ORDER
D.C. Mandal, Member (T)
1. In these 65 appeals, the same issue is involved and as such, they are being heard together and disposed of by this common order.
2. The issue to be decided by us is whether the electrolytic manganese dioxide for dry battery imported by the respondents was assessable to Customs duty under Heading 25.01/32 (3) of the First Schedule to the Customs Tariff Act, 1975 (hereinafter referred to as C.T.A) without any countervailing duty under item 68 of the Central Excise Tariff or under Heading 28.01/58 C.T.A with countervailing duty under Item 68 C.E.T as held by the Assistant Collector of Customs.
3. Some of these consignments were originally assessed by the Custom House under Heading 25.01/32(3), but as a result of Audit Objection that Chapter 25 C.T.A is applicable only to goods which are in the crude state or which have been washed, crushed, ground, powdered etc. and hence electrolytic manganese dioxide is not classifiable under Chapter 25 but under Heading 28.01/58 C.T.A with countervailing duty under Item 68 C.E.T, demand notices for differential duty were issued to the respondents and confirmed by the Assistant Collector of Customs. In other cases, the goods were originally assessed to duty under Heading 28.01/58 with c.v. duty under Heading 68 of C.E.T and the respondents claimed refund of the differential duty, but the Assistant Collector of Customs, rejected the refund claims. The Assistant Collector held that the goods were correctly assessable under Heading 28.01/58 C.T.A with c.v. duty under Item 68 C.E.T. His findings were, inter-alia, as follows :-
“No evidence has been produced to show that the Manganese Dioxide under reference is Crude Mined ore. The write up produced state “Battery Grade Manganese Dioxide” could be obtained by electrolysis of MNo 4 and during the process of Electrolysis MNo 2 gets deposited as on the anode. The deposit is hammered out, and ground to a finer mesh and treated with patented process for neutralising the acid that may be encapsulated in the deposited MNo 2. From the photostat of literature produced it is seen that the Electrolysis process consists of grinding, dissolution, leaching, electrolysis, hammering, washing, crushing, neutralisation, pulverising etc. These methods do not confine to the methods mentioned in Note (1) to Chapter 25 CTA.
The description of the goods in the import document is “Electrolytic Manganese Dioxide For dry battery – MNO 2-91%. “The Laboratory test report confirms these as Manganese Dioxide of declared purity. The Chapter No. 1 of Chapter 25 states that “except where the context otherwise requires”, the goods should satisfy the definition given therein. It is a fact that various grades of Manganese Dioxide exist and only few are suitable for use as battery grade. The subheading has to be read alongwith main heading and cannot be read in isolation. Therefore, the main heading covers only crude manganese dioxide in crude form. Thus, Chapter 25 will cover Manganese Dioxide in crude from purified only by methods mentioned in Chapter Note 1. The item imported is Electrolytic manganese Dioxide of very high purity and this chemically pure Manganese Dioxide would therefore qualify for assessment correctly under Chapter Heading 28.01/58(1) C.T.A with c.v. duty under Item 68 C.E.T.”
4. Appeals were filed by the respondents against the orders-in-original passed by the Assistant Collector. The Collector of Customs (Appeals), Madras allowed the appeals with consequential benefits to the respondents herein, holding that the goods were correctly assessable to duty under Heading 25.01/32(3) C.T.A. Hence, the present appeals before us. The Collector of Customs (Appeals), allowed the appeals on the following grounds :-
(i) The reliance placed by the lower authorities on Note 1 under Chapter 25 C.T.A w the general principle without taking into account, the opening clause “Except where the context otherwise required ….” is not correct.
(ii) Battery grade manganese dioxide is a specific entry under Chapter 25.01/32(3)].
(iii) The above entry is not qualified by any description like ‘Natural’ or ‘in crude form’ etc. In fact the word ‘Natural’ has been used in respect of such Headings (5), (7) & (8) indicating the intention of the law.
(iv) The encyclopedia of chemical Technology by Kirk-Othmer makes a specific reference to naturally occuring ore of battery grade Manganese dioxide in some of the tropical African region as well as in Ghana.
(v) In the absence of any qualifying words like natural or crude ore forms used in describing the article covered by 25.01/32(3) C.T.A the only conclusion that can be drawn is that all types of Battery grade Manganese Dioxide will be covered by the said sub-heading.
