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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 6088 OF 2013

M/S STAR INDUSTRIES .....APPELLANT(S)

VERSUS

COMMISSIONER  OF  CUSTOMS (IMPORTS), RAIGAD

.....RESPONDENT(S)

J U D G M E N T

A.K. SIKRI, J.

The appellant (hereinafter referred to as the 'assessee') is

engaged in the manufacture of Ferro-Alloys falling under Chapter

72 of Central Excise Tariff.  One of the inputs for manufacture of

Ferro-Alloys  is  Roasted  Molybdenum  Ore/Concentrate.   The

assessee has been regularly importing the aforesaid material i.e.

Roasted Molybdenum Ore/Concentrate (hereinafter referred to as

the 'Ore Concentrate').   

2. It  is  not  in  dispute  that  the  import  of  Ore  Concentrate  is,

otherwise, subject to additional duty of custom i.e. countervailing

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duty (CVD) in  addition to normal  custom duty.  However, vide

Notification  No.  4/2006-CE dated  March  01,  2011,  which  is  a

general  exemption  notification,  various  items,  either  fully  or

partially,  exempted  from payment  of  excise  duty.  One  of  the

items described in this notification is 'Ores' which is mentioned at

Sl. No.4 and the excise duty payable is Nil.  In case, the aforesaid

goods imported by the assessee, namely, 'Ore Concentrate' falls

within the aforesaid entry, as a fortiori, no CVD would be payable

on the import of this item.  The question, therefore, that arises is

as to whether the 'Ore Concentrate' imported by the assessee is

eligible for complete exemption from payment of additional duty of

custom/CVD under  Notification No.4/2006-CE dated March 01,

2006.  The answer to the aforesaid question would depend upon

the answer to another incidental question, namely, whether the

'Ore Concentrate'  imported by the assessee can be treated as

'Ores' mentioned in Notification No.4/2006.  To put it otherwise,

whether Molybdenum Ore after it undergoes the process of being

roasted and comes to be known as Ore Concentrate still remains

Ores.   

3. Before we attempt to answer the aforesaid question(s), we deem

it apposite to visit those fundamental facts that will have bearing

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on the issue involved.  

4. The assessee has been regularly importing Ore Concentrate and

claiming the benefit of the aforesaid Notification No.4/2006-CE.

The Customs Department had been extending this benefit.  As a

result, no CVD was levied under Section 3(1) of the Custom Tariff

Act,  1975.   However,  according  to  the  Department,  the

Directorate  of  Revenue  Intelligence  (DRI)  received  some

information  indicating  that  the  assessee  was  misdeclaring  the

product as 'Molybdenum Ore' or 'Roasted Molybdenum Ore' and

on  that  basis,  seeking  benefit  of  exemption  under  Notification

No.4/2006-CE.   According  to  them,  Roasted  Molybdenum Ore

was, in fact, Ore Concentrate which was different from 'Ores' and,

therefore,  benefit  of  said  Notification  No.4/2006-CE  was  not

available to the assessee. Based on the above intelligence, two

consignments of the assessee imported under B/E No.4567406

dated September 06,  2011 and 4551981 dated September 05,

2011 were  detained  for  examination  on  September  14,  2011.

Examination  of  the  goods  revealed  that  in  respect  of  B/E

No.4567406 dated September 06, 2011, the bags in which the

goods  were  packed  contained  labels/marking  which  read  as

'Roasted  Molybdenum  Concentrate'.   In  respect  of  B/E

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No.4551981  dated  September  05,  2011,  the  markings  were

'Molybdenum Sulfide (MoS2) Roasted.  Samples of the products

under importation were drawn and sent for chemical examination

to  Chemical  Examiner,  CRCL,  Vadodara.   On  that  basis,  the

goods/consignment was seized on September 26, 2011 under the

provisions  of  Section  110  of  the  Customs  Act,  1962  on  the

reasonable plea that they are liable to confiscation under Section

111 of the said Act.   

5. Statement of Shri Babu Khandelwal, Partner of the assessee-firm

was recorded under Section 108 of the Customs Act, wherein, he,

inter  alia, admitted that  the goods under  import  were Roasted

Molybdenum Ore  Concentrates  which  they  procured  from M/s

Glencore,  Switzerland and M/s Thompson Creek Metals,  USA.

He further admitted that natural ores and ore concentrates are

distinct  commodities  in  terms of  composition and concentrates

are value added products and the Molybdenum content  in  the

roasted molybdenum ore is  in  the range of  56% to 65%.  He

further  stated  that  they  have  declared  the  goods  as  Roasted

Molybdenum Ore as per the description given in the invoices.  He

also agreed with the test reports given by the Chemical Examiner.

As regards CVD exemption under  Notification 4/2006-CE,  Shri

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Khandelwal stated that since ores include concentrates, he had

claimed the exemption.  He also agreed to pay the CVD involved

in respect of the imports made under the aforesaid Bills of Entry.

The  seized  goods  valued  at  Rs.6,12,60,943/-  were  released

provisionally to the assessee on execution of a bond for the said

value and bank guarantee of Rs.61,26,200/-.  The assessee also

paid the differential duty of Rs.66,61,664/- on October 04, 2011.

The investigation further revealed that the assessee had imported

identical goods earlier also under 14 B/Es by declaring the goods

as  'Molybdenum  Ore/Roasted  Molybdenum  Ore'  and  availing

CVD exemption totally amounting to Rs.3,10,73,035/- during the

period March, 2011 to July, 2011.   

