Classification of 'anode slime' and its unconditional exemption under serial no. 195 of Notification No. 12/2012-CE dated17.03.2012. - Central Excise - F.NO.871/4/2012-CX.1

LETTER [F.NO.871/4/2012-CX.1], DATED 14-7-2015 Background of the matter: 1. A representation dated 25-7-2012 was received in the Board from the Chief Commissioner of Central Excise, Coimbatore Zone regarding classification of 'anode slime' and its unconditional exemption under serial no. 195 of Notification No. 12/2012-CE dated17.03.2012. A representation dated 26.07.2012 on the same subject was also received in the Board from M/s Sterlite Industries India Limited. It was submitted that M/s Sterlite Industries India Limited had copper processing plants at Silvassa (Dadra Nagar Haveli) and at Tuticorin (Tamil Nadu). During the refining of 'Copper Anodes' to highly pure 'Copper Cathodes' by the electrolytic process, Anode Slime emerges as a residual by-product. The Anode Slime arising at Silvassa refinery was being cleared on payment of central excise duty to the Tuticorin unit. Thereafter, from Anode Slime, selenium was extracted at Tuticorin unit and the desalinized Anode Slime was exported against cash rebate claim of central excise duty. The Chief Commissioner of Central Excise, Coimbatore Zone having jurisdiction over Tuticorin unit had taken a view that Anode Slime was exempted under serial no. 195 of Notification No. 12/2012-CE dated 17.03.2012 and on export of such exempted Anode Slime, rebate was not admissible under Rule 18 of Central Excise Rules, 2002. However, Central Excise at Silvassa unit had taken a view that Anode Slime is not covered under the said exemption. Hence, due to the divergent views of the jurisdictional Central Excise authorities at the two plants on the exemption to 'anode slime' under serial no. 195 of Notification No. 12/2012-CE dated 17.03.2012 , Board was requested to intervene and issue a clarification. The process of manufacture: 2. The process of refining of copper consists of two stages. In stage-I, the copper ore concentrate is first converted to blister (98% purity) by smelting and then converted to Copper Anode (99% purity) by reducing the blistered copper in an anode furnace. In stage-II, Copper Anode is refined by electrolysis. Copper Anodes from stage-I are put through electrolytic refining into an aqueous solution of copper sulphate and sulphuric acid. Cathodes are thin rolled sheets of highly pure copper. At the anode, copper dissolves and copper ions migrate to cathode. Thus highly pure Copper Cathodes are obtained. At anode, precious metals such as gold silver, non-metals such as selenium and rare elements like tellurium, do not dissolve and settle to the bottom of the electrolytic cell as Anode Slime. Hence, during the refining of 'Copper Anodes' to highly pure 'Copper Cathodes' by the electrolytic process, raw Anode Slime containing Copper, Selenium, Tellurium, Gold, Silver etc. emerges as a residual and saleable by-product. 3. M/s Sterlite Industries (I) Limited have two copper processing units with a smelter and refinery at Tuticorin (Tamil Nadu) and refinery at Silvassa (Dadra Nagar Haveli). 4. The raw anode slime arising from the refinery is leached and used for recovery of copper left in the slime and for recovery of Tellurium in the form of Copper Telluride. The Anode Slime after recovery of copper and Tellurium may be called Anode Slime (Stage-I). 5. The Anode Slime (Stage-I) left from these two processes is then sent to Tuticorin unit for extraction of Selenium. The Anode Slime (Stage-I) is cleared from Silvassa unit on payment of central excise duty to the Tuticorin unit. The duty paid Anode Slime (Stage-I) is received at Tuticorin unit and CENVAT Credit of duty paid at Silvassa unit is taken at Tuticorin unit. 6. The extraction of Selenium from the Anode Slime (Stage-I) is done at their Tuticorin unit only as Silvassa plant does not have such facilities. After extraction of Selenium at Tuticorinunit, there is still potential for recovery of precious metals such as gold and silver from the slime. After extraction of Selenium, the resultant desalinized Anode Slime called Anode Slime (Stage-II) is cleared from the Tuticorin unit on payment of central excise duty using CENVAT Credit and exported for extraction of precious metals. At the time of export, cash rebate (refund) of central excise duty paid is claimed. Disposal of representation dated 25.07.2012: 7. The representation was examined in the Board. However, it was