DCW Limited Vs Commissioner of Customs (CESTAT Chennai)
CESTAT Chennai held that Upgraded Beneficiated Ilmenite are synthetic Rutile and hence classifiable under CTH 2823 and not under 2614.
Facts- The assessee is engaged in the manufacture of Titanium Dioxide (TiO2) which is exported as “Upgraded Beneficiated Ilmenite (Synthetic Rutile) TiO2 95% Min. Moisture 0.5% Max.” The same was declared under Tariff Item No. 2823 00 90 of the Customs Tariff and it is a matter borne on record that the assessee has been declaring the said item under the said Tariff Heading since 1986. It is apparent from the record that the above product has also been cleared in the domestic market under the very same classification under the Central Excise Tariff (CET) since 1986. In fact, a copy of invoices placed on record supports the above claim.
Similar to its earlier exports, the assessee filed two shipping bills both dated 02.03.2013, for the export of Upgraded Beneficiated Ilmenite (Synthetic Rutile) under CTH 2823. The Revenue, however, not accepting the above classification of these goods, sought to classify the same under CTH 2614 00 20.
The Assistant Commissioner of Customs, vide Order-in-Original, classified the goods under export under Tariff Item No. 2624 00 20, as proposed. The first appellate authority accepted the classification made by the assessee thereby setting aside the re-classification proposed and confirmed by the original authority. Being aggrieved, revenue has preferred the present appeal.
Conclusion- The first appellate authority has considered the views of experts in the field who have certified or opined that there has been various chemical processes which has resulted in the final product, with a different molecular structure. There is also an observation that the chemical and crystallographic structure of change has occurred only after the process of leaching.
There is also an observation by the first appellate authority, after looking into the records, that the assessee had exported Buff Color Titanium Dioxide, Rutile grade (Isotox) through shipping bill dated 05.04.2012, which was classified by the Department under Chapter 28, thereby allowing drawback. Admittedly, the impurity content was much higher, as could be seen from paragraph 3 of the Order-in-Appeal dated 17.05.2013.
Held that the goods in question are synthetic Rutile which merit classification only under CTH 2823 and hence, the stand of the assessee is accepted.
FULL TEXT OF THE CESTAT CHENNAI ORDER
The facts that have led the rival parties before this bench, which could be gathered from the orders of lower authorities and upon hearing the rival contentions, are that the assessee is engaged in the manufacture of Titanium Dioxide (TiO2) which is exported as “Upgraded Beneficiated Ilmenite (Synthetic Rutile) TiO2 95% Min. Moisture 0.5% Max.” The same was declared under Tariff Item No. 2823 00 90 of the Customs Tariff and it is a matter borne on record that the assessee has been declaring the said item under the said Tariff Heading since 1986. It is apparent from the record that the above product has also been cleared in the domestic market under the very same classification under the Central Excise Tariff (CET) since 1986. In fact, copy of invoices placed on record supports the above claim.
1.2 Similar to its earlier exports, the assessee filed two shipping bills both dated 02.03.2013, for export of Upgraded Beneficiated Ilmenite (Synthetic Rutile) under CTH 2823. The Revenue, however, not accepting the above classification of these goods, sought to classify the same under CTH 2614 00 20.
1.3 Not satisfied with the reply filed by the assessee for the re-classification by the Revenue, the Assistant Commissioner of Customs, Tuticorin vide Order-in-Original No. 575/2013 classified the goods under export under Tariff Item No. 2624 00 20, as proposed. It appears from the record that the appellant-assessee preferred an appeal before the first appellate authority against the said reclassification by the adjudicating authority and the first appellate authority vide Order-in-Appeal No. 47/2013 (TTN) dated 17.05.2013, accepted the classification made by the assessee thereby setting aside the re-classification proposed and confirmed by the original authority.
1.4 Against the said Order-in-Appeal, the Revenue has preferred Customs Appeal No. 41778 of 2013 before this forum.
2.1 Further, it appears that the assessee filed another set of 21 shipping bills between 03.04.2013 and 14.05.2013 for export of the very same material by classifying the same under CTH 2823. But, however, the adjudicating authority proceeded to reclassify the same under Tariff Item No. 2614 00 20.