6. The Department,  thereafter, issued a show cause notice dated

March 09, 2012 to the assessee proposing to confiscate 59,000

kgs.  of  Roasted  Molybdenum  Ore  Concentrate  seized  on

September 26, 2011 valued at Rs.6,12,61,048/- and 275000 kgs.

of  the said goods valued at  Rs.28,57,49,418/-  imported earlier

under 14 Bills of Entry, under the provisions of Sections 111(d)

and 111(m) of the Customs Act, 1962.  The notice also proposed

to demand differential duty amounting to Rs.66,61,664/- on the

seized goods and Rs.3,10,73,035/- on the goods imported earlier,

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under the provisions of Section 28(1) of the Customs Act along

with interest thereon under Section 28AA apart from penalties on

the assessee under Sections 114A and 112(a) of the Customs

Act.   

7. After  adjudication,  order  was  passed  confirming  the  demand

raised in the show cause notice which covered the period from

March, 2011 to September, 2011.  The importation seized and

realised  earlier  provisionally  was  confiscated  under  Sections

111(d) and 111(m) of the Customs Act with an option to redeem

the same on payment of fine of Rs.1 crore under Section 125 of

the said Act and those imported earlier was liable for confiscation

under the same provisions in respect of  which differential  duty

demand of Rs.66,61,664/- and Rs.3,10,73,035/- were confirmed

by  denying  the  benefit  of  CVD  exemption  along  with  interest

under Section 28AA of the Customs Act.  A penalty of equivalent

amount was also imposed on the assessee under Section 114A

of the said Act.

8. Aforesaid order was challenged by the assessee in the form of an

appeal  before  the  Custom  Excise  and  Service  Tax  Appellate

Tribunal  (CESTAT),  Mumbai  Bench.   Vide  impugned  decision

dated February 08,  2013, the CESTAT has concurred with the

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opinion of the adjudicating authority on the merits of the case.

However,  partial  relief  is  granted  only  to  the  effect  that

confiscation of goods under Section 111(d) of the Customs Act

was  improper  and  order  to  that  extent  is  set  aside  with

consequential order of setting aside the imposition of redemption

fine under Section 125 and penalty under Section 112(a)/114A of

the Customs Act.  The outcome of the appeal is summed up in

para 8, which reads as under:

“8.  To sum up, we uphold the duty demand and interest thereon under the provisions of Sections 28  of  the  Customs  Act  along  with  interest thereon under Section 28AA.  However, we set aside  the  confiscation  of  the  goods  under Section  111 of  the  said  Act  and  imposition  of redemption fine under Section 125 and penalty under Section 114A ibid.”

9. Before we proceed further, it  is  pertinent  to  point  out  that  the

instant  appeal  was  tagged  with  Civil  Appeal  No.1036  of  2007

titled  Commissioner of Customs (Imports) v.  M/s. Hindustan

Gas and Industries Ltd.  That was an appeal which related to

the period from September 02, 1998 to October, 1999.  The issue

was identical inasmuch as there also the importer had imported

Molybdenum  Concentrate  and  claimed  benefit  of  exemption

Notification No. 5/1998-CE which was prevalent at the material

time and it exempted 'Ore' vide Sl. No.10 of the said notification

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from  payment  of  excise  duty.   There  also  the  adjudicating

authority had taken the view that after the Molybdenum Ore was

subjected  to  the  process  of  Concentratic  and  Roasting  it  had

become a different product, namely, Molybdenum Oxide and did

not remain 'Ore' and, therefore, was not entitled to the benefit of

exemption notification which applied only to the commodity 'Ore'.

In  an  appeal,  however,  same  Mumbai  Bench  of  CESTAT set

aside the order  of  the adjudicating authority  holding that  even

after Molybdenum Ore had undergone the process of Roasting, it

remained  Ore  and  there  was  no  difference  between  Ore  and

Concentrate which were one and the same product.  We would

like to mention that though we have dismissed the appeal of the

Revenue  against  the  aforesaid  order  of  the  CESTAT on  the

ground that the tax effect involved in the said appeal is negligible,

it would be necessary to understand the reason which prevailed

with the CESTAT to record the finding that Concentrate is to be

understood as nothing but enriched and prepared ore meaning

thereby it  remains the same product, namely, 'Ores' even after

the  aforesaid  processing  of  Roasting.   Before  discussing  this

order and to understand the implication thereof in an appropriate

manner,  it  is  necessary  to  point  out  the  tariff  entries  and  all

relevant provisions of the exemption notification.   

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10. Chapter 26 of the Central Excise Tariff Act, 1985 deals with 'Ores,

Slag  and  Ash  Notes'.   Tariff  Item  2601  thereof  gives  the

description of  goods falling in  the said item as 'Iron Ores and

Concentrates including Roasted Iron Pyrites'.  It contains certain

Chapter Notes, Note 2 thereof with which we are concerned is to

the following effect:

“2.  For the purposes of headings 2601 to 2617, the term “ores” means minerals of mineralogical species  actually  used  in  the  metallurgical industry  for  the  extraction  of  mercury,  of  the metals  of  heading  2844  or  of  the  metals  of Section XIV or XV, even if they are intended for non-metallurgical  purposes.  Headings 2601 to 2617  do  not,  however,  include minerals  which have been submitted to processes not normal to the metallurgical industry.”

