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Collectors of Customs Vs. J.K. Batteries and ors. - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1985)(20)ELT89TriDel
AppellantCollectors of Customs
RespondentJ.K. Batteries and ors.
Excerpt:
1. the facts leading to appeal no. 1520/81-c, briefly stated, are that m/s. j.k. batteries, bhopal, imported a consignment of 100 metric tonnes of "moanda manganese ore", valued at rs. 2,26,877/- for the manufacture of dry cell batteries and claimed its assessment to customs duty at 40%+5% ad valorem under heading no. 26.01(1) of the first schedule to the customs tariff act, 1975 (c.t.a. 1975, for short) as a metallic ore. on test, the goods were found to be battery grade manganese ore containing 84.7% of manganese dioxide (mno2). the assistant collector did not accept the importers' claim. he invoked chapter note 2 to chapter 26 of the c.t.a. 1975 and classified the goods under heading no. 25.01/32(3) and charged duty at 60%+15% ad valorem. the said order was challenged before the.....
Judgment:
1. The facts leading to Appeal No. 1520/81-C, briefly stated, are that M/s. J.K. Batteries, Bhopal, imported a consignment of 100 metric tonnes of "Moanda Manganese Ore", valued at Rs. 2,26,877/- for the manufacture of dry cell batteries and claimed its assessment to customs duty at 40%+5% ad valorem under heading No. 26.01(1) of the First Schedule to the Customs Tariff Act, 1975 (C.T.A. 1975, for short) as a metallic ore. On test, the goods were found to be battery grade manganese ore containing 84.7% of manganese dioxide (MnO2). The Assistant Collector did not accept the importers' claim. He invoked Chapter note 2 to Chapter 26 of the C.T.A. 1975 and classified the goods under Heading No. 25.01/32(3) and charged duty at 60%+15% ad valorem. The said order was challenged before the Appellate Collector of Customs, Bombay, who, by his impugned order No. S/49-51/79R dated 3-5-1980, allowed the appeal and ordered the assessment of the goods to duty at 40%+5% ad valorem under heading No. 26.01(1) of the C.T.A. 1975 read with Notification No. 128/Customs dated 2-8-1976. The Government of India, after perusing the records of the case, were tentatively of the view that the goods in question were correctly assessable under Heading No. 25.01/32(3) of the C.T.A., 1975. In this view of the matter, the Government of India proposed to set aside the order-in-appeal passed by the Appellate Collector and restore the Assistant Collector's order. Pursuant to this, the Government of India issued a show cause notice dated 5-9-1981 to J.K. Batteries under Section 131(3) of the Customs Act, 1962.

2. The dispute involved in the other Appeal No. 578/82-C is similar.

M/s. Union Carbide, Calcutta imported Battery Grade Manganese Dioxide from Moanda Mine, Gabon. The Customs Authorities classified the goods under Heading 25.01/32(3) of the C.T.A., 1975 and charged duty on that basis which was paid by the importer who, subsequently, claimed refund of duty paid, on the ground that the goods were classifiable under Heading No. 26.01. The claim was rejected by the Assistant Collector.

On appeal, the Appellate Collector set aside the Assistant Collector's order, allowed the appeal, ordered re-assessment of the goods under Heading 26.01 and consequential relief to the importer. The Central Government after perusing the records of the case, issued a notice F.No. 380/47/82-Cus. II dated 18-9-1982, proposing to review the Appellate Collector's order in terms of Section 131(3) of the Customs Act, 1962. In the notice, it was stated that Government were tentatively of the view that the original assessment of the goods was justified and that the Appellate Collector had erred in ordering re-assessment of the goods under Heading 26.01.

3. Both the above proceedings initiated by the Central Government, were transferred to this Tribunal, on its inception, in terms of Section 13IB of the Customs Act, 1962 to be disposed of as if they were appeals filed before the Tribunal.

4. We have heard Shri Sundar Rajan, Departmental Representative for the appellants. We have also heard Miss Anjali Behl for M/s. J.K. Batteries and Shri Ravindra Narain, Advocate with Shri T.M. Ansari and P.K. Ram, Advocates for Union Carbide. We have also perused the records.