(vi)In the light of the literature produced by the Appellants and the report from Electro Chemical Research Institute, Karaikudi, Electrolytic Manganese Dixoide is covered by the sub-heading (3) of Heading 25.01/32 C.T.A.”
5. While arguing for the appellant – Collector before us, Shri Sundar Rajan, learned 3.D.R has stated that the facts are not in dispute in these appeals. The dispute is about the classification of the goods, which again is dependent on the interpretation of Heading 25.01/32 and Heading 28.01/58 of the C.T.A. Tariff Heading 25.01/32(3) is specific for “Battery Grade Manganese Dioxide”. Heading 28.01/58 C.T.A is for classification of “Chemical elements, inorganic chemical compounds and other products as specified in Note 1 and 2 to Chapter 28 of the Customs Tariff” – “Not else where specified”. The imported goods are Electrolytic Manganese Dioxide for dry battery having 91% Manganese contents. > Technical write up and supplier’s literature show that goods are Electrolytic Manganese Dioxide. Test report on test of the sample of the goods also confirms this description. The subject goods are manufactured from low grade Manganese Ore and concentrated to 91% Manganese Dioxide content. Kirk Othmer Encyclopedia of Chemical Technology, Third Edition, Volume 14, at pages 864 to 868 deals inter alia with Electrolytic Manganese Dioxide (EMD). The methods of preparation of this product have been explained at Pages 865 to 867 of the said Encyclopedia. The supplier’s literature shows that Electrolytic Manganese Dioxide for dry cell batteries is manufacture through a number of processes. The literature shows that manufacture of the imported electrolytic Manganese Dioxide from manganese dioxide involves grinding, dissolving, leaching, electrolysis, washing, crushing, again washing, neutralising, drying and pulverising. It is a manufactured product which is obtained from law grade manganese ore and concentrated to 91-92% manganese dioxide content by electrolysis process. It is a chemical element falling under Heading 28.01/58(1) – Not elsewhere specified Tariff Heading 25.01/32 is meant for classification of mineral products which are in crude state. Chapter Note 1 to Chapter 25 of the First Schedule to the Customs Tariff Act provides that this Chapter applies only to the goods which are in crude state or which have undergone certain processes as mentioned in that Chapter Note. The imported goods are manufactured products and are the result of process in addition to those specified in that Note. In support of his argument that any product subjected to any process which is not mentioned in Chapter 25 of the Tariff will not fall under Chapter 2.5 the learned J.D.R. has also drawn our attention to the general Note in Chapter 25 of the Explanatory Notes to Customs Cooperation Council Nomenclature. He has stated that the imported product is not a natural mineral substance, it is a manufactured product resulting from electrolysis process and it has also many uses other than in the batteries, and hence it falls outside the scope of Chapter 25 of the Tariff.
6. Shri Sundar Rajan has further stated that the imported product is a chemical compund classifiable under Chapter 28 of the Tariff. That the process adopted in its manufacture is a chemical process has not been disputed and that it is a chemical product is also not denied by the respondents. It has also been argued by him that electrolytic manganese dioxide appears serial No. 140 under the head ‘Chemical and allied items,” in Appendix 5 of the Import Policy for 1982-83. He has further stated that according to Mineralogy Concept, Description and Determines by L.G. Berry and Brian Mason, “mineral is a naturally occurring homogeneous solid, inorganically formed, with a definite chemical composition and an ordered atomic arrangement. The requirement of a definite chemical composition implies that a mineral is a chemical compound, and chemical compounds have a definite composition which is readily expressed by a formula. Mineral formulas may be simple or complex, depending upon the number of elements present and, the proportions in which they are combined. It is important to distinguish between a definite and a fixed chemical composition, many minerals vary in composition (i.e. the composition is not fixed), but this variation is within definite limits … Minerals are natural objects, and their description, naming, and classification is the fundamental task of the science of mineralogy. Minerals are given distinctive names, and each is described in terms of its physical and chemical properties”.
