Case Law Details
Beach Minerals Company Vs Commissioner of Customs (CESTAT Chennai)
CESTAT Chennai held that the appellant has undertaken beneficiation process to make sand into processed/upgraded Ilmenite. Hence, export duty at rate of 5% FOB payable on such Ilmenite which is upgraded (beneficiated Ilmenite) processed.
Facts- The appellant filed the shipping bills for the export of “Ilmenite upgraded (processed)”, and classified the goods under Tariff Item 2614 00 20.
It was noted by the department that as per the Notification No.15/2013 dated 01.03.2013 export of Ilmenite unprocessed comes under Sl.No.24-C of Notification No.27/2011 dated 01.03.2011 and the export duty at the rate of 10% on FOB. The Ilmenite which is upgraded (beneficiated Ilmenite) processed comes under Sl.No.24 D at the rate of 5% on FOB with effect from 01.03.2013.
The appellant had filed shipping bills describing the goods as ‘processed Ilmenite’ and classifying it under Customs Tariff heading 2614 00 20. Due to the dispute the appellant requested to permit them to file shipping bills classifying the goods under CTH 2614 00 20 and allow them to pay the export duty at the rate of 10% under protest.
After due process of law, the original authority ordered classification of the Ilmenite upgraded (processed) under Customs Tariff Act 2614 00 10. Aggrieved by such order, the appellant filed appeal before the Commissioner (Appeals) who held that the Ilmenite sand exported is unprocessed and has to be classified under CTH 2614 00 10 of CTA, 1975. Thus, the appellant is now before the Tribunal.
Conclusion- We therefore find it difficult to agree with the view of the Department that to obtain beneficiated Ilmenite processes like roasting and chemical treatment is mandatory. Without furnishing any evidence to establish the said contention, we have to say that the processes undertaken by the appellant would result in beneficiated Ilmenite.
Though the original authority had discussed and held in Para 18 that the goods are not upgraded Ilmenite, however, has held in the operative part of the order that goods which are upgraded ilmenite has to be classified under CTH 26140010. The Commissioner (Appeals) held that the goods are unprocessed and has to be classified under 26140010. From the facts discussed above and on the basis of the documents furnished we have to say that such processes result in beneficiated Ilmenite.
FULL TEXT OF THE CESTAT CHENNAI ORDER
Brief facts are that the appellant M/s. Beach Minerals Company who is the holder of Importer Exporter Code XXXXXXX199 filed the following shipping bills through their Custom House Agent, M/s. Barath Marines Company, Tuticorin for the export of “Ilmenite upgraded (processed)”, and classified the goods under Tariff Item 2614 00 20. The CHA vide letter dated 09.03.2013 stated that the appellant had exported Ilmenite for the past 15 years. They had declared the classification of the Ilmenite exported by them as ‘2614 00 10’. It was noted by the department that as per the Notification No.15/2013 dated 01.03.2013 export of Ilmenite unprocessed comes under Sl.No.24-C of Notification No.27/2011 dated 01.03.2011 and the export duty at the rate of 10% on FOB. The Ilmenite which is upgraded (beneficiated Ilmenite) processed comes under Sl.No.24 D at the rate of 5% on FOB with effect from 01.03.2013. The appellant had filed shipping bills describing the goods as ‘processed Ilmenite’ and classifying it under Customs Tariff heading 2614 00 20. On 14.03.2013 a letter was issued to the appellant asking to submit right evidence to substantiate the tariff change. The appellant vide letter dated 18.03.2013 furnished the details as to the operation and process conducted on the Ilmenite before export. So as to claim the goods as processed Illmenite. They also attached the analysis report and the production flow chart. Due to the dispute the appellant requested to permit them to file shipping bills classifying the goods under CTH 2614 00 20 and allow them to pay the export duty at the rate of 10% under protest.
2. After due process of law, the original authority ordered classification of the Ilmenite upgraded (processed) under Customs Tariff Act 2614 00 10. Aggrieved by such order, the appellant filed appeal before the Commissioner (Appeals) who held that the Ilmenite sand exported is unprocessed and has to be classified under CTH 2614 00 10 of CTA, 1975. Thus, the appellant is now before the Tribunal.