5. The grounds urged in the show cause notice in the Union Carbide case proposing re-classification of the goods, briefly stated, are :- , (i) The imported goods are essentially mineral substance though obtained by highly selective mining which have been subjected to certain benefication processes. There is no chemical transformation and the essential characteristics of the product as a mineral substance remain unchanged. The goods are, therefore, not excluded from the scope of Chapter 25 of the C.T.A. 1975.

(ii) According to the literature of the supplier of the goods as well as other literature, a clear distinction is made in mining circles between battery grade MnO2 and metallurgical grade MnO2. The two have distinct characteristics and uses. The former contains a minimum of around 80% MnO2 and belongs to the gamma MnO2 group. The ore should provide high oxygen availability and should have minimum of metals like copper, nickel, etc., electro-negative to zinc. The characteristics which make a particular grade of manganese ore fit for use directly in the manufacture of dry cell battery, which have not been finally spelt out include crystal structure, surface area, pore size distribution, shape and size of the particles, electrical conductivity, surface condition, etc. These characteristics are not available in all run-of-mine (ROM) manganese ore and, therefore, highly selective mining and strict quality control is required to ensure that the product is lit for use in dry cell manufacture.

(iii) The battery grade manganese dioxide is priced considerably higher than the chemical grade.

(iv) The purport of Chapter note 2 to Chapter 26 of C.T.A, 1975 would appear to be that if mineral ore or metallurgical ore actually used in metallurgical industry had other uses which are non-metallurgical even then the metallic ore would fall under Chapter 26. However, Battery grade ore is a distinct grade used for battery manufacture and not for metallurgical purposes. Accordingly and in view of the specific entry under Heading No. 25.01/32(3), namely, "Battery Grade Manganese Dioxide" the goods would fall under that heading.

(v) The Supreme Court's decision in the M M.T.C, case on classification of Wolfram ore concentrate is prima facie not applicable to the present case, since the Customs Tariff Act of 1975 has a well defined scheme and classification principles and is not based on commercial considerations. The explanatory notes under Heading 26.01 of the Customs Co-operation Council Nomenclature (CCCN) provide that pyrolusite prepared for use in dry battery is excluded from heading 26.01 and falls under Heading 25.32. Again Nsutite, the manganese ore used in battery industry, is classified under Heading 25,32.

(vi) For all these reasons, Moanda Battery Grade Manganese ore, called also natural or Battery Grade Manganese Dioxide/ore, should merit classification under Heading 25.01/32(3) of C.T.A., 1975.

6. The show cause notice in the J.K. Batteries' ae is not as detailed in the Union Carbide case. It says that ;-v- (i) MnOa used in the manufacture of dry batteries is of two types, viz.- (a) natural ore, including chemically treated and activated; and (b) chemically or electrocytically prepared MnO2. The latter does not fall within Chapter 25, since it is not derived from ore and would, therefore, fall within Chapter 28. The battery-grade MnO2 falling under heading 25.01/32 (3) would, therefore, appear to include only natural ore, including chemically treated and activated.

(ii) Battery grade MnO2 ore has its own characteristics which are exclusively suitable for use in batteries. Since this is included in heading 25.01/32(3), only metallurgical grade of ore would fall within Chapter 26.

7. The submissions of Shri Sundar Rajan, on behalf of the appellant may be summarised thus- (i) The question is whether Moanda Natural Battery grade MnOa ore would fall for classification under heading 25.01/32(3) or 26.01.

The former was specific for battery grade MnO2. Since the words of the heading were clear and unambiguous, they should be given their natural meaning. This is the ratio of the decisions in AIR 1984-SC-684-(para 18). 1980-E.L.T.-521, 1980-E.L.T-390, and this Tribunal's Order No. 548-555 dated 21-8-1984 in the HICO case.

(ii) The combined effect of note 1 to Chapter 25 and note 2 to Chapter 26 is that if the mined ore was subjected to processes not normal to the metallurgical industry, it would not fall within Chapter 26.

(iii) The explanatory notes to the Customs Co-operation Council Nomenclature (C.C.C.N.) make it clear beyond doubt that battery grade MnO2 falls under heading 25.32 of the CCCN. This was the classification shown in the compendium of classification opinions too. Though there is no exact correspondence between the C.C.C.N. and the C.T.A , 1975, there can be no doubt about the correct classification of the subject goods under the latter, viz.