7. In support of his arguments that only natural products fall under Chapter 25 of the Tariff. Shri Sundar Rajan has relied upon this Tribunal’s decisions reported in (i) 1985-(20)-ELT-89 (Collector of Customs, Bombay & Calcutta v. J.K. Batteries, Bhopal and Ors.) and (ii) 1983-ELT-1137 (Collector of Customs, Bombay v. Dr. D.D. Tanna, Bombay). In the first mentioned case, manganese dioxide battery grade ore (Moanda) was imported. The goods were natural grade ore, obtained from highly selective mining. This Tribunal held that the goods fell under Heading 25.01/32(3) of C.T.A and not under Heading 26.01(1) as “metallic ores and concentrates”. In the latter case, the imported bone cement was a dual polymer formulation of rigid quality standards required for use in the human body. It was held that the product could not be regarded as a synthetic resin or plastic material of Heading 39 C.T.A and that it was also not a medical appliance like plates, nails etc. which were inserted inside the human body to hold together two parts of broken bone or for similar treatment of fracture. It was decided by this. Tribunal that the bone cement, being akin to dental cement, would fall under Heading 30.04/05 and not under Heading 90.19 C.T.A as medical appliance.
8. On behalf of the respondents, the learned advocate Shri Krishnan has argued that the imported goods are electrolytic manganese dioxide. Suppliers’ literature, write up and Report of Central Electrochemical Research Institute, Karaikudi were relied upon by the Collector of Customs (Appeals) in holding the goods classifiable under Heading 25.01/32(3) of the Tariff. The literature was not disputed by the Department. The goods were imported for manufacture of batteries and the process applied to the goods was only removal of impurity. Heading 25.01/32(3) specifically states battery grade manganese dioxide. There is nothing to take away the imported goods from the scope of Chapter 25 of the Tariff. Therefore, the Collector’s order was correct and the appeals of the Department are to be dismissed.
9. We have considered the arguments of both sides and have perused the records of the case. The question to be decided is whether the imported electrolytic manganese dioxide should be classified under Heading 25.01/32(3) or Heading 28.01/58 of the C.T.A with c.v. duty under Item 68 of Central Excise Tariff. The relevant portions of the two Tariff Heads read as follows :-
(a) “25.01/32. Mineral substances, not elsewhere specified (including clay, earths, earth colours, natural abrasives, salt, sulphur, slate and stone); cements, all sorts not elsewhere specified (including portland cement and clinker); lime, plasters, with a basis of calcium sulphate, whether or not coloured, but not including piasters – specially prepared for use in dentistry :
XXX XXX XXX
(3) Battery grade manganese dioxide.
xxx xxx xxx
(b) "28.01/58. Chemical elements, inorganic chemical compounds and other products as specified in Notes 1 and 2 to this chapter :
(i) Note elsewhere specified.
xxx xxx xxx"
The learned advocate has strongly argued for assessment of the goods under Heading 25.01/32(3) on the ground that Battery grade manganese dioxide is specifically mentioned against this Heading. Collector (Appeals) has also laid emphasis on this ground while deciding the classification under this Heading. There is no doubt that battery grade manganese dioxide is mentioned in this Heading. But the Tariff Headings and subheadings cannot be read in isolation. These are to be read along with the Chapter Notes and Section Notes of the Tariff Schedule and the Rules for Interpretation of the First Schedule to the Customs Tariff Act. Tariff Heading 25.01/32 covers mineral substances and certain other things and the battery grade manganese dioxide is a mineral substance. It is stated in “Mineralogy Cencept, Description and Determines by L.G. Berry and Brain Mason” that all minerals are chemicals. Appendix 5 of the Import Policy for 1982-83 also shows electrolytic manganese dioxide and natural manganese dioxide under the Heading “chemical and allied items” vide serials No. 140 and 220 of the Appendix. Both natural manganese dioxide and electrolytical manganese dioxide are chemicals. Out of these two, the natural manganese dioxide goes to Chapter 25 of the Tariff Schedule according to Chapter Note 1 to Chapter 25 and Rule 3 of the Rules for Interpretation. Chapter Note 1 to Chapter 25 reads as follows :-
“Except where the context otherwise requires, this chapter is to be taken to apply only to goods which are in the crude state, or which have been washed (even with chemical substances eliminating the impurities without changing the structure of the product), crushed, ground, powdered, levigated, sifted, screened, concentrated by floatation, magnetic separation or other mechanical or physical processes (not including crystalisation) but not calcined or subjected to any further process other than a process specially mentioned in respect of the goods described in Note 3”.
