Washed Manganese Ore Treated as ‘Concentrate’: CESTAT Upholds Denail of Excise Duty Exemption [Read Order]

The Customs, Excise and Service Tax AppellateTribunal (CESTAT), Hyderabad Bench,upheld the denial of the CVD exemption under Notification No. 04/2006-CE. The Tribunal held that manganese ore subjected to processes such as washing, crushing, and sizing prior to import amounts to ‘concentrate’ rather than raw ‘ore’, thereby disqualifying it from the exemption benefit.

The appellant, M/s Royalline Resources Ltd, imported Manganese Ore and classified the goods under Tariff item 2602 00 10. They initially cleared the goods without payment of CVD, claiming the benefit of the exemption notification. However, the Department later issued a Show Cause Notice (SCN) proposing to classify the goods as ‘Manganese Concentrate’ on the grounds that the imported goods had undergone washing, removal of waste, and sizing. The Adjudicating Authority and the Commissioner (Appeals) subsequently confirmed the demand for CVD, agreeing that the goods were concentrates and not entitled to the exemption.

The appellant’s written submissions argued that they had discharged the evidentiary burden by providing certificates from the load port and recognized testing laboratories. They contended that processes like crushing or sizing are routine in the mining industry and do not amount to "concentration" or "beneficiation," as they do not chemically alter the ore. Relying on Circulars and HSN Explanatory Notes, they argued that "concentrates" result only from "special treatments," whereas mere preparation for transport does not change the nature of the goods.

Shri A. Rangadham, the Departmental Representative, countered that the goods were not "Run of Mine" (ROM) ore but had been processed to meet the appellant's specific contractual specifications. He relied on Chapter Note 4 to Chapter 26 of the Central Excise Tariff, inserted w.e.f. 01.03.2011, which deems the conversion of ores into concentrates as a "manufacturing" process. He argued that "beneficiation" includes any process physical or physico-chemical undertaken to remove foreign matter or improve quality, making the resulting product distinct from raw ore.

The Division Bench of A.K. Jyotishi (Member Technical) and Angad Prasad (Member Judicial) noted that the appellant had not appeared for the hearing. The Bench referred to its recent decision in M/s Sarda Energy & Minerals Ltd & Ors Vs CC, Visakhapatnam, which relied on the Supreme Court’s judgment in M/s Star Industries Vs CC (Imports), Raigad.

The Tribunal observed that the Supreme Court in Star Industries had held that the insertion of Note 4 created a legal fiction treating the conversion of ore into concentrate as "manufacture." It was held that "concentrate" must be treated as a distinct commodity from "ore." The Tribunal reasoned that Notification No. 4/2006-C.E., being an exemption notification, must be construed strictly. Since it exempts only "ores," concentrates which are now deemed manufactured goods automatically fall outside its ambit.

Rejecting the appellant's reliance on older judgments that distinguished between "normal" and "special" treatments, the Tribunal held that any activity undertaken on ROM ore to remove impurities for economical transport or metallurgical use amounts to conversion. The Tribunal noted that the sub-classification of Manganese ore in the tariff schedule, based on varying manganese content (e.g., 35%, 40%), indicates that improving the content through processing results in a distinct product (concentrate).

The Tribunal concluded that the processes of washing, crushing, and sizing admitted by the appellant resulted in the emergence of "concentrate." Following the deeming provisions of Chapter Note 4, the appellant was not eligible for the exemption claimed. Accordingly, the appeal was dismissed.

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