25.01/32)(3).

(iv) Referring to technical authorities, it was stated that battery grade MnO2 was different from metallurgical MnO2 ore. Reliance was placed on the book "Materials Survey". The former had to possess certain characteristics which were not required for the latter.

Several other books were also relied upon to which we shall be adverting elsewhere. It was submitted that the distinguishing features of battery grade MnO2 ore were its chemical composition, crystal structure, processing, selective mining, pricing, etc.

(v) The Supreme Court decision in the M.M.T.C. case-AIR 1972 SC-2551-was not applicable to the present case. In that case, the question was whether Wolfram ore concentrates were "ores" for the purpose of item 26 ("metallic ores" of the erstwhile Indian Tariff Act, 1934, First Schedule (I.C.T., for short). The concentrate was -: imported for the purpose of extraction of metal whereas in the present case, the ore was not imported for extraction of metal but for manufacture of dry cells.

(vi) On the other hand, the ratio of the Gujarat High Court decision in the G.S.F.C. case (S.C.A. No. 658/74, decided on 14-12-1976) was relevant. There the court ruled that the specific item for rock phosphate irrespective of its form was item No.35 I.C.T. and not the omnibus residuary item 87 I.C.T. (vii) The Appellate Collector, Calcutta had ignored the specific heading for battery grade MnO2. The Appellate Collector of Bombay had, in order No. S/49-51/79R dated 7-5-1980 (holding battery grade MnO2 ore as falling within Chapter 26, C.T.A., 1975)-relied upon by the respondents-also gone wrong in ignoring the specific entry for the more general entry. That order dealt more with electrolytic and synthetic MnO2 than natural MnO2.

The Departmental Representative concluded by submitting that the specific; heading 25.01/32(3) must prevail and the impugned orders deserved to be set aside.

8. The submissions of Shri Ravinder Narain, Counsel for Union Carbide, may be summarised thus- (i) Heading 26.01 of the C.T.A., 1975, was specific to cover all sorts of metallic ores and concentrates, whereas heading 25.01/32 covered mineral substances not elsewhere specified. Therefore, unless heading 26.01 was ruled out, the latter heading would not enter the picture.

(ii) The main submission was that the battery grade MnO2 ore was an "Ore" falling within 26.01. The alternative submission was that the goods were, in any event, /"ore concentrate", again falling under heading 26.01. In this connection, particular stress was laid on the fact that Note 2 to Chapter 26 applied only to ores and not concentrates.

(iii) That Moanda battery grade MnO2 was a natural manganese ore was an undisputed position. Note 2 to Chapter 26 explained the term "metallic ores" as meaning minerals of mineralogical species, actually used in the metallurgical industry for the extraction of metals, even if they were intended for non-metallurgical purposes.

It further provided that the heading (26.01) did not include minerals which had been submitted to processes not normal to metallurgical industry.

(iv) In answering the question to which mineralogical species the subject goods belonged, the commercial grading (relied upon by the Departmental Representative) which depend upon the end-use was not relevant but the mineralogical classification. This position was conceded even in the show cause notice. Note 2 (Supra) did not talk of trade classification. Relying upon technical authorities (to which we shall advert elsewhere), it was submitted that the Moanda ore belonged to the mineralogical species known as manganite, pyrolusite, cryptomelane, nsutite and lithiophorite though the ore might be battery grade. Once the goods were identified to belong to one or more mineralogical species, it would make no difference to its classification if it was used for manufacture of dry batteries.

(v) Moanda battery grade MnO2 ore was selected from the run of the mill (R.O.M.) ore and subjected to certain physical processes like crushing, washing and tabling-leading to a concentration of 83-85% MnO2. These are processes normal-not alien-to the mining industry.

Of 2 million tonnes of the R.O.M. ore, only about 70,000 tonnes were fit for battery manufacture. However, the process of selective mining and the physical processes to which the ore was subjected did not take it out of the category of "metallic ore". For this, reliance was placed on the Supreme Court decision in the M.M.T.C. case-AIR 1979 SC 397.

