2015(10)LCX0158

IN THE CESTAT, SOUTH ZONAL BENCH, CHENNAI

S/Shri R. Periasami, Member (T) and P.K. Choudhary, Member (J)

V.V. MINERALS

Versus

Commissioner of Customs, Tuticorin

Final Order No. 41412/2015, dated 14-10-2015 in Appeal No. C/41854/2013

Cases Quoted -

Indian Aluminium Company Ltd. v. State of Bihar - 1994 (1) PI JR 122 - Followed [Paras 4, 12]
Indian Rare Earths Ltd. v. Commissioner - 2001(09)LCX0244 Eq 2002 (139) ELT 0352 (Tribunal) - Referred [Paras 5, 6]
Kerala Minerals and Metals Ltd. v. Commissioner- 2007(03)LCX0194 Eq 2007 (214) ELT 0356 (Tribunal)- Distinguished [Paras 5, 6,12]
National Mineral Development Corporation v. State of M.P.- 2004 (6) SCC 281 - Referred [Paras 4, 7,12]
Tata Steel Ltd. v. UOI - 2015 (3) SCALE 759 - Followed [Paras 4, 7,12]

Departmental Clarification Quoted-

C.B.E.&C Circular, dated 17-2-2012 [Paras 4, 7, 12]

Advocated By -

S/Shri N. Venkatraman, Sr. Counsel and S. Muthu-
venkatraman, Advocate, for the Appellant.
Shri B. Balamurugan, AC (AR), for the Respondent.

[Order per : R. Periasami, Member (T)]. -

The appeal is filed against OIA dated 31-3-2013 passed by Commissioner (Appeals), Trichy.

2. The brief facts of the case are that appellants are a registered EOU and manufacturer and exporter of processed Ilmenite. They had filed shipping bills for export of "Ilmenite upgraded (processed)" by classifying them under Chapter Heading No. 2614 00 20 of Customs Tariff Act, 1975 and paid duty @ 5% in terms of Notification No. 15/2013-Cus., dated 1-3-2013. Prior to 8-3-2013, the appellants claimed classification under Chapter Heading 2614 00 10 whereas subsequently they sought for reclassification under 2614 00 20. The adjudicating authority in terms of OIO dated 18-4-2013 finally assessed all the 85 shipping bills and ordered for classifying the goods under CTH 2614 00 10 as Ilmenite unprocessed as per Section 18 of the Customs Act. Against this, appellant preferred appeal and Commissioner (Appeals) in the impugned order rejected the appeal and upheld the OIO. Hence the present appeal.

3. Learned Senior Counsel Shri S. Venkatraman appearing for the appellants explained the brief background of the various processes involved in the export of Ilmenite upgraded ore and also submitted a detailed written submissions with case laws and reiterated the same. He submits that appellants are exporting "Ilmenite upgraded" and the issue in this appeal is of classification of goods exported whether "Ilmenite, unprocessed" falling under 2614 00 10" or "Ilmenite, upgraded (beneficiated Ilmenite including Ilmenite ground) falling under 2614 00 20". He also produced raw samples (unprocessed) as well as finished samples (processed) ready for export. He drew our attention to para-5(i) of OIO where the adjudicating authority has explained the various processes undertaken by the appellant which is not disputed. He submits that they mined the raw sand and put through various processes i.e. the spiralling processing, magnetic separator, cross flow separator, hydro cyclone processing, wet table dryer and electrostatic separator for removal of other minerals and on-magnetic heavies and obtain Ilmenite, garnet, Kutile and Zircon. From the above process results in Ilmenite Ore where the Ilmenite bearing sand is being removed. He also submits that these processes are both physical and mechanical in nature. He drew our attention to photographs of the entire processing plant starting from mining of raw sand, washing of raw sand in spiral plant, drying of washed ore, Electro Magnetic Separation Process and Sieving Section and finally the Ilmenite Packing Section. He submits that in this process, there is no roasting or chemical treatment. He submits that department's contention is that the process carried out by the appellant is only physical and mechanical process and does not involve roasting or chemical treatment and there is no enrichment or augmentation of mineral content. He submits that these contentions are incorrect as the above process undertaken by them is process of beneficiation.

