ORDER
V.K. Agrawal, Member (T)
1. The common issue involved in all these appeals, arising out of different orders, is whether the product in question is “Iron Ore” or ”Iron Ore Concentrate” chargeable to Central Excise duty under Heading 26.01 of the Schedule to the Central Excise Tariff Act.
2.1 The learned Departmental Representative submitted that the Respondents are mining iron ore from mines and subjecting the same to crushing, grinding, screening and washing with an aim to concentrate the ores; that the Commissioner Appeals while allowing the appeals, has relied upon Order-in-Appeal No. 1/BBSR/98, dated 6-5-98 in the case of M/s. Essel Mining & Industries Ltd.; that the processes adopted by the Respondents are substantially different than those obtaining in the case of M/s. Essel Mining & Industries Ltd.; that Essel Mining, after mining the Ore only crush and
screen the Ore whereby only the size of the iron lumps gets reduced and iron contents do not alter at any time whereas in the case of the Respondents their mining activity is done by fully mechanized system; that they are mining iron ores from mines and then ores are subjected to process of crushing, grinding and screening and washing with a view to remove foreign materials and to concentrate such ores; that the Respondents resorts to washing with an aim to concentrate the ores; that the purpose of washing is to increase the flowability/fluidity of iron ore after it has been mined as mined ore has very little flowability; that at each stage of washing water is added to improve the flowability of material by removing the sticky particles; that the processes undertaken by them definitely involve removal of parts of foreign material from the ores and increase the “Fe” content (i.e. iron content); that goods obtained by such process would qualify as concentrate as defined in the Explanatory Notes of HSN which reads as under :
“For the purpose of Headings 26.01 to 26.17, the term “concentrates” applies to ores which have had part or all of the foreign matters removed by special treatments, either because such foreign matter might hamper subsequent metallurgical operation or with a view to economic transport.
Processes to which products of Headings 26.01 to 26.17 may have been submitted include physical, physico-chemical or chemical operations, provided they are normal to the preparation of the ores for the extraction of metals. With the exception of changes resulting from calcinations, roasting or firing (with or without agglomeration), such operations must not alter the chemical composition of the basic compound which furnishes the desired metal.
The physical or physico-chemical operations include crushing, grinding, magnetic separation, gravimetric separation, flotation, screening, grading agglomeration of powders (e.g. by sintering or pelleting) into grains, balls or briquettes (whether or not with the addition of small quantities of binders), drying calcinations, roasting to oxide, reduce or magnetise the ore, etc. (but not roasting for the purpose of sulphating chloridating, etc.).”
2.2 The learned Departmental Representative, further submitted that from these Explanatory Notes, it is clear that any ore which after being subjected to physical or physico chemical process viz., crushing, screening, etc., has had part or whole of its extraneous, foreign matter removed, would be termed as “concentrate”; that thus the product obtained after the processes carried out by the Respondents is “iron ore concentrate” only and not iron ore.
3.1 We also heard Shri S.K. Bagaria, learned Advocate, and Shri Partha Banerjee, learned Advocate, for the Respondents. Shri Bagaria, learned Advocate submitted that Respondents extract iron ore from mines at different places which is used as iron ore at the various steel plants; that at the mines, the following mining activities are undertaken by them –
(a) Iron Ore is excavated from the mines in the form of blasted mass/rocks. (b) Blasted mass/rocks are crushed and screened into small sizes. This facilitates charging of iron ore into blast furnaces at the integrated Steel Plants of the Respondent. (c) At some mines, after crushing and screening, the ore is also washed. (d) Iron Ore extracted from the Respondent's mines has got iron content of 60% or more. By reason of the said washing/sizing activities the Fe contents of iron ore do not increase in any way.
3.2 The learned Advocate, further, submitted that the Order-in-Appeal in the case of M/s. Essel Mining was accepted by the Department as no Appeal was filed; that the Revenue has filed the present appeals on the ground that M/s. Essel Mining were only indulging in crushing and screening whereas the Respondents are also indulging in washing activity at the mines; that crushing, screening and washing of iron ore are only mining activities; that even after these activities iron ore remains iron ore technically as well as in commercial parlance and there is no manufacture of any new or different goods by reason of the said activities; that National Metallurgical Laboratory, Jamshedpur, in its opinion dated 17-3-1997 has mentioned that crushing, grinding and certain amount of washing are essential to dress the ore and still maintaining its identity as ore.
