In case of M/s Star Industries v Commissioner of Customs (Import), Hon’ble Supreme Court while interpreting Notification No.4/2006-CE held that it is an exemption notification where only ‘Ores’ were exempted and if after the process of manufacture, the ‘concentrate’ is generated then the benefit will not be available due to the insertion of Note 4 in the concerned Chapter No. 26. Hence, the CVD will be payable on the import of ‘concentrates’.
Facts of the Case
The assessee has been regularly importing Ore Concentrate and claiming the benefit of the aforesaid Notification No.4/2006-CE. The Customs Department had been extending this benefit. As a result, no CVD was levied under Section 3(1) of the Custom Tariff Act, 1975. However, according to the Department, the Directorate of Revenue Intelligence 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.
The show cause notice was issued by the Department on the basis of the statements taken by the partner of the assessee firm, where he stated that natural ores and ore concentrates are distinct commodities in terms of composition and concentrates are value added products. He further stated that they have declared the goods as Roasted Molybdenum Ore as per the description given in the invoices. The Department proposed to confiscate 59,000 kgs of Ore Concentrate. Also, notice proposed to demand differential duty, interest and penalty.
The demands were confirmed by the adjudicating authorities.
Judgment of the Hon’ble Tribunal
The Hon’ble Tribunal 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, the Hon’ble tribunal set aside the confiscation of the goods under Section 111 of the said Act and imposition of redemption fine under Section 125 and penalty under Section 114A.
Contention of the Revenue
The ld. Counsel for the revenue contended that aforesaid decisions proceeded on the basis that roasting of an ore to obtain concentrate does not amount to manufacture. This basis was knocked off with the insertion of Chapter Note 4, thereby, introducing a fictional element, namely, treating the process of converting ores into concentrate as ‘manufacture’. 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. It was also submitted that exemption notification 4/2006 exempted only ‘ores’ and did not exempt ‘concentrate’. He 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.
Contention of the Assessee
The Ld. Counsel of the Assessee contended that addition of Note 4 had not made any difference to the legal position. He submitted that the basic concept underlined in the judgment of Minerals and Metals Trading v Corporation v. Union of India and others, (1972) 2 SCC 620 remained the same which was that ore is genus and concentrate is only a specie 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. Also, it was submitted 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 an enriched ore. Further, it was argued that Chapter Note 2, which was the basis of decision in the case of M/s. Hindustan Gas and Industries Limited still occupies the field in the statute book, viz., Chapter 26 and reading thereof makes it amply clear that ore and concentrate are one and the same product. It was submitted that in the impugned order, the Tribunal has only considered Chapter Note 4 added by amendment in 2011 and altogether omitted to discuss the implication of Chapter Note 2 which rendered the impugned decision as erroneous.
Judgment of the Hon’ble Supreme Court
The Hon’ble Supreme Court observed that on the aforesaid facts, case of the assessee was that since ores include concentrates, assessee had claimed exemption from payment of CVD under Notification No. 4/2006-CE.
The Hon’ble Supreme Court observed 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. 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 intended for creating such a legal friction, would automatically follow.
Further it was observed that on the basis of deeming fiction created by Note 4, once the conclusion has been arrived that process of roasting of Ore amounts to manufacture and it creates a different product known as Concentrate, for the purpose of exemption notification, which exempts only ‘Ores’ it is not possible to hold that Concentrate will still be covered by the exemption notification.
The Hon’ble Supreme Court also mentioned the Judgment of Hon’ble CESTAT in which it has been observed that if the domestic manufacturer of concentrates is liable to pay excise duty on conversion of ‘ores’ into ‘concentrates’ in terms of Note 4 to Chapter 26, can his interests be sub-served when concentrates imported into India are not levied to CVD at the same rate by interpretation of Notification No. 4/2006 so as to construe that ores includes ‘concentrates’ and, therefore, no CVD is leviable which would be against the interests of domestic producers and also the plain language of the notification.
Accordingly, it was held that the benefit of exemption under Notification No. 4/2006-CE will not be applicable to ‘concentrates’ imported from abroad and the appeals were dismissed.