Page 1 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

Civil Appeal No. 6088 of 2013 Page 1 of 32

Page 2 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

Civil Appeal No. 6088 of 2013 Page 2 of 32

Page 3 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

Civil Appeal No. 6088 of 2013 Page 3 of 32

Page 4 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

Civil Appeal No. 6088 of 2013 Page 4 of 32

Page 5 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,

Civil Appeal No. 6088 of 2013 Page 5 of 32

Page 6 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

Civil Appeal No. 6088 of 2013 Page 6 of 32

Page 7 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

Civil Appeal No. 6088 of 2013 Page 7 of 32

Page 8 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.

Civil Appeal No. 6088 of 2013 Page 8 of 32

Page 9 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:

Civil Appeal No. 6088 of 2013 Page 9 of 32

Page 10 Tariff ItemDescription of goods UnitRate 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

RateCondition

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

Page 11 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 others

1

.

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

Civil Appeal No. 6088 of 2013 Page 11 of 32

Page 12 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

Civil Appeal No. 6088 of 2013 Page 12 of 32

Page 13 Corporation v. Union of India and others

2

. 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

Civil Appeal No. 6088 of 2013 Page 13 of 32

Page 14 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

Civil Appeal No. 6088 of 2013 Page 14 of 32

Page 15 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

Civil Appeal No. 6088 of 2013 Page 15 of 32

Page 16 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

Civil Appeal No. 6088 of 2013 Page 16 of 32

Page 17 '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

Civil Appeal No. 6088 of 2013 Page 17 of 32

Page 18 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

Civil Appeal No. 6088 of 2013 Page 18 of 32

Page 19 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.

xxxx 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

Civil Appeal No. 6088 of 2013 Page 19 of 32

Page 20 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

Civil Appeal No. 6088 of 2013 Page 20 of 32

Page 21 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

Civil Appeal No. 6088 of 2013 Page 21 of 32

Page 22 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

Civil Appeal No. 6088 of 2013 Page 22 of 32

Page 23 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

Civil Appeal No. 6088 of 2013 Page 23 of 32

Page 24 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

Civil Appeal No. 6088 of 2013 Page 24 of 32

Page 25 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

Civil Appeal No. 6088 of 2013 Page 25 of 32

Page 26 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

Civil Appeal No. 6088 of 2013 Page 26 of 32

Page 27 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 another

3

, 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

31994 (73) ELT 769 (SC)

Civil Appeal No. 6088 of 2013 Page 27 of 32

Page 28 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, Chennai

4

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.”

42015 (319) ELT 194 (SC)

Civil Appeal No. 6088 of 2013 Page 28 of 32

Page 29 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.”

Civil Appeal No. 6088 of 2013 Page 29 of 32

Page 30 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 India

5

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

51999 (108) ELT 321 (SC)

Civil Appeal No. 6088 of 2013 Page 30 of 32

Page 31 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

Civil Appeal No. 6088 of 2013 Page 31 of 32

Page 32 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.

Civil Appeal No. 6088 of 2013 Page 32 of 32