(vi) Thus, the subject goods were a concentrate of MnO2 ore of minera-logical species. It was not as if it could not be used for extraction of metal, though it might not be economical. (At this stage, in response to a query from the Bench, the Departmental Representative stated that there was no dispute about the goods being ore concentrate but he urged that these were not used for metallurgical purposes). There were no hard and fast specifications for MnO2 for battery grade application. Technical authorities including Indian Standards, would bear this. It was a trial and error method by which such MnO2 was located. (This was agreed to by the Departmental Representative). In fact, if the ore failed the tests for battery manufacture, it was diverted to the metallurgical stockpile. Such an indefinite basis could not be a tenable basis for the purpose of classification for taxation.

(vii) Thus, the goods satisfied all the tests laid down in Note 2 to Chapter 26. It was a metallic ore of mineralogical species, not subjected to processes not normal to mining industry. The fact that the goods were meant for manufacture of dry cells would not make any difference.

(viii) At any rate, the said note did not apply to ore concentrates.

The goods were ore concentrates and were covered by heading 26.01.

(ix) Heading 25.01/32 being a "not elsewhere specified" heading would not apply. The battery grade MnO2 covered by the heading was MnO2 of the types known as-activated ore, natural ore chemically treated to give improved characteristics, "synthetic" MnO2 prepared by chemical means and "synthetic" MnO2 prepared electrolytically.

The present goods were "active natural ore". In preparing the former types, non-metallurgical processes were employed and so, they would go out of Chapter 26.

(x) Ihe way to harmonise the two entries would be to construe heading 26.01 to cover active natural ore and heading 25.01/32(3) to cover activated and chemically treated (non-metallurgically treated) ores.

Concluding, Shri Ravinder Narain, submitted that the imported goods were covered by heading 26.01 and to show cause notice deserved to be vacated.

9. Miss Anjali Behl, Counsel for J.K. Batteries, adopted the arguments in the Union Carbide case. In reply, Shri Sundar Rajan submitted that- (i) Absence of any acid test to distinguish battery grade ore was no impediment to classification which would depend on trade understanding.

(ii) The price factor, the fact that rich (80-85%) MnO2 concentrate was not necessary for extraction of metal, the fact the battery grade ore was the result of selective mining all militated against classification under heading 26.01.

(iii) Though there was no dispute about the mineralogical species of the battery grade ore, the point to note was that it was not "actually used for extraction of metals." These words were construed in (61)-ITR-1966-154, in the case of D.M. Wadhwana v. Commissioner of Income-tax, West Bengal. In that case, the Calcutta High Court was construing the meaning of the word "actual" in explanation 2 to Section 24(1) of the Indian Income Tax Act, 1922. The Court said that the word "actual" means "real" as opposed to "theoretical and probable." The words "even if, they are intended for non-metallurigcal purposes" in Note 2 to Chapter 26 qualified the extracted metals. Even if the extracted metal is put to non-metallurgical use, it would not matter.

(iv) The "concentrates" covered in Chapter 26 were, concentrates of R.O.M. ores, used for extraction of metals.

(v) The C.C.C.N. notes indicated that prepared pyrolusite (a MnO2 ore) was out of Chapter 26. (At this stage, Shri Ravinder Narain clarified that the subject goods were not "prepared" ore. The "preparation" referred to non-metallurgical processes which was not the case here.) (iv) The commercial parlance test has been recognised in respect of metals-1978 ELT 439.

(vii) Heading 25.01/32 (3) was a deliberately inserted heading (not to be found in CCCN) to get over the previously faced classification problems.

10. Before we consider the rival contentions, it is expedient to set out the headings of the Customs Tariff Act, 1975, falling for consideration. They are : "25.01/32-Mineral substances, not elsewhere specified (including clay, earths, earth colours, natural abrasives, salt, sulphur, slate and stone) ; cements, all sorts, not elsewhere specified (including portland cement and clinkers) ; lima ; plasters, with a basis of calcium sulphate, whether or not coloured, but not including plasters specially prepared for use in dentistry :(1) * * * * *(2) * * * * * The title of Chapter 26 (which also is in Section V) is "Metallic Ores, Slag and Ash".

11. Note 2 to Chapter 26 on which much discussion has taken place reads : "For the purposes of Heading No. 26.01, 'metallic ores' means minerals of mineralogical species actually used in the metallurgical industry for the extraction of mercury, of the fissile or radio-active metals of Chapter 28, or of the metals of Section XIV or XV, even if they are intended for non-metallurgical purposes. The Heading does not, however, include minerals which have been submitted to processes not normal to the metallurgical industry".