3. The learned counsel Shri Sathish Sundar appeared and argued for the appellant. It is submitted that the appellant is an entity involved in the process, manufacture and exports of garnet, rutile, etc.,. During the period from March 2013 to April 2013, they had exported 58 consignments of Ilmenite upgraded (processed) classifying the goods under CTH 2614 00 20. The export duty in respect of such goods comes under Sl. No.24 D at the rate of 5% on FOB value as per Notification No.27/2011 dated 01.03.2011 as amended by Notification No.15/2013 dated 01.03.2013, whereas, the Department has held the classification to be under CTH 2614 00 10 under Sl. No.24 C of the said notification. The export duty for the said heading is at 10% FOB value. The request of the appellant for filing the shipping bills under the said classification was not acceded to by the Department and the appellant was directed to pay export duty at 10% on the FOB value under protest.
4. The learned counsel adverted to the flow chart to show the process undertaken on the ore (Beach Sand). The mining, refining and processing of beach sand minerals results in the processed Ilmenite which has a minimum of 51 to 52% TIO2 Beside the flow chart, the appellant had also submitted to the Department, a Certificate issued by the Geology and Mining Department (State of Tamil Nadu) dated 01.03.2013 in which it is stated that the appellant has license to export processed/upgraded Ilmenite and that they have been doing so over many years.
5. Ignoring these documents, the department has held that the process undertaken by the appellant on beach sand mineral does not bring into existence any new product/commodity / goods with distinct identity from the initial ore. The learned counsel adverted to the flow sheet of the mineral beneficiation plant which has been certified by the Geology Department as well as the Department of Atomic Energy and submitted that the beneficiation process would show that the product derived after the process is upgraded Ilmenite. For better appreciation, the said flow sheet is reproduced as under:
6. The process undertaken by the appellant is described by the process chart as under:
7. The learned counsel submitted that according to the Department, the processes as shown above are mere physical processes and does not involve any special process such as roasting or chemical treatment and that therefore the processes do not bring any upgradation or augmentation of mineral (TIO2) content. Countering this allegation, the learned counsel explained that though the process of beneficiation in the present goods does not involve any chemical treatment and roasting the processes undertaken as per the flow chart would show that the raw sand has undertaken beneficiation and the Ilmenite obtained is upgraded Ilmenite. The classification would be therefore under 2614 00 20.
8. To support his argument, the learned counsel relied upon the decisions of the Tribunal in the case of V Minerals Vs. Commissioner of Customs, Tuticorin 2016 (332) ELT 888 (Tri. Chennai).It is submitted by the learned counsel that the appeal filed by the Department against the above decision is pending before the Hon’ble Apex Court as reported in Commissioner of Customs Vs. VV Minerals 2016 (342) ELT A54 (S.C). However, the jurisdictional High Court in the case of Industrial Mineral Company (IMC) Vs. Commissioner of Customs, Tuticorin2018 (18) GSTL 396 (Mad.), held that the decision of the Tribunal has to be applied to the issue even though appeal filed by the Department is yet to reach finality before the Hon’ble Apex Court. The learned counsel prayed that the appeal may be allowed.
9. The learned AR Shri S. Balakumar appeared and argued for the Department. He supported the findings in the impugned order. It is submitted by him that the raw sand has not undergone any chemical treatment or such other processes and therefore it cannot be said that the Ilmenite is processed Ilmenite. The mineral content remains the same as it existed in the ore Ilmenite before these processes. Upgradation or beneficiation is carried out to enhance the titanium dioxide content upto 95%, by removing impurities such as iron oxide, silica, etc., by roasting and chemical treatment. Only such processes can result in beneficiated Ilmenite. The goods are therefore rightly classifiable under CTH 2614 00 10 and the appellant is liable to pay export duty at the rate of 10%. He prayed that the appeal may be dismissed.
