CVD Exemption Denied on Processed Manganese Ore: CESTAT Hyderabad Holds Washing, Crushing & Sizing Amount to Deemed Manufacture Under Chapter Note 4 to Chapter 26

Background and Context

A batch of connected appeals came up before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad, filed by multiple importers — M/s Hira Power & Steels Ltd, M/s Manganese Products Corporation, M/s Hira Electro Smelters Pvt Ltd, and M/s Raghuvir Ferro Alloys Pvt Ltd — challenging orders passed by the Commissioner (Appeals). The central dispute revolved around the denial of Countervailing Duty (CVD) exemption under Notification No. 04/2006-CE dated 01.03.2006 in relation to imported goods declared as "Manganese Ore."

The Revenue authorities took the position that the imported goods were not raw ore in their natural state but had undergone processing operations such as washing, removal of impurities, crushing, and sizing prior to shipment, effectively converting them into "Manganese Concentrates." Since the exemption under the notification was available only for ores and not concentrates, the benefit was denied. The Commissioner (Appeals) sustained this denial, and the matter was carried to the Tribunal.

Classification of Goods and Nature of the Dispute

The appellants had imported manganese ore lumps and classified them under Tariff Item 2602 00 10 of the Customs Tariff, claiming exemption from CVD. The Bills of Entry were provisionally assessed under Section 18 of the Customs Act, 1962. Upon finalization, the Original Authority concluded that the goods had undergone beneficiation processes, making them "Manganese Concentrates," and accordingly confirmed the recovery of CVD.

The core legal question before the Tribunal was:

Whether processes such as washing, crushing, screening, and sizing carried out on Run of Mine (ROM) ore before importation constitute "normal preparatory processes" associated with mining — or whether they amount to "special treatment" that converts ore into concentrate, thereby triggering the deeming provision under Chapter Note 4 to Chapter 26 of the Customs Tariff Act.

Arguments Advanced by the Appellants

Finality of Earlier Tribunal Decision

The primary contention raised by the learned Advocate for the appellants was that this very issue had been settled in the appellants' own favour in an earlier Tribunal ruling — Hira Power & Steels Ltd Vs CC, Visakhapatnam [Final Order No. A/31006-31046/2017 dt.22.06.2017] — involving different Bills of Entry. Since that order was never challenged by the Revenue, it had attained finality. Reliance was placed on the Supreme Court's ruling in UOI Vs Kaumudini Narayan Dalal [2001 (249) ITR 219 (SC)], which held that if the Revenue accepts an adverse order in one case, it cannot litigate the identical issue in another.

Absence of Departmental Evidence

It was contended that the department failed to produce any credible evidence establishing that the imported goods were concentrates rather than ore. In contrast, the appellants had furnished relevant documentation including:

Load port certificates and analysis reports from recognised laboratories
Commercial invoices for the imported consignments
Certificates from agencies at the port of loading

Nature of Processes — Not Amounting to Manufacture

The appellants argued that operations such as crushing, screening, and sizing are standard practices routinely carried out in the mining industry to prepare ore for delivery to end-users. These do not involve beneficiation and cannot be equated with concentration or manufacture in the conventional legal sense.

Reliance on HSN Explanatory Notes

The appellants drew upon the HSN Explanatory Notes to Chapter 26, which distinguish between "ores" and "concentrates" as follows:

"The term 'ore' applies to metalliferous minerals associated with the substances in which they occur and with which they are extracted from the mine... For the purposes of headings 26.01 to 26.17, the term 'concentrates' applies to ores which have had part or all of the foreign matter removed by special treatments, either because such foreign matter might hamper subsequent metallurgical operations or with a view to economical transport."

On this basis, it was submitted that concentrates arise only when special treatments are applied to remove foreign matter — not merely through routine physical operations.

CBIC Circular Support

The appellants also invoked Circular F.No.332/1/2012-TRU dated 17.01.2012, which states:

CVD Exemption Denied on Processed Manganese Ore: CESTAT Hyderabad Rules Physical Processing Constitutes Deemed Manufacture Under Chapter Note 4