3.3 He also mentioned that in the Monthly Statistics of Mineral published by the Ministry of Mines, Government of India, these goods are always treated and accepted as iron ore; that as per the said Monthly Statistics, the States wherein iron ore concentrates are manufactured are only Goa and Karnataka; that in the monthly returns filed under Rule 45 of the Mineral Conservation and Development Rules, 1988 the said goods are always described as iron ore; that the Indian Bureau of Mines and all concerned authorities including the Controller of Mines/Regional Controller of Mines have always accepted the goods in question to be iron ore; that the production targets and annual raw material requirements for different mines are fixed by their Raw Material Division and in the said Documents, the goods are always described as iron ore; that the Steel Plants always receive and use the impugned goods as iron ore and never as concentrates; that in the annual returns filed with various Government Authorities, these goods are always shown as iron ore. The learned Advocate, further, mentioned that by reason of the processes, Fe content of iron ore is not increased nor there is concentration of the ore or its Fe content by reason of these processes; that the Fe content is always found to be in the range of 60% to 65% which is the same as at the time of extraction from the mines.
3.4 The learned Advocate referred to Note 2 to Chapter 26 of the Tariff which defines “ores” as under :
“For the purpose of Heading Nos. 26.01 to 26.17, the term “Ores” means minerals of mineralogical species actually used in the metallurgical industry for the extraction of the mercury, of the metals of Heading No. 28.44 or of the metals of Section XV, even if they are intended for non-metallurgical purposes. Heading Nos. 26.01 to 26.17 do not, however, include minerals which have been submitted to processes not normal to the Metallurgical Industry.”
The learned Advocate submitted that the iron ore in question satisfies the definition as given in Note 2 as they are minerals of mineralogical species actually used in Metallurgical Industry for extraction of metals of Section XV; that the ores are not at all subjected by the Respondents to any process not normal to Metallurgical Industry.
4.1 The learned Counsel further, submitted that the washing of iron ore by itself can never convert it into concentrates; that there is not even an
iota or evidence or material to support such a view; that in fact washing by itself does not even amount to manufacture; that in the case of Indian Rare-Earths Ltd. v. CCE, 2002 (139) E.L.T. 352, the same very Explanatory Notes of HSN were relied upon by the Department to allege that the Appellants therein were manufacturing concentrates from ore by removal of foreign matters; that the Tribunal rejected the Department’s submissions by holding as under:
“The processes carried out by the Appellants lead to separation of valuable rare mineral sands from the ordinary sand. The processes are physical and mechanical in nature. No special processes including roasting or chemical treatment are carried out. The processes do not bring about any upgrada-tion or augmenlation of purity in the mineral sands separated from ordinary sand. It is clear from Note 2 of Chapter 26 of the Central Excise Tariff that only ores which have been submitted to processes, not normal to the metallurgical industries are excluded from ores. Thus, ores which have been subjected to special treatment go out of the scope of ores. No such special treatment is carried out in the present case.”
4.2 Reliance has also been placed on the decision in the case of CCE v. Koimbatore Pioneer Fertilizers Ltd., 1997 (94) E.L.T. 6 (S.C.) wherein it has been held that pulverization of rock phosphate does not amount to manufacture; Divisional Deputy Commissioner v. Bherhaghat Mineral Industries, 2000 (119) E.L.T. 271 (S.C.) wherein it was held that crushing of dolomite lumps into chips and powder was not process of manufacture; Rina Metal Syndicate v. CCE Rajkot, 2001 (130) E.L.T. 885 (T) wherein it was held that cleaning/washing and sieving of brass dross did not amount to manufacture as no new marketable commodity with a separate product emerged and Super Engg. Co. v. CCE – 1996 (82) E.L.T. 539 (T). Process of pulverizing, washing and cleaning of brass dross does not amount to manufacture.
4.3 He also contended that the concentrates are manufactured by increasing the concentration of Fe content of the mineral by removing and separating different impurities; that concentrates are manufactured by enriching the material in terms of its Fe content; that under this process, raw Iron Ore of low Fe content is ground to very fine consistency and passed through various processes for making concentrates; that in the present matters neither they undertake any such process nor there is any variation in the Fe content of Iron Ore extracted from its mines and the Fe content of seized iron ore. The learned Advocate has referred to the following references :-
(i) Mc Graw Hill Encyclopaedia of Science and Technology – Vol 12.
(ii) An Introduction to Metallurgy by Sir Alam Cottrell
(iii) Ferrous Production Metallurgy by A.T. Peters.
4.3 The learned Advocate also referred to the serial No. 25 of Schedule II to the Mines and Minerals Development Act according to which concentrates are prepared by purification and/or concentration of low grade ore containing 40% Fe or less and contended that this is not at all the position as the iron ore extracted from their mines is already containing more than 60% of iron; that at mines they do not have any facilities for making concentrates such as mechanical separation, flotation, calcinations, roasting, palletisation, etc.
4.4 He also mentioned that at Kudremukh Iron Ore Ltd. the iron ore extracted has got average iron content of about 38% and it is converted into iron ore concentrate at the plant by crushing, reducing size and making the material in the form of slurry, primary magnetic separation by treating the materials in Primary Magnetic Concentration Device, treating further in the Ball Mills to reduce the solid particles size and magnetic content is further enriched in quality, secondary Magnetic Separation where almost the entire magnetic content in the slurry is separated out; that the Magnetic concentrates in slurry form finally obtained has got Fe content of about 67%; that SAIL do not follow the aforesaid processes nor they have got any such facilities at their mines.