observed that: (a) The Commissioner of Central Excise, Tirunelveli having jurisdiction over Tuticorin unit had passed Order-in-Original No. 02/CE/COMMR/2013 dated 13.03.2013 for the period August 2011 to January 2012 deciding that 'anode slime' was unconditionally exempted and confirmed the demand of erroneous paid rebate of ₹ 166,83,21,408 against the party. The Appeal of the party against the said adjudication order was pending in the CESTAT, Chennai. The Board decided not to interfere with the discretion of the Tribunal. (b) Under Section 37B of the Central Excise Act, 1944 , Board can issue orders, instructions and directions to the Central Excise Officers for the purpose of uniformity in the classification of excisable goods or with respect to levy of duties of excise on such goods. However, Board cannot exercise power under the said Section so as to require any Central Excise Officer to make a particular assessment or to dispose of a particular case in a particular manner. It was observed that only one assessee had represented for the said clarification and hence Section 37B of the Central Excise Act, 1944 was not applicable. 8. Accordingly, it was decided in October, 2013 not to issue any clarification in the subject matter. The same was conveyed to the Chief Commissioner of Central Excise, Coimbatore Zone vide letter dated 17-2-2014. Writ Petition No. 5643 of 2015: 9. M/s Sesa Sterlite Limited has filed a WP No. 5643 of 2015 in the Madurai Bench of Hon'ble High Court of Madras. The Para 4 of the Order dated 15.04.2015 of Hon'ble High Court is reproduced as under: In view of the limited scope of the prayer, without expressing any opinion on the merits of the issue involved, the second respondent (i.e. Member - Central Excise) is directed to consider the representation of the petitioner dated 26.07.2012, and pass appropriate orders on merits and in accordance with law, within a period of two months from the date of receipt of a copy of this order, after affording the Petitioner an opportunity of being heard. If on a specified date the Petitioner does not appear for personal hearing, orders may be passed on merits based on the available records after recording the absence of the party/parties. 10. Shri Mukul Agarwal, General Manager, SesaSterlite Limited and Shri Vishal Agrawal, Advocate appeared for a personal hearing on 22.06.2015. They re-iterated the submissions made before the Madurai Bench of Hon'ble High Court of Madras in WP No. 5643 of 2015 and submitted that they are not covered under serial no. 195 of Notification No. 12/2012-CE dated 17.03.2012. Pending quasi-judicial proceedings: 11. It is observed from the WP No. 5643 of 2015 filed by the party that on the same issue, proceedings for different periods are pending at various stages. As per the details in para 19 of the subject Writ Petition, the status of these cases are as follows: S. No. Period Amount involved (in Rs.) Present status as per WP filed by the party 1 August 2011 to January 2012 166,83,21,408 Commissioner of Central Excise, Tirunelveli had passed Order-in-Original No. 02/CE/COMMR/2013 dated 13.03.2013 confirming the demand of erroneous paid rebate of ₹ 166,83,21,408. CESTAT has vide order dated 28.01.2014 remanded the matter for de-novo adjudication and is pending with the Commissioner of Central Excise, Tirunelveli. 2 February 2012 March 2012 35,34,86,306 Pending before Revisionary Authority, Delhi 3 April 2012 6,73,52,902 Pending before Revisionary Authority, Delhi 4 January 2013 to March 2013 31,98,71,573 Pending before the Commissioner of Central Excise, Tirunelveli 5 April 2013 66,32,053 Pending before Revisionary Authority, Delhi 12. For the period of May 2012 to December 2012, a Show Cause Notice was issued on 22.05.2013 and an Order-in-Original No. 03/CE/COMMR/2014 dated 21.11.2014 was passed by the Commissioner of Central Excise, Tirunelveli confirming the demand of ₹ 73,38,26,035 being the ineligible CENVAT Credit. Against the said Order-in-Original, instead of filing Appeal before CESTAT, the party had challenged the same by filing WP No. 1409 of 2015 which has been dismissed by the Hon'ble High Court vide Order dated 05.02.2015. The Hon'ble High Court had observed that the remedy of filing an Appeal before the CESTAT is available and WP is not maintainable. Against the said Order of the Hon'ble High Court, the party has filed Writ Appeal WA No. 82 of 2015 before two member bench of the Hon'ble High Court. Analysis of the issue: 13. The main issue is