4. He drew our attention to Hon'ble Supreme Court judgment in the case of National Mineral Development Corporation v. State ofM.P. - 2004 (6) SCC 281 where the Supreme Court had discussed upgrading of ores (beneficiation). He also relied Hon'ble Supreme Court judgment in the case of Tata Steel Ltd. v. UOI -2015 (3) SCALE 759. The Supreme Court at Page 26 of the above judgment explained the coal beneficiation. The Supreme Court concluded that beneficiation process or physical separation process is to separate higher ash coal and lower ash coal as no chemical changes are there in the coal mineral as there are no chemical reactions involved during this beneficiation process. He also relied the Patna High Court decision in the case of Indian Aluminium Company Ltd. and Another v. State of Bihar & Ors. -1994 (1) PLJR 122 where the Hon'ble High Court has referred to the definition of "beneficiation" as provided under Mineral Conservation and Development Rules, 1998. The High Court has dealt with process of beneficiation and clearly explained "beneficiation" which does not require for roasting and chemical process. Further, he relied Board's circular dated 17-2-2012 enclosed in Annexure IV of the Paper Book. He submits that the Board has categorically clarified that no special treatment is involved in the crushing and screening of ores and the end product can be termed as a concentrate only when the grade of ore is sufficiently improved through beneficiation. He submits that in view of Board's circular and the Supreme Court's citation referred to above, the product Ilmenite is described by process of beneficiation and this does not involve any chemical change or chemical reaction and through the process of beneficiation the resultant product is Ilmenite Upgraded Ore called "Ilmenite Beneficiated".

5. He further submits that the department classified their product as Ilmenite Unprocessed by relying Tribunal's decision in the case of Kerala Minerals and Metals Ltd. v. CCE - 2007(04)LCX0202 Eq 2007 (214) ELT 0556 (T.) and Indian Rare Earths Ltd. v. CCE - 2002 (139) ELT 352 which are not applicable and not relatable to the present case as in those cases, what was before the Tribunal was the issue of manufacture and excisability under Section 2(f) of Central Excise Act not the issue of "beneficiation". Further the department relying on website details of Kerala Minerals Ltd. is beneficiation-related where the ore undergoes the process of roasting and chemical treatment and after its chemical treatment and roasting, the product emerging out is only "Synthetic Rutile". He submits, the department is trying to bring in Synthetic Rutile into Chapter Heading of 2614 00 20 whereas Rutile and other Rutile products are separate identifiable commodity and classified under separate Heading 2614. He submits that what was exported by them was "Ilmenite Upgraded (beneficiated)" and not "Synthetic Rutile". He further sub-mits that only Synthetic Rutile will contain high percentage of Titanium Dioxide. He also submits that the department cannot take a plea that prior to 2003 the appellant themselves classified under 2614 00 10. The appellant is free to revise classification as different rates prescribed on export goods both unprocessed and processed.

6. On the other hand, Id. AR on behalf of Revenue reiterated the findings of OIO and the impugned order. He submits that beneficiation process is different for each ore. What is beneficiation for coal cannot be compared to beneficiation for Ilmenite. He referred to para-12 of OIO where as per the website of Kerala Minerals & Metals Ltd. "Ilmenite Beneficiation" involves various processes of Roasting and Cooling, Calcination and Cooling, Acidic Liquor Treatment etc. and the beneficiated product contain 90% Titanium Dioxide. He submits that process involved in the present case does not involve the above processes and no enrichment of ore is undertaken and no roasting is done. He drew our attention to Para 16 of OIO. He relied on the following case laws :-

(i) Kerala Minerals and Metals Ltd. v. CCE - 2007(04)LCX0202 Eq 2007 (214) ELT 0556 (Tri.).

(ii) Indian Rare Earths Ltd. v. CCE - 2001(09)LCX0244 Eq 2002 (139) ELT 0352 (Tri.-Kolkata).

7. Ld. senior advocate in his rejoinder countered the arguments and submits that both the Supreme Court orders referred to above and the Board's circular had clarified that the word "beneficiation" which is not related to any single ore and accepted the process of beneficiation. He submits that the Supreme Court relied on Encyclopaedia Britannica for the definition of "beneficiation". He also countered that enrichment of ore is not the criteria, beneficiation is only upgraded and not enriched. The department relied on roasting and calcinations and acid treatment which results in production of Synthetic Rutile and not upgraded Ilmenite.