11. There was an amendment in the said Chapter in the year 2011,

whereby,  inter alia,  Chapter Note 4 was added, which reads as

under:

“4.  In relation to products of this Chapter, the process  of  converting  ores  into  concentrates shall amount to “manufacture”.

12.  Description of  Tariff  Item 2601,  however, remained the same.

We would, however, like to refer to sub-item 2613 which was also

on the identical terms as in the original Chapter 26, which reads

as under:

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Tariff Item Description of goods Unit Rate  of duty

2613 Molybdenum ores and concentrates 2613 10 00 -Roasted kg. 12% 2613 90 00 -Other kg. 12%

13. It would also be useful, at this stage, to mention about general

exemption Notification No.4/2006.  Same was issued in exercise

of powers conferred upon the Central Government by sub-section

(1) of Section 5A of the Central Excise Act in the public interest,

thereby exempting excisable goods of the description specified in

column  (3)  of  the  table  below  read  with  the  relevant  List

appended hereto.  Item 3 thereof reads as under:

S. No. Chapter  or heading  or sub-heading  or tariff  item  of  the First Schedule

Description  of excisable goods

Rate Condition No.

4. 2601 to 2617 Ores Nil -

We would like to point out that the amendment which was carried

out in the year 2011 basically related to addition of Chapter Note 4 as

per which the process of converting Ores into Concentrates is treated

as 'manufacture'.   

14. Having taken note of the relevant statutory/legal provisions, we

revert  back  to  the  orders  passed  by  the  CESTAT  in  M/s.

Hindustan Gas and Industries Limited case.   While  discussing Civil Appeal No. 6088 of 2013 Page 10 of 32

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this decision of the CESTAT, it is to be borne in mind that Chapter

Note 4 was not there at the relevant time when this decision was

rendered  in December, 2006.

15. It is settled position that for the purpose of determining the levy of

CVD under Section 3 of the Customs Tariff Act, it is to be deemed

that the product that was imported was manufactured in India and

thereafter rate of central excise duty leviable thereupon is to be

determined.  That duty becomes the CVD i.e. the additional duty

on the import  of  the item.  This position stands settled by the

Constitution  Bench  judgment  of  this  Court  in  Hyderabad

Industries Limited and another v. Union of India and others1.

Two implications follow from the aforesaid judgment, namely, (i) if

the process by which concentrate obtained does not amount to

manufacture in India, then the imported concentrate would also

not be subjected to CVD, and (ii) if the goods are manufactured

or produced in India, are exempted or at Nil rate of duty due to

any excise exemption notification, the imported goods would be

subjected to Nil rate of CVD.   

16. The Tribunal in Hindustan Gas case held that roasting of an ore,

to  obtain  concentrate,  does  not  amount  to  manufacture,

1 (1999) 5 SCC 15

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especially because of the reason that roasting is a process by

which impurities  in  the ore  are  removed and the  recoverable

content of metal oxide is enhanced.  The Tribunal also held that

the product in question attracted 'Nil' duty as it was covered by

exemption  notification  because  of  the  reason  that  Ore  and

Concentrate  are  one  and the  same and hence entitled  to  the

exemption.  While answering the two questions in the aforesaid

manner, the Tribunal explained the process of Concentrate.  For

this  purpose,  it  referred  to  Kirk-Othmer's  Encyclopedia  of

Chemical Technology, Vol. 16, Page 315,  Concentrate and Ore

are defined as under:

“Concentrate is an action to intensify in strength or  purity  by  the  removal  of  valueless  or unneeded constituents, i.e. separation of ore or metal  from  its  containing  rock  or  earth.   The concentration of ores always proceeds by steps or stages.  Liberation of mineral values is often the  initial  step.   Concentrate  also  means  a product  of  concentration i.e.  enriched ore after removal of waste in a beneficiation mill.

Ore.   A mineral  or  aggregate of  minerals  from which a valuable constituent, especially a metal, can be recovered at a profit.”

17. Having regard to  the aforesaid  definitions,  the Tribunal  opined

that the term Concentrate has to be understood as nothing but

enriched and prepared ore.  The Tribunal, thereafter, relied upon

judgment  of  this  Court  in  Minerals  and  Metals  Trading

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Corporation v. Union of India and others2.   That was a case

where the assessee had imported Wolfram Concentrate having

minimum 65% Tungsten Oxide.  The assessee had contended

that Wolfram Concentrate is  an ore and, therefore,  classifiable

under Item 26.  This contention of the assessee was accepted by

this Court in the following words:

“The separating of wolfram ore from the rock to make  it  usable  ore  is  a  process  of  selective mining.  It is not a manufacturing process.  The important  test  is  that  the chemical  structure of the ore should remain the same.  Whether the ore  imported  is  in  powder  or  granule  form  is wholly immaterial.  What has been to be seen is what is meant in international trade and in the market by wolfram ore containing 60% ore more WO3.  On that there is a preponderation weight of  authority  both  of  exports  and books  and of writings on the subject which show that wolfram ore when detached and taken out from the rock in which it  is embedded either by crushing the rock  and  sorting  out  pieces  of  wolfram  or  by washing  or  magnetic  separation  and  other similar  and  necessary  process  it  becomes treated with any chemical it cannot be classified as process”.

