The processes of simple crushing and screening of run-of-mine iron ore to achieve specific sizes do not constitute 'manufacture' of 'iron ore concentrate' under Chapter Note 4, as these are not 'special treatments' that remove foreign matter to enrich the mineral content.

Per Ashok Jindal :

1. The appellant is in appeal against the impugned order wherein demand of Excise duty of Rs.8,50,65,540/- was confirmed along with interest and an equal amount of penalty under Section 11AC of the Act read with Rule 25 of the Central Excise Rules, 2002, was also imposed on the appellant.

2. The facts of the case are that the Appellant being a proprietorship concern, is engaged in the mining of iron ore and manganese ore pursuant to a mining lease granted by the Government of Odisha under the Mines and Minerals (Development and Regulation) Act, 1957 read with the Mineral Concession Rules, 1960.

2.1 The iron ore raised from the appellant’s mine is high-grade ore which requires no concentration. The ore is classifiable as iron ore lumps and fines under sub-headings 26011110/26011120/26011149 of the Central Excise Tariff and is unconditionally exempt as “ores” under Notification No. 4/2006-CE dated 01.03.2006 (Sl. No. 4) and, on supersession, under Notification No. 12/2012-CE dated 17.03.2012 (Sl. No. 56).

2.2 The actual field operations at the mine, namely (i) raising/excavation of the iron ore and (ii) crushing and screening thereof, were carried out not by the Appellant but by an independent contractor, M/s Sun Ispat Pvt. Ltd., under a Work Order dated 01.02.2010 (Exhibit A) at the rates of Rs. 150/MT (raising) and Rs. 225/MT (crushing & screening). The contractor rendered these activities as a taxable service and raised invoices charging Service Tax thereon, which was duly borne and discharged. The charges so paid are reflected in the Appellant’s ledgers (Exhibit B) and the corresponding service-tax invoices are at Exhibit C.

2.3 The iron-ore raising process, in substance, comprises: drilling and blasting of the ore body to obtain Run-of-Mines (ROM); screening of the ROM to segregate lumps and fines; crushing of the lumps to sized ore (5–18 mm); and dispatch of the sized lumps and fines from the stockpile. The process effects only size reduction and segregation as per the buyers’ requirements. No beneficiation, milling, hydraulic/magnetic separation, flotation, concentrate thickening or any other special treatment removing foreign matter (gangue) or enriching the ferrous content is carried out, and the Appellant has no concentration/beneficiation plant.

2.4 By the Finance Act, 2011, Chapter Note 4 was inserted in Chapter 26 of the Central Excise Tariff Act, 1985 (w.e.f. 01.03.2011), providing that “in relation to products of this Chapter, the process of converting ores into concentrates shall amount to manufacture.” Purporting to act on the said Chapter Note, the Department took the view that the Appellant’s crushing and screening of iron ore amounted to the manufacture of “iron ore concentrate” classifiable under sub-heading 26011150, which is excisable.

2.5 On that basis, five Show Cause Notices were issued to the Appellant covering the period March 2011 to March 2015, proposing recovery of central excise duty of Rs.8,50,65,540/- with interest and penalty, as tabulated below:

2.6 The Appellant denied the allegations and contended that crushing and screening do not amount t