8. We have carefully considered the submissions of both sides and examined the records. The short issue in the instant appeal is related to classification dispute of the exported goods as to whether the Ore Ilmenite is classifiable under Chapter sub-heading 2624 00 20 or under chapter sub-heading 2614 00 10 of CTH. On perusal of OIO passed by the adjudicating authority, we find that he had passed the order only on classification and finalised all the 85 shipping bills and there is no demand of export duty. There is no dispute in the fact that the appellant is an EOU had set up plant for processing of ore and regularly exporting Ilmenite in the past as there was no export duty and classification was not disputed by either side. Consequent on imposition of export duty on Ilemnite in the year 2013 (w.e.f. 1-3-2013) the rate of duty on export has been prescribed under Notfn. 15/2013-Cus. for unprocessed Ilmenite falling under CH 2614 00 10 is chargeable @ 10% and the Ilemnite upgraded (Beneficiated Ilmenite) falling under chapter 2614 00 20 chargeable @ 5%. Apparently the two different rates of export duty on the Ilmenite prompted the appellant to reclassify the goods and the appellant's claim that the goods are rightly classifiable under CH 2614 00 10 as Ilmenite upgraded (Beneficiated) whereas the Revenue choose to classify the goods under Ch 2614 00 10 as Ilmenite unprocessed. It was brought to our notice that the department insisted on higher rate of duty and the appellant paid export duty @ 10% under protest for all the regular exports.

9. On perusal of original adjudication order wherein he recorded the various processes undertaken by the appellant plant from raw beach sand to Ilmenite and there is no dispute on these processes. The Revenue's plea for classifying the goods under CH 2614 00 10 as "Ilmenite unprocessed" is that the ore has not undergone the process of roasting and Acid Treatment and therefore the Ilmenite cannot be considered as Ilmenite Beneficiated or upgraded. Revenue also contended that various processes undertaken by the appellant are only mechanical processes for separation.

10. In this regard, it is relevant to see the classification of Ilmenite under CH 26 of CTA which is reproduced as under :-

2614 00 - Titanium Ores and Concentrates 2614 00 10 - Ilmenite unprocessed 2614 00 20 - Ilmenite upgraded (beneficiated Ilmenite including Ilmenite ground)
2614 00 31 - Rare earth oxides including rutile sand
2614 00 39 - Other
2614 00 90 - Other

It is seen from the above classification, there are only two (3 -) sub-headings under major heading CH 2614 - Titanium Ore* & Concentrates. CH 2614 00 10 - Umenite Unprocessed and CH 2614 00 20 - Umenite upgraded (beneficiated Ilmenite including Ilmenite ground). The above description Ilmenite upgraded is qualified with the words used in the brackets i.e. Beneficiated Ilmenite clearly indicates that Ilmenite upgraded should be beneficiated, in other words, the ore should have undergone beneficiation process. In the absence of any definition of word "beneficiation" in the Chapter 26 of the CTH, the definition provided in the other enactments becomes relevant. Rule 3(d) of Mineral Conservation and Development Rules, 1988 defines "beneficiation". The said rule is reproduced 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.

The above statutory definition of 'beneficiation' is for 3 purposes either for regulating the size of desired produce or removing unwanted materials for the purpose of easy transportation and also for improving the quality, purity of the product. Anyone or all the 3 activities carried out on ore/mineral is known as 'beneficiation'. On perusal of flow chart of various processes of beneficiation plant of the appellant which is duly approved by Ministry of Mines & Department of Atomic Energy clearly confirm the appellant's carrying out the activities stipulated under Rule 3(d) of Mineral Conservation and Development Rules. By this process the unprocessed ore becomes upgraded Ilmenile.


11. We have also seen the sample of both unprocessed and the final product i.e. upgraded Ilmenite and perused the certificate dated 1-3-2013 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 TOi which is 'Synthetic Rutile'. We find that the classification of 'Ruble' 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 benefication 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 (si/e < 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 o
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 ta
ble, it is also quite evident that due to addition of water during wet beneficiation, the summation of beneficiated coal product quantity is 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 under 2614. 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 sub-headings are to be literally applied and no other meaning or assumption can be made. The sub-heading 2624 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.

14. Order by 'Dash'.

(Pronounced in open Court on 14-10-2015)

Equivalent 2016 (332) ELT 888 (Tri. - Chennai)