18. The Tribunal  also took note of  some more judgments  wherein

removal of impurities from a mined product was not treated as

manufacturing process.  On that basis, the Tribunal came to the

conclusion that roasting of an ore, to obtain concentrate, does not

amount to manufacture, as it only removed the impurities and the

2 (1972) 2 SCC 620

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recoverable content of metal oxide is enhanced thereby.  Thus,

ore  and  concentrate  are  one  and  the  same  as  concentrate

remains ore and only impurities were removed therefrom.  Again,

referring  to  the  judgment  of  this  Court  in  MMTC (supra),  the

Tribunal made the following observations:

“...Therefore, 'Ore' is genus and 'Concentrate' is species.   Therefore,  under  Central  Excise exempting ore concentrates of ores would also be  exempted.   Sl.  No.10  of  Notification  No. 5/98-CE grants unconditional exemption to ores falling under Heading 26.01 to 26.17.  Applying the decision of  the Supreme Court  in MMTC's case, the expression 'ores' in the notification will include 'concentrates' also.  The mention of ores and concentrates separately  in  Heading 26.03 does  not  go  against  the  above  arguments. Even  when  an  entry  does  not  mention concentrate but refer only to ore, the Supreme Court  in  MMTC case holding that  concentrate will be classified as ores will therefore, applying same principle  while  construing the word 'ore' appearing in the Notification No. 5/98 will call for coverage of the concentrate.  It is clear from the judgment  of  Supreme Court  in  MMTC's  case, that 'ore' is genus and 'concentrate' a species. Therefore,  separate  mention  of  'ore'  and 'concentrate' in Heading 26.03 ipsofacto will not imply  they are different.   Therefore,  term 'ore' covered by Notification  No.  5/98 can apply  to 'concentrate' also.”

19. Thereafter, it  specifically  referred to Note 2 of  Chapter 26 and

held that said Note also supported the view taken by the Tribunal

by  pointing  out  that  as  per  Note  2,  'Ores'  means  minerals  of

mineralogical species actually used in the metallurgical industry

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for the extraction of mercury of the metals,  inter alia,  of Section

XIV  to  XV  and  discussed  the  implication  of  this  Note  in  the

following words:

“The use of the imported goods is for recovery of metal.  Thus, the primary condition of Note 2 of Chapter 26 viz. the imported goods are used for  the  metals  of  Section  XV, is  satisfied,  the second condition of  Note 2 of   Chapter  26 is also  satisfied  inasmuch  as  the  imported concentrate had not been subjected to process not  normal  to  the  metallurgical  industry.  The department, in fact, has stated in the ground of appeal that by virtue of Note 2 to Chapter 26, the goods have been classified under Heading 2613.10.   Therefore,  concentrate  in  question when it satisfies and is covered under term 'ore' as  given  in  Chapter  Note  2.   The  above definition of 'ore' mentioned in Note 2 of Chapter 26 will also apply to appearing in S. No. 10 of Notification No. 5/98-CE.”

20. As per the aforesaid decision of the Tribunal which had followed

judgment of  this  Court  in  MMTC,  roasting of  ore and thereby

removing  the  impurities  from the  ore  made the  ore  known as

concentrate  but  it  was  still  covered  by  the  genus  ore  and

concentrate was only a specie of this genus.  This process did not

amount  to  any  manufacture  and,  therefore,  no  new  item,

commercially known, come into existence.   

21. Mr. Adhyaru, learned senior counsel appearing for the Revenue

submitted that the aforesaid decision was rendered in the context

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of unamended Chapter 26 and this was before the addition of

Chapter Note 4.  He pointed out that judgment in MMTC was also

of  the same vintage.   According to him,  addition of  Note 4 to

Chapter 26 made fundamental difference, thereby, rendering the

decision of MMTC and the aforesaid decision of CESTAT in M/s.

Hindustan  Gas  and  Industries  Limited inoperative  for  the

purposes  of  present  case.   He  vehemently  argued  that  the

aforesaid decisions proceeded on the basis that roasting of an

ore to obtain concentrate does not amount to manufacture.  This

basis  was  knocked  off  with  the  insertion  of  Chapter  Note  4,

thereby,  introducing  a  fictional  element,  namely,  treating  the

process of converting ores into concentrate as 'manufacture'.  He,

thus, was emphatic in his submission that now conversion of ore

into concentrate was treated as manufacture and, therefore, the

concentrate could not be treated as same product as ore and it

had  transformed  into  an  altogether  different  product.   On  that

basis, he proceeded to build up his case by submitting that Tariff

Item  2601  which  describes  the  goods  as  'iron  ores  and

concentrates, including roasted iron pyrite' clearly treated the two

items differently i.e. iron ore on the one hand and concentrate on

the other.  He also submitted that Tariff Item 2613 to which this

product  specifically  related  also  gives  the  description  as

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'Molybdenum Ores  and Concentrates' which would again mean

that  Molybdenum Ore  was different  from concentrate  and  two

were distinct items.  In the same hue, his further submission was

that exemption notification 4/2006 exempted only 'ores' and did

not exempt 'concentrate'.  He argued that when the Tariff Entry

2613  mentioned  ores  and  concentrates  but  the  exemption

notification  exempted  only  'ores'  with  conspicuous  absence  of

concentrate, such an exemption notification was to be given strict

interpretation and even if two views were possible, the view which

favours  the  Revenue  had  to  be  preferred  while  interpreting

exemption notification.

22. On this basis, grounding his plea on Chapter note 4, he made a

passionate plea that the impugned decision in appeal took into

consideration  the  aforesaid  significant  change  in  law  with  the

addition of Note 4 and decided the issue in correct perspective.