10. Heard both sides.
11. The appellant has adopted the classification under CTH 2614 00 20 as beneficiated/processed Ilmenite whereas the Department has held that the goods exported will fall under CTH 2614 00 10 as unprocessed Ilmenite. For better appreciation, the Tariff heading with respect to Ilmenite under Chapter 26 is reproduced as under:
12. The major objection but forward by the Department is that the appellants have not undertaken any beneficiation process to make the mined sand into processed/upgraded Ilmenite. The appellant has produced the flow chart showing the various processes undertaken before the goods are exported. It may be true that the mine sand has not undergone any chemical treatment or roasting. It has to be seen that the said flow chart has been approved by the Mining Department as well as the Atomic Energy. Further in the Tariff heading reproduced above, the word “beneficiation” has not been explained. Rule 3(d) of Mineral Conservation and Development Rules, 1988 defines “beneficiation”. The said rule reads as under:
“4.5 Mineral Conservation and Development Rules, 1988.
3. Definitions. – In these rules, unless the context otherwise requires –
3(d) ”beneficiation” means process of minerals or ores for the purpose of
(i) Regulating the size of a desired produce;
(ii) Removing unwanted constituents; and
(iii) improving quality, purity or assay grade of desired product.”
13. As per the above definition beneficiation is done for three purposes. Any processes done for the above three purposes carried out on the mined sand would be known as “beneficiation”. From the flow chart which has been noticed above it can be seen that the various processes undertaken on the raw sand by the appellants achieves the purpose of regulating the size, removing unwanted impurities and also improving quality or SI grade of Ilmenite. We therefore find it difficult to agree with the view of the Department that to obtain beneficiated Ilmenite processes like roasting and chemical treatment is mandatory. Without furnishing any evidence to establish the said contention, we have to say that the processes undertaken by the appellant would result in beneficiated Ilmenite.
14. Though the original authority had discussed and held in Para 18 that the goods are not upgraded Ilmenite, however, has held in the operative part of the order that goods which are upgraded ilmenite has to be classified under CTH 26140010. The Commissioner (Appeals) held that the goods are unprocessed and has to be classified under 26140010. From the facts discussed above and on the basis of the documents furnished we have to say that such processes result in beneficiated Ilmenite.
15. Our view is supported by the decision of the Tribunal in the case of VV Minerals Vs. Commissioner of Customs (supra). The Tribunal analyzed the issue in detail and observed as under:
“11. We have also seen the sample of both unprocessed and the final product i.e. upgraded Ilmenite and perused the certificate dated 1-32013 issued by the Department of Geology & Mines, Government of Tamil Nadu which clearly confirms that appellants are licensed by the Government of Tamil Nadu to export processed/upgraded Ilmenite. Both adjudicating authority and the LAA relied the website literature of another company i.e. Kerala Minerals Ltd. and based their decision only on the issue of roasting and acid wash or chemical treatment. The department also contends that beneficiated ore should be high % of TiO2 which is ‘Synthetic Rutile’. We find that the classification of ‘Rutile’ is separately classified under CH 2614 00 31. Therefore, the department’s contention for classifying under Chapter 2614 00 10 is not based on valid reasons and relying another firm’s website details cannot be taken as authentic evidence. It might be the process undertaken by the said company.
12. The Hon’ble Supreme Court in the case of Tata Steel & Others v. UOI (supra) while discussing the entitlement of refund of royalty on the Mines & Minerals has discussed the ‘beneficiation’ and the benefits. The relevant paragraphs of Apex Court is reproduced as under :-
“26. The question that, therefore, arises is what is the consequence of beneficiation? Very briefly, the consequence of beneficiation or coal is upgrading or improving its quality from ROM coal. In the Convenience Volume handed over to us, with reference to beneficiation or coal, it is stated by Tata Steel as follows :
The crushed raw coal (ROM) has ash percentage varying from 22% to 40% and moisture of 3% to 5%. For use in Blast furnace for steel making, we require clean coal of uniform quality at low ash %. So, Beneficiation of ROM raw coal is done to reduce the ash content to bring up to Steel Grade coal.
ROM coal of various seams at coal mine is fed into the Coal washery (Beneficiation plant) for beneficiation so that the final clean coal product has ash of below 15% (Steel Grade coal).
For coal beneficiation, gravity separation methods for coarser (size 13 mm to 0.5 mm) material and froth floatation method for finer material (size < 0.5mm) are done.
So, before beneficiation, the raw coal is crushed into size below 13 mm at Coal Handling Plant (Crushing Plant). The coarse material i.e. size from 13 mm to 0.5 mm is treated in dense media cyclone whereas, less than 0.5 mm is treated by froth floatation method. As beneficiation is a wet process hence, it increases the moisture percentage of beneficiated coal by around 8% to 15%.