5. The learned Advocate finally submitted that as per the Explanatory Note of HSN before iron ores can be converted into concentrates, such ores must have had part or all of the foreign matter removed by special treatment; that the said essential pre-requisite of removal of foreign matter by special treatments is not at all satisfied in the present cases; that increase in Fe content of concentrate is obviously contemplated in and in built into the special treatments; that the processes of washing and/or sizing cannot be treated as such special treatments nor the same are undertaken for making any concentrates; that in HSN Notes it has not been stated anywhere that simply by reason of mere washing and/or sizing, iron ores become concentrates. He also mentioned in any case in the facts and circumstances of the case levy of penalty is wholly unwarranted as there is no violation of any of the provisions; that if any duty would have been payable, they would have availed Modvat credit; that as such there is no Revenue involvement.
6. We have considered the submissions of both the sides. Heading 26.01 of the Central Excise Tariff applies to “Iron Ore and concentrates, including roasted iron by rites.” The Revenue wants to levy duty on the ground that the mined iron ore is subjected to crushing, grinding, screening and washing and it becomes iron ore concentrate which is covered by Heading 26.01 of the Tariff. The Revenue has placed heavy reliance on the Explanatory Notes of HSN according to which the term “concentrates” applies to ores which have had part or all of the foreign matter removed by special treatment. On the other hand the Respondents have contended that the processes undertaken by them do not convert iron ore into iron ore concentrates as no special treatments are undertaken by them nor Fe content increases after the processes undertaken by them. The learned Advocate for the Respondents has emphatically contended that the activities of crushing, grinding, screening and washing do not amount to manufacture of any goods attracting levy of Central Excise duty. It is settled law that the activity or process in order to amount to “manufacture” must lead to emergence of a new commercial product, different from the one with which the process started. In the landmark judgment in the case of U.O.I. v. Delhi Cloth & General Mills, 1977 (1) E.L.T. (J 199) (S.C.), the Apex Court has held that manufacture is generally understood to mean as “bringing into existence a new substance” and does not mean merely “to produce some change in a substance.” The Court has held that “… something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use.” The Supreme Court has laid down a two fold test for determining
whether the process is that of manufacture in J.G. Glass Industries Ltd. v. U.O.I., 1998 (97) E.L.T. 5 (B.C.) as under :
“First, whether by the said process a different commercial commodity comes into existence or whether the identity of the original commodity ceases to exist; Secondly, whether the commodity which was already in existence will serve no purpose but for the said process. In other words, whether the commodity, which was already in existence, will be of no commercial use but for the said process.”
7. Applying the test laid down by the Apex Court we observe that the process undertaken by the respondents remove extraneous, unwanted material from the ore and as such is devoid of “gangue” which adheres to the blasted ores. From this it has been claimed by the Revenue that the constituents of the final product are distinctly different from that of the blasted ore. The Revenue then applying the Explanatory Notes of HSN has come to the conclusion that iron ore has become a new commodity known as “iron ore concentrates” which is no more exempted from payment of duty as Notification No. 19/88-C.E., dated 1-3-88 has been rescinded by Notification No. 19/96-CE., dated 23-7-1996. We find ourselves unable to agree with the Revenue that on account of the processes undertaken by the Respondents, a new and different article has emerged on which Central Excise duty can be levied and collected. Even according to HSN the term “concentrates” applies to ores which have had part or all of the foreign matters removed either because such foreign matter might hamper subsequent metallurgical operations or with a view to economical transport. In our view, removing of foreign matters would not, in the present matter, bring into existence a new and different article having a distinctive name, character or use. The use of iron ore as mined or iron ore after the process undertaken by the respondents remains same that is to be used in metallurgical industry for the extraction of metals. In Indian Rare Earths case, supra, the Appellants were removing gangue materials from the sand. It has been held by this Tribunal that “at the end of the processes, the mineral sands do not undergo any transformation. They remain the same condition in which they remained along with ordinary sand on the sea beach. No upgradation or augmentation of their purity takes place. The Chemical structure of the ore remained the same. The processes are not any special treatment which would take the ores out of the stage of plain and simple ores.” The learned Advocate has also relied upon the decision in the case of Super Engineering Co. 1996 (82) E.L.T. 539 wherein the Tribunal has held that “the process of pulverizing, washing and cleaning of brass/ash does not result into emergence of a new marketable commodity with a separate, distinct name having separate physical, chemical composition or characteristic.” Similar views were expressed in the case of Seth Liladhar Eiyani & Sons v. CCE Jaipur, 2001 (129) E.L.T. 423 (T) relied upon by the learned Advocate. In view of this we hold that the processes undertaken by the Respondents do not result in the manufacture of a different commercial commodity. Hence no Central Excise duty is leviable. Accordingly, all the appeals are rejected.