From this Note 1, it follows that subject to the exceptions made in respect of certain goods as mentioned in this chapter, Chapter 25 applies to goods which are in crude state. However, the Note allows the goods which have undergone certain processes as mentioned above. The supplier’s literature shows that the electrolytic manganese dioxide imported by the respondents was manufactured through various processes, viz. grinding, dissolution, leaching, electrolysis, washing, crushing, again washing, neutralising, drying and pulverising. Electrolysis is not a permissible process under Note 1 to Chapter 25. A mineral substance which has been subjected to the process to electrolysis falls outside the purview of chapter 25 of the Tariff Schedule. Therefore, only natural manganese dioxide or manganese dioxide subjected to the processes specified in Chapter Note 1 fails under Sub-heading (3) of the Tariff Heading 25.01/32. Electrolytic manganese dioxide which is a manufactured product does not fall under this sub-heading. Further, this product has various other uses than in dry batteries.
10. As already stated earlier in this order, Electrolytic Manganese Dioxide is a chemical compound. Chemical elements and inorganic chemical compounds fall under Heading 28.01/58 of C.T.A. Electrolytic Manganese Dioxide is not listed in the items specified in Sub-heading (1) of this Heading. It will, therefore fall under Item (1) – “Not elsewhere specified”, of Sub-heading (1) of Heading 28.01/58. Manganese Dioxide is included in Chapter 28.22 of the Explanatory Notes to the Customs Co-operation Council Nomenclature, on which the Cusotms Tariff Schedule under C.T.A. 1975 was based. The question of classification of “high grade manganese dioxide” with 83-85% MNO 2 content came up for consideration before this Tribunal in Appeal No. CD (SB) (T) 28/79-C (M/s Toshiba Anand Betteries Ltd. Cochin v. Collector of Customs, Madras) and the goods imported in that case were high grade manganese dioxide (battery grade) with 83-85% MNO 2. It was held by the Tribunal in that rase, vide Order No. C-504/83 dated 13.10.83, that the original assessment of the goods under Item No. 28 I.C.T (chemicals, drugs and medicines, all sorts) was correct.
11. The main grounds on which the Collector of Customs (Appeals) has classified Electrolytic Manganese Dioxide under Tariff Heading 25.01/32(3) are that the imported goods are of battery grade and Subheading (3) of this Tariff Heading is specific for “battery grade manganese dioxide” and that certain finished product, viz. “Cements, all sorts”, “Insoluble sulphur” and “Sulphur of all kinds” appear at Sub-headings (4), (10) and (11) of this Tariff Heading. He did not accept the contention that Chapter 25 of the Tariff Schedule is applicable to natural mineral substances, because the aforesaid finished products are also listed under this Tariff Heading. According to him, all types of battery grade manganese dioxide should fall under Sub-heading (3) of Heading 25.01/32. This is also the bone of contention of the learned Advocate for the respondents before us. Referring to the findings of the Collector of Customs (Appeals), we are to observe that while interpreting the Tariff Heading in the manner indicated above, the Collector of Customs (Appeals) has not taken into consideration the fact that according to Chapter Note 1 to Chapter 25 of the Tariff Schedule, this chapter applies only to goods which are in crude state, or which have been subjected to the processes specified in the said Note. In the present cases under appeal, the imported goods were not in crude state and they were manufactured by the electrolysis process. The process of electrolysis is not specified in the said Chapter Note and because of the processing which the electrolytic Manganese Dioxide has undergone, the same ceased to be natural manganese dioxide. This being the position, the imported goods correctly fall under Heading 28.01/58(1), which is meant for classification of chemical elements and inorganic chemical compounds not elsewhere specified. A few finished products are no doubt included in Tariff Heading 25.01/32. The inclusion of the same is exception to the general rule that the goods which are in crude state fall under this Chapter. Because of this exception, the Chapter Note 1 to Chapter 25 begins with the clause “Except where the context otherwise requires”. The conclusion of the Collector of Customs (Appeals) was, in the circumstances, erroneous.
12. In the light of our foregoing discussions, we hold that the Electrolytic Manganese Dioxide falls outside the purview of Heading 28.01/32 and the same is correctly classifiable under Heading 28,01/58(1) of C.T.A and accordingly the classification decided by the Assistant Collector of Customs, viz., Heading 28.01/58(1) C.T.A with countervailing duty under Item 68 C.E.T, is correct. Consequently, we uphold the orders-in-original of the Assistant Collector of Customs, set aside the impugned orders passed by the Collector of Customs (Appeals) and allow the appeals filed by the Revenue before us.