After beneficiation, apart from the clean coal (required in Blast furnace for Steel making), we also get Coal by-products named as, middling (ash 40-45%), Tailings (ash 40-45%) and Rejects (ash 60-65%).
The product quantity after beneficiation process gets increased due to wet process by adding moisture into the output, shown by an example below –
Production (Extraction) : The basis figure of production of 100 tonnes of ROM coal has been taken.
Therefore, Quantity produced (Extracted) : = 100 tonnes
Beneficiation : The products are dewatered but still the surface moisture gets adhered to the product generated. The beneficiation is a wet process i.e. raw coal mass flows through different process in slurry form. Output is measured on wet process because it is transported on wet basis (with moisture). Hence the output is more than the input of raw coal.
Beneficiation process results in
Clean Coal;
Middlings;
Tailings; and
Rejects
… … …
Conclusion :
It is quite clear that beneficiation process (dense media gravity separation and froth floatation) are a physical separation process to separate higher ash coal and lower ash coal, so no chemical changes are there in the coal mineral, as there are no chemical reactions involved during this beneficiation process.
Referring below a flow chart [not relevant]…… From the quantity related table, it is also quite evident that due to addition of water during wet beneficiation, the summation of beneficiated coal product quantity isn higher than fed ROM coal quantity.”
The Apex Court in the above decision clearly spelt out that beneficiation processes are only related to physical separation. The ratio of the Apex Court decision though it was held with respect to coal, the same squarely is applicable to the present case as the principle of beneficiation is same. Further the Hon’ble High Court of Patna in the case of Indian Aluminium Co. Ltd. and Anr. v. State of Bihar & Ors. (supra) while deciding the constitutional validity of collection of fees on ores under Mines & Minerals Act, 1980 relied the definition of beneficiation given under MCD Rules, 1988. Further, we find that the Board’s circular dated 17-2-2012 had clarified chapter note of Chapter 2601 – 2617 and by beneficiation process the end product of ore is concentrate or upgraded ore. The extract of circular is reproduced as under :-
“ * * *
From the above definition, 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.
3. Hence it is clarified that the levy of excise duty is attracted only in cases where the product meets the definition of concentrate as per HSN Notes, that is, ‘ores which have had part or all of the foreign matter removed by special treatments either because such foreign matter may hamper subsequent metallurgical operations or with a view to economical transport’.”
The above clarification covers the appellant’s export product which is covered under2614. The above circular and the ratio of the Hon’ble Apex Court and High Court decisions (supra) are squarely applicable to the present case. The department relying on the Tribunal decision in the case of Kerala Minerals & Metals Ltd. (supra) is on the manufacture and excisability of the product and not on beneficiation or classification. The same is not applicable to the present case as the issue here is on charging export duty on Ilmenite Upgraded (beneficiated). The definition of “beneficiation” given in Mineral Conservation and Development Rules, 1988 is more authentic than the website literature relied by department. Both Apex Court decision and High Court decision on ‘beneficiation’ are applicable to the present case. While classifying the goods whether for import or export the descriptions used in the chapter headings and subheadings are to be literally applied and no other meaning or assumption can be made. The sub-heading 2614 00 20 only describes Ilmenite upgraded (beneficiated Ilmenite) without any specification. As evident from the findings of LAA the Revenue’s trying to put the “Synthetic Rutile” under the above heading is incorrect and not acceptable. Therefore, by respectfully following the Apex Court and High Court decisions referred above, we are of the considered view that the product “Ilmenite” exported by the appellant is rightly classifiable under CH 2614 00 20 of CTH as “Ilmenite upgraded (Beneficiated Ilmenite) and chargeable to appropriate export duty and not under 2614 00 10 of CTH.
13. Accordingly, the impugned order is set aside and the appeal is allowed with consequential benefit.”
16. After appreciating the facts and evidence and following the decision, we hold that the goods which are upgraded/processed Ilmenite are classifiable under 2614 00 20. The impugned order is set aside. The appeal is allowed with consequential reliefs, if any, as per law.
(Order pronounced in the open court on 26.05.2023)
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