12. The appellant's contention is that the battery grade MnO2 ore imported by the Respondents falls under heading 25.01/32(3) whereas the Respondents contend the correct classification is under heading 26.01(1).

13. During the course of the arguments, it emerged that there was agreement between the appellant and the Respondents on certain points.

They are :- (iii) The imported goods are "ore", belonging to certain known minera-logical species.

14. Against this background, let us examine the requirements of heading 26 01 read with Chapter Note 2. They are- (ii) To be a "metallic ore" for the purpose of the heading, the goods should be minerals of mineralogical species actually used in the metallurgical industry for the extraction of metals, even if they are intended for non-metallurgical purposes ; (iii) The goods should not, however, be minerals which have been submitted to processes not normal to the metallurgical industry.

15. The dispute thus reduces itself into a narrow compass. The appellants contend that battery grade MnO2 ore is not actually used in the metallurgical industry for the extraction of metal. Therefore, they are excluded from Chapter 26 by virtue of the said Note 2 and fall under the specific heading 25.01/32(3) for battery grade MnO2. The Respondents, on the other hand, contend that the fact that the goods are used for manufacture of dry batteries and not for extraction of metal would make no difference to their classification under heading 26.01(1).

16. We should, at this stage itself touch upon Shri Sunder Rajan's contention that the words in Note 2 "even if they are intended for non-metallurgical purposes" qualified metals. This, to our mind, is an entirely erroneous reading grammatically or otherwise. The quoted words evidently qualify "minerals".

17. Shri Sunder Rajan relied, inter alia, on the Explanatory Notes to the CCCN which, at pages 186-187, say under heading 26.01- (e) Ores which have been submitted to processes not normal to the metallurgical industry; this applies, for example, to : (i) ..., and pyrolusite prepared for use in dry batteries (heading 25.32)." He also relied on the following extract from the CCCN Compendium of Classification opinions : "25 32-Nsutite, manganese ore containing not less than 79% by weight of manganese oxides, not actually used in the metallurgical industry for the extraction of manganese but exclusively in electric batteries".

18. While the explanatory notes to the CCCN have no statutory effect or binding force in so far as the interpretation of the entries in the CTA, 1975 is concerned, this Tribunal has, in the case of Kanwar Sewing Machine Co. v. Collector of Customs, Bombay (1983 ELT 804), held that they are of considerable persuasive value in the matter of interpreting expressions occurring in the CTA, 1975 as well as in ascertaining the scope of headings therein. Of course, due regard must always be had to the express words used in the CTA, 1975.

19. One significant difference between the CCCN and the CTA, 1975 is that there is no specific entry for battery grade MnO2 in the former whereas there is one in the latter. We have, therefore, to see whether the specific entry in the CTA, 1975-heading 25.01/32(3)-is wide enough to cover the imported goods.

20. In the above context, an important thing to note is, as Shri Ravindra Narain has stated, that heading 25.01/32 covers, inter alia, mineral substances but only those not elsewhere specified. Therefore, the first thing to see is whether the imported goods fall within the scope of Chapter 26.

21. As we have already seen, it is an undisputed position that the imported goods are ores of known mineralogical species. Shri Sunder Rajan, however, contends that the species to which the goods belong are not used in the metallurgical industry for the extraction of manganese metal but for manufacture of dry batteries and, for that reason, the goods are excluded from heading 26.01. He relied on the publication "Manganese Moanda Gabon" by Comilog (Compagnie Miniere do l'Ogooue), the supplier of the goods. This describes at length the geographical and historical background of the Moanda mine in Gabon, Africa. The Moanda mine reserves are estimated to be over 200 million tons of run-of-mine (ROM) ore. The ROM ore is made up principally of MnO32.

Describing the mining process, the book says that- "Over twenty MnO2 minerals have been reported in nature. Most of the battery grade MnO2 belongs to the gamma MnO2 group, which includes the naturally occurring mineral Nsutite.

