Exemption to Imported Iron ore CONCENTRATE - CVD – Confounded Board?
DOUBTS have been raised whether on imports of Ore Concentrate classifiable under Chapter 26 of the First Schedule to the Customs Tariff Act, 1975, the benefit that is admissible to “Ore” under Serial Number 4 of the Notification No. 4/2006 – CE dated 1.3.2006 can be granted to the “Concentrate” of that Ore.
The issue was taken up for discussion during the Conference of Chief Commissioners of Customs on Tariff and allied matters held in May 2011.
The matter related to:
1. Whether the term ‘Ore' includes Concentrate, and
2. Whether insertion of Chapter Note 4 in the Chapter 26 will have any impact on the admissibility of notification benefit to Concentrates was examined.
The Conference noted the HS definitions of Ore and Concentrate are 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; it also applies to native metals in their gangue (e.g. metalliferous sands").
"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".
In view of Chapter Note 4 to Chapter 26 of CETA, 1985 inserted vide Finance Act 2011, Ores and Concentrates are two distinct products. Thus, Concentrates suffer Central Excise duty being a manufactured product. The implication for imported Concentrates is that the benefit of exemption of additional duty of Customs leviable under Section 3 of Customs Tariff Act, 1975 in terms of a notification that applies only to Ores is no longer available to Concentrates, even if Concentrates and Ores fall under the same tariff heading.
Thus, it is concluded in the Conference that the benefit of exemption notification under Sr. No. 4 of the Notification 4/2006-CE dated 1.3.2006 will be available only to imported Ores and not to imported Concentrates.
So, the Board wants suitable instructions to be given to the field formation and all pending assessments, if any, may be finalized accordingly.
All fine!, but …
Notification No. 4/2006-CE dated 1/3/2006 has been superseded by Notification No. 12/2012 dated 17.03.2012. The above clarification was given by the Board on 23.03.2012, exactly a week after the Budget and obviously this Section of the Board is not aware of what happened in the budget!!!.
The Chief Commissioners' Conference decided the issue in May 2011 and it took the Board, about a year to communicate that decision.
And does the Board really clarify anything?
Everybody knows that the exemption is not applicable for concentrates and it is only for ores. The point here is when ores such as manganese ore or chrome ores are mined, they are subjected to certain processes, which may be just washing, grinding, sizing for the purpose of removing the certain impurities. By removing these impurities, the concentration is also increased.
In view of the chapter note 4 of the Chapter 26 of excise tariff, this small usual process of concentration amounts to manufacture. Once it amounts to manufacture, the item is to be called as "concentrate" and not "ore". Thus, when such item is imported, no benefit of CVD as ORE is to be given to that item and the exemption under sl.no. 4 of Notification No/ 4/2006 –C.E (Now Sl. No. 56 of 12/2012-C.E) is not applicable.
But the importers who are importing these goods say that the processes they undertake before loading the cargo into vessels from the country of origin are common and the product still has to be called as ORE as the same is being sold to them by the seller as ORE and not concentrate.
Customs in India, have a dilemma now whether to give exemption to the product by taking it as ORE or to consider it as concentrate since the product after mining, is subjected to certain processes.
Importers and Customs Officers DDT spoke to, were unanimous that the present Board Circular is totally useless, as it does not provide any clarification. What is needed is, under the Customs Act or Customs Tariff Act or Excise Tariff Act, when can we exactly call an item as ORE and when it is a Concentrate.
As if this confusion on what is ore and what is concentrate are not enough, several notifications and circulars of the Board apart from judgements of the Courts and Tribunal use the phrase “ore Concentrate”. Now do we have ‘ore', ‘concentrate' and ‘ore concentrate'?
And is excise duty being collected on concentrates in any mines?
CBEC Circular No. 9/2012-Cus., Dated: March 23, 2012, Dated: February 27, 2012