge iron', 'mild steel (MS) billets' and 'TMT bars', imported 'iron ore lump' from Khumani mine in South Africa claiming assessment accordingly with eligibility for exemption from additional duty of customs permitted by notification no. 12/2012-CE dated 17th March 2012 which customs authorities held to be otherwise for having undergone process for removal of 'foreign matter' rendering those to be 'concentrate' which, admittedly, was not covered by the exemption. 2. The 'ore' had been imported in two consignments of 60,000 metric tons against bill of entry no. 013/JGD/Into-Bond/16-17/01.08.2016 for warehousing and of 30,903 metric tons against bill of entry no.166/JGD/16-17/01.08.2016 for home consumption with provisional assessment sought in both as the contract provided for consideration to be determined on ascertained 'ferrous content' in imported material at destination. The warehoused goods were cleared against nine bills of entry between 18th August 2016 and 27th September 2016 with duty of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 12 of Customs Act, 1962, commonly referred to as classification. 'Query memo' is a tool devised to assist 'proper officer' in assessment of imported goods wherein statutory provisions contemplating seeking of clarifications or for expressing doubts about the correctness or completeness of information furnished for assessment is resorted to. Even where rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 empowers rejection of declared value, either from non-response or from unsatisfactory response to query envisaged therein, revision for assessment must necessarily be preceded by notice of intention to resort to specific alternative, in accordance with the Rules, before onus is shifted to importer for discard of such proposal. It cannot but escape our attention that it is not denial of exemption on claimed classification which is in dispute here but non-entitlement to exemption consequent upon change in classification. In the light of provisions of Customs Tariff Act, 1975, re-classification is an exercise of much more procedural rigour. 5. It has been held by the Hon'ble Supreme Court in HPL Chemicals v. Commissioner of Central Excise, Chandigarh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and sub-headings in chapter 26 of Harmonized System of Nomenclature (HSN) Code, as well as in Kirk-Othmer's Encyclopaedia of Chemical Technology, and of 'beneficiation' in McGraw Hill Dictionary of Scientific and Technical Terms (6th edition) were drawn upon to conclude that '14.5 ....... This, I find that, if any one or more processes, which would result in removing a part or all of the foreign matter, so as to make it fit for metallurgical operation or economical for transport, would result into "concentrate". In short, the term "concentrate" is applicable to ores which are made free of impurities through the application of certain processes by which part or all of the foreign matter are removed for the reason that such foreign matter might hamper subsequent metallurgical operations or such foreign matter would not help in economical transport.' and, further, after examining note 4 in chapter 26 of Schedule to the Central Excise Tariff Act, 1985, along with circular no. 332/1/2012-TRU dated 17th February 2012 of Central Board of Excise & Customs (CBEC), to render the outcome that '15.2. .... it should be considered as manufacture .... such processed ore when imported are t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning assigned in the First Schedule to Customs Tariff Act, 1975 that replicated Explanatory Notes and in the Explanatory Notes respectively, for ferrous extractions, that the contents of web-site of supplier is, in the context of particulars in contract, more reliable authority on processes that mined material has been subjected than a certificate produced on prompting of assessing officer and, owing to which, the disadvantage of excise duty leviable upon occurrence of similar activity in India would have to be neutralized through additional duty of customs at like rate for having been manufactured in South Africa. 10. Yet another caveat would not be out of place here. The headings in the Harmonized System of Nomenclature (HSN) Code are scientifically clustered, and progressively ordered, groups of goods for transnational applicability through adoption by participating States and the Explanatory Notes are intended, first and foremost, to afford framework for national governments in evolving tax strategy on imports and the placement of particular goods therein. The elaborations in the Explanatory Notes do aid, in the context of this dispute, in segregation of 'ores and concentrates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proper arrogation of the exclusive preserve of the Central Government by an instrument of that government. It is here that the compartmentalization of judicial interpretation in the two contexts, precluding cross-over and an aspect that should have made its brooding presence felt in assessment to duty, has not received due acknowledgment in the impugned order. 12. According to Learned Counsel for appellant, the finalization relied on description of activities in the web-site of supplier to hold that processing at the site of mining - washing, screening, crushing, jigging - for removal of foreign matter, to make fit for metallurgical operations and economic transportation, sufficed for categorizing as 'concentrates' which the first appellate authority upheld to thus limit the scope of the dispute to determination of conformity with 'concentrates', as tariff item, in chapter 26 of First Schedule to Customs Tariff Act, 1975. Challenging the conclusion that 'beneficiation' had occurred on the 'ore' before import, it was contended that there is no material on record to establish that these had undergone anything beyond 'crushing' and 'screening' before shipment to India. In support of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncentrates' and that even the certificate, for not having been produced at the time of import, did not suffice to support claim of the appellant in the face of web-site of the supplier having elaborately set out the activities undertaken by them to leave no room for doubt that the goods were indeed 'concentrates' not conforming to claim in bills of entry. It was pointed out that 'washing' and 'jigging', in addition to 'crushing' and 'screening', were intended for removal of foreign matter from the mined material. He drew upon the information on the web-site to submit that any process after extraction could only be for production of 'concentrates' with the ISO 9001:2015 certification corroborating that conclusion. Reliance was placed on the decisions of the Tribunal in Rungta Mines Ltd v. Commissioner of Central Excise, Customs and Service Tax, Bhubaneswar-II [2016-TIOL-717-CESTAT-KOL] and of the Hon'ble Supreme Court in Star Industries v. Commissioner of Customs (Imp), Raigad [2015-TIOL-234-SC-CUS]. 