He  specifically  referred  to  the  following  discussion  in  the

impugned order wherein ores and concentrates were treated as

two different products, which reads as under:

“From the tariff description given above, the tariff uses  the  expression  “ores  and  concentrates”. Further wherever the tariff wanted to prescribe different  classification,  separate  sub-headings have been provided.  For example, in the case of  Iron ore,  separate sub-headings have been provided for iron ore lumps, iron ore fines and

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iron  ore  concentrates.   From  the  above structure,  it  is  clear  that  the  use  of  the expression  'ores  and  concentrates'  and provision of separate sub-headings of ores and concentrates  wherever  necessary,  implies  that the  legislature  consciously  made  a  distinction between  'ores'  on  the  one  hand  and 'concentrates'  on  the  other.   The  preposition “and” between the two terms is conjunctive.  If the  legislative  intention  is  that  ores  and concentrates  are  one and the  same,  then the legislature  would  have  used  the  expression “ores and concentrates.”

In the book Principles of Statutory Interpretation, 12th Edition 2010, Justice G.P. Singh at pages 477 and 478 has written as under:

“Conjunctive  and  Disjunctive  Words  'OR'  and 'AND'

The word 'or' is normally disjunctive and 'and' is normally conjunctive but at times they are read as  vice  versa  to  give  effect  to  the  manifest intention of the Legislature as disclosed from the context.  (Ishwar Singh Bindra v. State of U.P., AIR 1968 SC 360, p. 363 : (1980) 1 SCC 158; R.S. Nayak v. A.R. Antulay (1984) 2 SCC 183, pp.  224,  225  :  AIR  1984  SC  684;  M. Satyanarayana v. State of  Karnataka (1986) 2 SCC  512,  p.  515  :  AIR  1986  SC  1162).   As stated by SCRUTTON L.J.: “You do sometimes read 'or' as 'and' in a statute.  But you do not do  it  unless  you  are  obliged  because  'or' does not generally mean 'and' and 'and' does not  generally  mean  'or' (Green  v.  Premier Glynrhonwy Slate Co. (1928) 1 KB 561, p. 568, Nasiruddin v. State Transport Appellate Tribunal, AIR 1976 SC 331 p.  338 :  (1975) 2 scc 671; Municipal  Corporation  of  Delhi  v.  Tek  Chand Bhatia,  supra;  State  (Delhi  Administration  v. Puran Mal (1985)  2  SCC 589 :  AIR 1985 SC 741.

And as pointed out by LORD HALSBURY, the

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reading of 'or' as 'and' is not to be resorted to,  “unless  some  other  part  of  the  same statute  or  the  clear  intention of  it  requires that to be done.” (Mersey Docks and Harbour Board  v.  Henderson  Bros.  (1888)  13  AC  595 (HL) p. 603.  See further, Puran Singh v. State of M.P.,  AIR  1965  SC  1583  p.  1584,  (para  5); Municipal  Corporation  of  Delhi  v.  Tek  Chand Bhatia, supra.

But  if  the  literal  reading  of  the  words  is  less favourable  to  the  subject  provided  that  the intention  of  the  legislature  is  otherwise  quite clear. [A.G.  v.  Beauchamp  (1920)  1  KB  650;  R.  v. Oakes (1959) 2 All ER 92]”  

In the case before us, the expression used is “ores and concentrates” and the tariff itself has provided separate sub-headings for  these items,  wherever  it  so wanted. Thus the legislative intent is very clear, that is to treat 'ores'  and  'concentrates'  as  distinct  and  different commodities.

xx xx xx

From the principles of statutory interpretation as explained by this Court and applying these to the facts of the present case, the only reasonable conclusion that can be reached is that the legislature intended to treat 'ores'  and  'concentrates'  distinctly  and  differently. Otherwise,  there  was  no  need  for  the  legislature  to employ  these  two  terms  with  a  conjunctive  'and'  in between.   If  one  treats  ores  and  concentrates synonymously, as argued by the learned counsel for the appellant,  that  would  render  the  term  “concentrate” redundant which is not permissible.”

23. He also impressed upon this Court to keep in mind the purpose of

treating the process of roasting a manufacturing process which

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was  to  bring  the  said  product,  namely, concentrate  within  the

sweep of central excise levy.

24. The  endeavour  of  Mr.  Lakshmikumaran,  learned  counsel

appearing  for  the  assessee,  on  the  other  hand,  was  to

demonstrate that addition of Note 4 had not made any difference

to  the  legal  position.   He  submitted  that  the  basic  concept

underlined in MMTC case remained the same which was that ore

is genus and concentrate is only a specie and, therefore, even if it

is  now to  be  treated  as  'manufacture',  still  for  the  purpose  of

applying exemption notification concentrate would still be covered

by umbrella term, 'ore' of which it was a specie.  He reiterated

that roasting of ore was only to remove impurities so that it could

be used in the manufacture of Ferro-Alloys.  He also argued that

even 'roasted ore' was in Chapter Heading 26 and the process,

as defined in the technical dictionaries, makes it only an enriched

ore.  He further argued that Chapter Note 2, which was the basis

of  decision  in  the  case  of  M/s.  Hindustan  Gas and Industries

Limited still occupies the field in the statute book, viz., Chapter 26

and  reading  thereof  makes  it  amply  clear  that  ore  and

concentrate are one and the same product.  He submitted that in

the impugned order, the Tribunal  has only considered Chapter

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Note 4 added by amendment in 2011 and altogether omitted to

discuss  the  implication  of  Chapter  Note  2  which  rendered  the

impugned decision as erroneous.  He also argued that the basic

principle enshrined in MMTC judgment, namely, ore is genus and

concentrate is specie, still remains valid even after the addition of

Chapter Note 4.