2.2 It appears that the assessee filed appeals against the said reclassification before first appellate authority. But however, this time, the first appellate authority appears, vide Order-in-Appeal Nos. 160 to 180/2013 dated
23.08.2013, to have not accepted the classification adopted by the assessee and confirmed the reclassification of the adjudicating authority. It is against this order of the first appellate authority that the assessee has filed another set of appeals in Customs Appeal Nos. 42216 to 42236 of 2013, before this forum.
3. Agreeably, the issue revolves round the classification of the same material in both the appeals filed by the Revenue as well as the assessee and hence, for convenience, all the appeals are heard together and are being disposed of by this common order.
4. Shri S. Jaikumar, learned Advocate, appeared for the assessee and Shri R. Rajaraman, learned Assistant Commissioner, argued for the Revenue.
5.1 Submissions of the Ld. Advocate could be summarised as below: –
(i) The assessee normally procures raw Ilmenite ore containing 50 to 54% of Titanium Dioxide (TiO2), either from M/s. Indian Rare Earths Ltd. or imports the same from outside. Naturally, the ore so procured is impure, with 5-10% of other materials like Garnet, Silica and other heavy metal traces.
(ii) Raw Ilmenite ore procured would be having impurities, i.e., Ilmenite (FeTiO3) as well as Ferric Oxide (Fe2O3), along with other many impurities. The material so procured would then be subjected to various processes, both physical as well as chemical, to start with electrostatic separation using electrostatic separators, wherein some of the impurities like Garnet, Silica, etc., would get separated. The same is further subjected to a magnetic separation process to eliminate magnetic and non-magnetic impurities.
(iii) It is thereafter that the ore is subjected to the process of Roasting in a rotary furnace at a high-temperature of about 900°C using coke or charcoal, during which oxides from the above ore would combine with the Carbon in the charcoal and thus Carbon Dioxide mixture gets liberated, thereby leaving the Ilmenite concentrate.
(iv) The roasted ore is thereafter charged to a digester wherein Leaching process takes place, with Hydrochloric Acid of about 30 to 31% concentrate. The said leaching process is repeated multiple times under high-pressure and temperature until the iron content drops from 33-35% to 2.5%, and hence this process of leaching is treated as the most crucial step/process whereby the Iron [Fe] content in the said Ilmenite ore [FeTiO3] is converted into Ferric Chloride [FeCl3], thereby leaving Titanium Dioxide [TiO2] of the highest possible purity and moisture.
(v) Typically, ‘Rutile’ would mean a molecular structure having tetragonal shape, as given below: –
(vi) Rutiles are generally of two types, namely, natural Rutile and synthetic Rutile and the common difference is in their molecular structure. If the molecular structure is tetragonal in the natural state of the mineral, then they are natural Rutiles. If the tetragonal molecular structure, which is called rutile structure, is achieved by any chemical processes, then the same is called synthetic Rutile.
(vii) The original raw Ilmenite procured by the assessee will be having the following hexagonal structure :
(viii) After subjecting the procured ore to various processes ending with the process of Leaching, the following TETRAGONAL molecular structure is obtained:
(ix) It is in the leaching process that the crucial manufacturing process happens, resulting in the change of the molecular structure from hexagonal Ilmenite to tetragonal Titanium Dioxide. This rutile structure is not occurring naturally, but is achieved by means of chemical reaction in the process of leaching in the digesters, and therefore the assessee had only mentioned the same as synthetic Rutiles and not natural Rutiles.
(x) The resultant synthetic rutile Ilmenite slurry is transferred to slurry tanks after blowing down the supernatant liquor, which is thereafter subjected to the next stage of the process.
(xi) The slurry so obtained contains about 30-40% solids and such solids are then separated from slurry by vacuum filtration operation, by which the moisture content is reduced to 20-25%.
(xii) The above operations result in getting wet cakes which are calcined in oil-fired rotary calciners by direct contact of flue gas with coke whereby, the moisture content further reduced to 1.5% – 2% and thus, the final product emerges.
5.2 The Ld. Advocate took us through the relevant entries of the Tariff Heading 2614 as it stood at the relevant point of time, which is reproduced below for convenience: –