15. It is common ground that the rival claims on eligibility for exemption from additional duties of customs has been distilled from dispute over classification of imported goods. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing leviable on a like article if produced or manufactured in India ....' in section 3 of Customs Tariff Act, 1975, that applies to imported goods akin to manufactured goods, is tested on similarity of description and not on the process by which these emerge. 17. In re Star Industries Ltd, the issue before the Hon'ble Supreme Court was not about classification of the imported 'molybdenum' which, admittedly, was 'roasted' but about eligibility for exemption notifications intended for 'ores' that the importer pleaded to be inclusive of 'concentrates' also owing to heading 2613 of First Schedule to Customs Tariff Act, 1975 being applicable to 'Molybdenum ores and concentrates' and, therefore, were interchangeable. Furthermore, the description was also evocative of a process that was akin to manufacture prompting the Hon'ble Supreme Court to hold that '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 will be useful at this juncture to examine the object of levy of additional Customs duty (CVD). This issue was examined at great length by this Court in the case of H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notification No. 4/2006-CE will not be applicable to 'concentrates' imported from abroad." to, effectively, approve the finding of the Tribunal on the intent of duties leviable under section 3(1) of Customs Tariff Act, 1975 after noting that '28. According to us, it is very 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 of ores and converting the same into concentrates would not be manufacture. For the same reason, the judgment in MMTC becomes inapplicable and reliance upon Kirk-Othmer's Encyclopedia becomes irrelevant. With the addition of Note 4, a legal friction is created treating the process of converting ores into concentrates as manufacture. Once this is treated as manufacture, all the consequences thereof, as intend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arises from policy driven segregation of similar heading at the 'eight digit', and 'tariff item', level transcending the utility of those very Explanatory Notes common to the two, as well as other, minerals once the national policy has deemed 'ores' and 'concentrates' of 'iron' to be distinct for amenability to separate rates of duty. The resolution against the appellant in the claim, of the appellant in re Star Industries Ltd, of both being 'ores' is too patently contextual to have any bearing on the dispute before us. 18. Learned Counsel has placed before us the decision of the Tribunal, in re Amba River Coke Ltd, with particular reference to the interpretation of 'beneficiation', or enriching process by which the metal content is enhanced, in the show cause notice, as demonstrating inconsistent stand by customs authorities. Doubtlessly, it does, but such positing before different appellate authorities is vastly at variance, as far as consequence is concerned, from proposals of different jurisdictions for triggering adjudicatory process. Such is the issue of notice leading to the impugned order which, even if different from the one in re Amba River Coke Ltd, does not acquire an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly in relation to descriptions upto the 'sub-heading', or 'six digit', level. 21. 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. It is not the case of customs authorities that they find support for the classification adopted for finalization of provisional assessment in a declaratory provision of the First Schedule to Customs Tariff Act, 1975 or the General Rules for the Interpretati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pter 28 of the Schedule thus 'Concentrates of ores obtained by treatments, other than calcining or roasting, which alter the chemical composition of crystallographic structure of the basic ore are excluded. .... Also excluded are more or less pure products obtained by repeated physical changes (fractional crystallisation, sublimation, etc.), even if there has been no change in the chemical composition of the basic ore.' making it apparent that chapter 26 of the Schedule is intended to be restricted in coverage to inputs for further processing after mining. The logic of the lower authorities would stultify 'ores' in the heading entirely; the absence of objective criteria for differentiating 'ores' and 'concentrates' cannot weigh against imports merely for resorting to revenue advantage. We are also struck by the applicability of the Explanatory Notes not just to 'iron' but across the spectrum of metals extracted from 'ore' mined from the earth. Hence, the Harmonized System of Nomenclature (HSN) relevant to the impugned goods and the corresponding Explanatory Notes do not assist in classification of 'iron ore and concentrates' as occur below heading 2601 in First Schedule of Custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efinition, it is clear that removal of part or all of foreign material is envisaged for conversion of ores into concentrates. Ministry of Mines have "clarified that no special treatment is involved in the crushing and screening of ore and the end product can be termed as a concentrate only when the grade of ore is sufficiently improved through beneficiation. Federation of Indian Mineral Industries have also pointed out that several processes (in addition to crushing and screening) such as milling, hydraulic separation, magnetic separation, floatation & Concentrate thickening have to be undertaken for ores to be converted into concentrate.' therein. Furthermore, in circular of 23rd March 2012, the impact of 'deemed manufacture' in conversion of 'ores' to 'concentrates', by incorporating note 4 in chapter 26 of Schedule to Central Excise Tariff Act, 1985, as well as the available elaboration in the Explanatory Notes was examined to conclude that '3. In view of Chapter Note 4 to Chapter 26 of CETA, 1985 inserted vide Finance Act 2011, Ores and Concentrates are two distinct products. Thus, Concentrates suffer Central Excise duty being a manufactured product. The implication for impo ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