25. We  have  thoughtfully  considered  the  respective  arguments  of

counsel for both the parties.

26. Before  we discuss  these  arguments  and  arrive  at  a  particular

conclusion, we would like to recapitulate the salient features of

the case about which there is no dispute:

(a)  The assessee is seeking benefit of Notification No.4/2006-CE and

relies  upon  Sl.  No.4  thereof  which  totally  exempts  goods

described therein from payment of excise duty.  The goods which

are  otherwise  excisable  are,  thus,  exempted  from payment  of

duty.  Description of these goods in Sl. No.4 is 'Ores'.

(b)  The goods imported by the assessee fall in Chapter 26 of Central

Excise Tariff Act.  Particular Tariff Item is 2613 against which the

description  of  goods  given  under  the  said  Tariff  Item  is

'Molybdenum Ores and Concentrate'.

(c)  The goods imported by the assessee were not Molybdenum Ores

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in original form as mined.  They had admittedly undergone the

process of  roasting and after  the roasting,  they are  known as

'concentrates'.  Even the assessee has described these goods as

'Roasted Molybdenum Ore Concentrate.'

(d)  Chapter Note 4 treats the aforesaid process of roasting Ores into

Concentrate as 'manufacture'.

27. On the aforesaid facts, case of the assessee was that since ores

include  concentrates,  assessee  had  claimed  exemption  from

payment of CVD under Notification No. 4/2006-CE.  In support of

this claim that even after roasting, concentrates remain ores only

on the plea that ores is genus and concentrates is specie thereof,

the assessee refer to literature on chemical technology and also

its earlier judgment in M/s. Hindustan Gas and Industries Ltd.

case which,  in  turn,  relied upon the judgment  of  this  Court  in

MMTC case.   We have already analysed the decision in  M/s.

Hindustan Gas and Industries Ltd. case.  The entire decision

proceeds  on  the  basis  that  roasting  of  an  ore  to  obtain

concentrate  does  not  amount  to  manufacture  specially  when

roasting is a process by which impurities in the ore are removed

and  the  recoverable  content  of  metal  oxide  is  enhanced.   In

support,  reference was made to Kirk-Othmer's Encyclopedia of

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Chemical Technology.  Likewise, in  MMTC  case as well,  which

was relied upon by the Tribunal, this Court had held that Wolfram

Concentrate  which  was having  minimum 65% Tungsten  Oxide

was still an ore and classifiable under Item 26.  Thus, the decision

in Hindustan Gas primarily rested on the reasoning that roasting

of an ore to obtain concentrate would not amount to manufacture

and ore  and  concentrate  are  one and the same inasmuch as

concentrate  remains  ore  and  only  impurities  are  removed

therefrom.  On this premise, it  was held that ore is genus and

concentrate is a specie thereof.

28. According to us, it is very clear from the reading of the judgment

in Hindustan Gas case that basic and the common thread which

runs throughout the decision is that subjecting ore to the process

of roasting does not amount to manufacture.  This very basis gets

knocked off with the amendment carried out in the year 2011 with

the insertion of Note 4.  Note 4 now categorically mentions that

the process of converting ores into concentrates would amount to

'manufacture'.  Therefore, it cannot now be argued that roasting

of ores and converting the same into concentrates would not be

manufacture.   For  the  same  reason,  the  judgment  in  MMTC

becomes  inapplicable  and  reliance  upon  Kirk-Othmer's

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Encyclopedia becomes irrelevant.  With the addition of Note 4, a

legal friction is created treating the process of converting ores into

concentrates  as  manufacture.   Once  this  is  treated  as

manufacture,  all  the  consequences  thereof,  as  intended  for

creating  such  a  legal  friction,  would  automatically  follow.

Following shall be the inevitable implications:

(a)   It  is  to  be  treated  that  Molybdenum  Ore  is  different  from

concentrate.   That  is  inherent  in  treating  the  process  as

'manufacture'  inasmuch  as  manufacture  results  in  a  different

commodity from the earlier one.  Section 2(f) defines this term as

under:

“manufacture” includes any process,-

(i)  incidental or ancillary to the completion of a manufactured product;

(ii)  which is specified in relation to any goods in the  Section  or  Chapter  notes  of  the  First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture; or

(iii)  which, in relation to the goods specified in the  Third  Schedule,  involves  packing  or repacking of such goods in a unit container or labelling or  re-labelling of  containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer.”

(b)  The purpose of treating concentrate as manufactured product out

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of  ores  is  to  make  concentrates  as  liable  for  excise  duty.

Otherwise,  there  was  no  reason  to  deem  the  process  of

converting ores into concentrates as manufacture.   

29. Once the aforesaid legal repercussions are taken note of, as a

fortiori, it becomes obvious that Notification No. 4/2006-CE which

exempts only ores would not include within itself 'concentrates'

also because of  the reason that  after  the insertion of  Note  4,

concentrate is to be treated as a different product than ores, in

law for the purposes of products of Chapter 26.   