whether the raw Anode Slime and Anode Slime at Stage -I and Stage-II of processing are dutiable or the same are exempted under serial no. 195 of Notification No. 12/2012-CE dated 17.03.2012, which is reproduced below- S. No. Heading Description of excisable goods Rate Condition 195 7105 or 7112 Dust and powder of natural precious or semi-precious stones; waste and scrap of precious metals or metals clad with precious metals, arising in course of manufacture of goods falling in Chapter 71 Nil - 14. The above entry in the notification covers two categories of goods. The first category is goods of heading 7105, namely, dust and powder of natural precious or semi-precious stones . Anode Slime is not dust powder of natural precious or semi-precious stones. Another category of goods covered under serial no. 195 of Notification No. 12/2012-CE dated 17.03.2012 are covered by heading 7112, namely, waste and scrap of precious metals or metals clad with precious metals, arising in course of manufacture of goods falling in Chapter 71. 15. It may be noted that the heading 7112 of Central Excise Tariff Act, 1975 covers the following products: (a) Waste and scrap of precious metal or of metal clad with precious metal; (b) Other waste and scrap containing precious metal or precious metal compounds, of a kind used principally for the recovery of precious metal. 16. The Note 4(A) to Chapter 71 of the Central Excise Tariff defines that the expression precious metal means, silver, gold and platinum. 17. It may be noted that exemption notification covers goods of description waste and scrap of precious metals or metals clad with precious metals which is similar in language to part (a) of heading 7112 as mentioned above. The question to be examined is whether part (b) of heading 7112 is covered by exemption notification or not. For this to be covered by exemption notification, two conditions should be satisfied viz. (i) item should be waste and scrap of precious metals and (ii) such waste and scrap should arise in the course of manufacture of good of chapter 71. 18. Regarding the first condition i.e. whether Anode Slime is a waste and scrap of precious metal, it is observed that anything can be called as waste and scrap of precious metals only if it is generated out of manufacturing of precious metals. The Anode Slime contains only traces of precious metals or precious metal compounds and hence is not covered under the term 'waste and scrap of precious metal'. Therefore, Anode Slime does not fall under part (a) of heading 7112 but falls in part (b) of the said heading which covers 'other waste and scrap containing precious metal or precious compound'. Since, the exemption is available to only part (a) of the heading 7112, the first condition of the notification is not satisfied. 19. Even though Anode Slime is not covered under that part of the tariff head which is included in the exemption, for analysis, the second condition of the notification is further examined hereafter. The second condition to be satisfied for the exemption is whether this waste and scrap has arisen in course of manufacture of goods falling in Chapter 71. Anode Slime is generated either during the extraction of copper which is not a precious metal or during the further processing of raw Anode Slime when more copper and selenium, tellurium etc. are extracted. None of these materials is considered to be a precious metal of Chapter 71. Hence, the Anode Slime does not arise during the course of manufacture of goods falling under Chapter 71. Conclusion Order: 21.(a) Anode slime, a byproduct of copper refining industry is not entitled to exemption under S. No. 195 of the Notification No. 12/2012-C.E. dated 17.03.2012. (b) The issue under consideration is a mixed question of law and fact and has been considered and decided by the Commissioner, who is the adjudicating authority under Section 33 of Central Excise Act, 1944 . As per Section 35B of Central Excise Act, 1944 , against the adjudication Order, a statutory remedy of filing the Appeal is available to the party before the CESTAT. Further, against the Order passed by the Tribunal, an appellate remedy is available before the Division bench of the High Court on questions of Law. The present order does not substitute the due process prescribed in the Act. The view expressed on merits are in compliance of the Orders dated 15.04.2015 of the Hon'ble High Court. The adjudicating and appellate authorities may pass suitable orders in accordance with law.