30. This brings us to the effect of Chapter Note 2 which is retained

even after insertion of Chapter Note 4.  No doubt, as per Chapter

Note 2, 'ores' means minerals of mineralogical species actually

used in the metallurgical industry for the extraction of mercury, of

the metals of heading 2844 or of the metals of Section XIV or XV,

even if they are intended for non-metallurgical purposes.  As per

this note,  metals  of  Section XV would be included in the term

'ores'.  However, after the insertion of Chapter Note 4, these two

Notes, namely, Note 2 and Note 4 have to be read harmoniously.

If  we  accept  the  submission  of  the  learned  counsel  for  the

assessee  predicated  on  Note  2,  then  Note  4  even  after  its

conscious inclusion, would be rendered otiose which cannot be

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countenanced.  Therefore, Note 2, when seen along with Note 4,

has to govern itself in limited territory.  On the basis of deeming

fiction created by Note 4, once we arrive at the conclusion that

process of roasting of Ore amounts to manufacture and it creates

a  different  product  known  as  Concentrate,  for  the  purpose  of

exemption  notification,  which  exempts  only  'Ores'  it  is  not

possible  to  hold  that  Concentrate  will  still  be  covered  by  the

exemption  notification.   Therefore,  harmonious  construction  of

Note 2 and Note 4 would lead us to hold that in those cases when

Note 4 applies and Ores becomes a different product, it ceases to

be Ores.

31. We, thus, are of the opinion that in the impugned judgment, the

Tribunal has rightly arrived at the conclusion that by virtue of Note

4, concentrate has to be necessarily treated as different from ores

which  is  deemed  as  manufactured  product  after  Molybdenum

Ores underwent the process of roasting.  Once we keep in mind

that  conversion  of  ores  into  concentrate  is  considered  as

manufacture  and,  therefore,  becomes  liable  for  central  excise

levy, exemption Notification No. 4/2006-CE is to be interpreted in

this  light  as  the  Legislature  has  intended  to  treat  ores  and

concentrates as two distinct items and Notification No. 4/2006-CE

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exempts only 'ores', concentrates automatically falls outside the

purview of said notification.  It  is  rightly argued by the learned

senior counsel for the Revenue that exemption notifications are to

be  construed  strictly  and  even if  there  is  some doubt,  benefit

thereof shall not enure to the assessee but would be given to the

Revenue.   This  principle  of  strict  construction  of  exemption

notification is now deeply ingrained in various judgments of this

Court taking this view consistently.   

32. In M/s. Navopan India Ltd., Hyderabad v. Collector of Central

Excise  and  another3,  this  principle  of  interpretation  of  an

exemption notification was summarised in the following words:  

“We  are,  however,  of  the  opinion  that,  on principle, the decision of the Court in Mangalore Chemicals  -and  in  Union  of  India  v.  Wood Papers,  referred  to  therein  -represents  the correct view of law.  The principle that in case of ambiguity, a taxing statute should be construed in  favour  of  the  assessee  -assuming  that  the said principle is good and sound -does not apply to  the  construction  of  an  exception  or  an exempting provision; they have to be construed strictly.  A person invoking an exception or  an exemption  provision  to  relieve  him  of  the  tax liability must establish clearly that he is covered by  the  said  provision.   In  case  of  doubt  or ambiguity, benefit of it must go to the State.  This is  for  the  reason  explained  in  Mangalore Chemicals and other decisions, viz., each such exception/exemption  increases  the  tax  burden on  other  members  of  the  community correspondingly.  Once, of course, the provision

3 1994 (73) ELT 769 (SC)

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is  found  applicable  to  him,  full  effect  must  be given to it.  As observed by a Constitution Bench of  this  Court  in  Hansraj  Gordhandas  v.  H.H. Dave, (1969) 2 SCR 253 that such a Notification has to be interpreted in the light  of  the words employed by it and not on any other basis.  This was so held in the context of the principle that in a  taxing  statute,  there  is  no  room  for  any intendment, that regard must be had to the clear meaning of the words and that the matter should be  governed  wholly  by  the  language  of  the notification,  i.e.,  by  the  plain  terms  of  the exemption.”

33. Without multiplying the case-law, we refer to the latest judgment

of  this  Court  in  IVRCL  Infrastructure  &  Projects  Ltd.  v.

Commissioner of Customs, Chennai4 wherein this principle is

reiterated in the following manner:

“4.   ...We have heard learned Counsel  for  the parties.  We find that the first argument made by Shri  Lakshmikumaran  can  be  disposed  of immediately.  The subject matter before us is an exemption notification issued under  Section 25 of  the  Customs  Act,  1962.   The  interpretative notes  that  have  been  referred  to  by  Shri Lakshmikumaran are in the Customs Tariff Act. Note  2(a)  referred  to  by  Shri  Lakshmikumaran reads as follows:

“2.(a)  Any reference in a heading to an article shall  be  taken  to  include  a  reference  to  that article incomplete or unfinished, provided that, as presented,  the  incomplete  or  unfinished  article has the essential  character  of  the complete  or finished article.  It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue  of  this  rule),  presented  unassembled  or dis-assembled.”

4 2015 (319) ELT 194 (SC)

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It is clear that such note will have no application to  an  exemption  notification  which  is  issued under Section 25 of the Customs Act.  Therefore, the  fact  that  an  unassembled  plant  which  is incomplete but which has the essential character of a complete plant is not the test to be applied in the  present  case.   On  the  other  hand,  the applicable  test  would  be  what  has  been  laid down  in  a  catena  of  decisions.   Two  such decisions  will  suffice.   In  Commissioner  of Customs  (Imports),  Mumbai  v.  Tullow  India Operations Ltd. (2005) 13 SCC 789 = 2005 (189) E.L.T. 401 (S.C.), this Court held:

“34.  The principles as regards construction of an exemption notification are no longer res integra; whereas  the  eligibility  clause  in  relation  to  an exemption  notification  is  given  strict  meaning where for the notification has to be interpreted in terms  of  its  language,  once  an  assessee satisfies  the  eligibility  clause,  the  exemption clause  therein  may be  construed liberally.  An eligibility  criteria,  therefore,  deserves  a  strict construction, although construction of a condition thereof may be given a liberal meaning.”

Similarly  in  G.P.  Ceramics  Private  Limited  v. Commissioner, Trade Tax, Uttar Pradesh, (2009) 2 SCC 90, this Court held:

“29.  It is not a well-established principle of law that  whereas  eligibility  criteria  laid  down in  an exemption  notification  are  required  to  be construed  strictly,  once  it  is  found  that  the applicant  satisfies  the  same,  the  exemption notification should be construed liberally.  [See CTT v. DSM Group of Industries, (2005) 1 SCC 657 (SCC para 26); TISCO v. State of Jharkhand (2005) 4 SCC 272 (SCC paras 42 to 45); State Level Committee v. Morgardshammar India Ltd. (1996) 1 SCC 108; Novopan India Ltd. v. CCE & Customs (1994 Supp. (3) SCC 606); A.P. Steel Re-Rolling Mill  Ltd. v. State of Kerala (2007) 2 SCC  725  and  Reiz  Electrocontrols  (P)  Ltd.  v. CCE (2006) 6 SCC 213.”

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Judged by this test, it is clear that a hot mix plant of  the  type  mentioned  alone  is  exempt  from payment  of  Customs duty.  Obviously, what  is meant is that such plant in its entirety must be imported albeit in an unassembled form.  Judged by this test, it is clear that the concurrent findings of  fact  of  the  Commissioner  and  the  CESTAT requires no interference by the Court inasmuch as  both  authorities  have  held  that  a  complete plant  in  an  unassembled  form  has  not  in  fact been imported...”

34. The Tribunal in the impugned judgment has also examined the

issue keeping in view the objective behind the levy of CVD.  Such

a discussion proceeds as under:

“It will be useful at this juncture to examine the object of levy of additional Customs duty (CVD).  This issue was examined at great length by this Court in the case of Hyderabad Industries Ltd. v. Union of India5 and this Court held as follows:

“15.  The Customs Tariff Act, 1975 was preceded by the Indian Tariff Act, 1934.  Section 2A of the Tariff  Act,  1934  provided  for  levy  of countervailing duty.  This section stipulated that any article which was imported into India shall be  liable  to  customs  duty  equal  to  the  excise duty for the time being leviable on a like article if produced or manufactured in India.  In the notes to clauses to the Customs Tariff  Bill  1975 with regard to clause 3 it was stated that “Clause 3 provides  for  the  levy  of  additional  duty  on  an imported  article  to  counter-balance  the  excise duty  leviable  on  the  like  article  made indigenously, or on the indigenous raw materials, components  or  ingredients  which  go  into  the making  of  the  like  indigenous  article.   This provision  corresponds  to  section  2A  of  the existing Act, and is necessary to safeguard the interests of  the manufacturers in India.”   Apart

5 1999 (108) ELT 321 (SC)

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from the  plain  language  of  the  Customs  Tariff Act, 1975 even the notes to clauses show the legislative  intent  of  providing  for  a  charging section in  the Tariff  Act,  1975 for  enabling the levy of additional duty to be equal to the amount of  excise  duty  leviable  on  a  like  article  if produced  or  manufactured  in  India.   Even though the impost under Section 3 is not called a countervailing duty, there can be little doubt that this levy under Section 3 of the Customs Tariff Act  has  been  enacted  to  provide  for  a  level playing  field  to  the  present  or  future manufacturers of the like articles in India.”  

    (emphasis supplied)

This  object  of  levy  has  to  be  kept  in  mind  while interpreting notification No. 4/2006-CE for the purposes of  levy  of  CVD  on  concentrates.   If  the  domestic manufacturer of concentrates is liable to pay excise duty on conversion of  'ores'  into 'concentrates'  in  terms of Note 4 to Chapter 26, can his interests be sub-served when concentrates imported into India are not levied to CVD at the same rate by interpretation of Notification No.  4/2006  so  as  to  construe  that  ores  includes 'concentrates' and, therefore, no CVD is leviable.  In our humble view, such an interpretation militates against the interests  of  domestic  producers  and  also  the  plain language of the notification.  Accordingly we hold that the  benefit  of  exemption  under  Notification  No. 4/2006-CE  will  not  be  applicable  to  'concentrates' imported from abroad.”

35. It was submitted by the learned counsel for the assessee that the

entire exercise is Revenue neutral because of the reason that the

assessee would, in any case, get Cenvat credit of the duty paid. If

that is so, this argument in the instant case rather goes against

the assessee.  Since the assessee is in appeal and if the exercise

is  Revenue  neutral,  then  there  was  no  need  even  to  file  the

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appeal.  Be that as it may, if that is so, it is always open to the

assessee to claim such a credit.  

36. We, thus, do not find any merit  in this appeal and dismiss the

same with cost.

.............................................J. (A.K. SIKRI)

.............................................J. (ROHINTON FALI NARIMAN)

NEW DELHI; OCTOBER 07, 2015.   

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