It is first selected from the ore body through analysis of drill hole content. Trucks haul the ore to the plant where it is reduced by a cone-crusher and then washed in two contra-flow rotating drum washers. The product then obtained gives a lumpy ore containing from 5 to 10% moisture. Then it is stored in big hoppers before being concentrated on shaking tables to give a final material containing a minimum of 81.5% natural MnO2.

Automatic sampling devices permit regular and comparative analysis throughout the processing steps. Should one of these checks fail, the ore will be diverted back to the metallurgical stockpile." The total production of MnO2 ore in the Moanda mine is stated now to exceed 2 million tons of metallurgical ore and about 1,00,000 tons of battery grade MnO2. The publication goes on to say that production of dry-cell batteries with natural MnO2 is one of the non-metallurgical uses of manganese. "Ore of the gamma MnO2 group is capable of treatment to bring out its natural electrical reactivity for use in dry cell batteries".

"Manganese dioxide serves an important role as a depolariser in a dry-cell. It operates as a scavenger to remove those products associated with the generation of electrical energy from an electrolyte solution which, if not removed, would prevent further electrical flow. The performance of commercial dry-cells is governed to a considerable degree by the depolarising characteristics of the manganese dioxide used.

During discharge, hydrogen gas is generated at one electrode : and unless removed a gas film will coat the electrode preventing any wetting by the water solution and thereby cutting off further electricity generation.

The role of manganese dioxide is to react with this hydrogen gas, oxidizing it to form water, and thereby maintain a wetted electrode surface.

Since the rate at which the gas is removed is determined by the reactivity of the manganese dioxide, selection of the type of manganese used is of utmost importance. With heavy-duty currents, a material with high reactivity is needed to keep pace with gas formation : with low-current drains a much less reactive material can be used.

The underlying principle of the battery operation is that zinc metal at the anode is consumed by oxidation, using part of the oxygen in the manganese dioxide cathode to provide electricity." The literature says that at Moanda, it is exceptional for a mine of this size to be able to "select" more than 5% of ROM ore for use as a depolariser in dry cells : "Ores with high electrical reactivity and as low metallic impurities as possible are selected from the ore body, then crushed to I mm, concentrated to a final product containing a minimum of 81.5% manganese dioxide, MnO2.

The laboratory at Moanda ascertains that proper areas are selected and mined. Then it implements daily chemical controls and checks electrical reactivity by making dry-cell batteries 'D' size and controlling their yield. Thorough blending is assured to offer a perfectly homogenized manganese dioxide with low impurities and regular electrical properties.

From 1965 till today the Moanda ore has reached a reputation in the trade thanks to its excellent overall properties such as battery activity, low heavy-metal impurities, high dioxide content and its reliability of supply. With a production of approximately 1,00,000 tons a year it stands high in the industry of Leclanche dry-cell batteries." 22. It can be seen from the above para that the mineral ore undergoes the processes of crushing, washing and concentration on shaking tables and blending. These are physical processes normal to mining practice.

Apparently, no chemical processing is involved. If the spot tests fail, the ore is diverted back to metallurgical stockpile. However, it is clear that the battery grade ore, though natural, is the result of highly selective mining and is distinguished by the properties of high electrical reactivity, minimal metallic impurities and perfectly homogenized MnO2 through thorough blending. While these properties are essential for manufacture of dry batteries, they are not necessary for metallurgical purposes, for, we have noted, if the ore fails to pass the test for properties required for battery-making, it is diverted to the metallurgical stockpile. Therefore, it is reasonable to conclude that Moanda battery grade manganese dioxide ore is distinguishable and different from the metallurgical grade ore.

23. What distinguishes battery grade MnO2 ore from the matallurgical ore can also be gathered from the literature placed before us-the Cornilog publication referred to : "A treatise on Industrial Minerals of India"; "Indian Standard Specification for battery grade ore (tentative)-IS : 372-1952; "Minerals Survey-Manganese" published by the Bureau of Mines, U.S. Dept. of Interior. It is clear that there is no acid test whereby a given ore conforming to a set of prescribed specifications could be distinguished as battery grade ore and labelled as non-metallurgical ore. The whole thing seems to depend on trial and error. What emerges, however, is that the ore suitable for battery manufacture should essentially belong to the (gamma) MnO2 group. It should have electrical reactivity and as low as possible metallic impurities like lead, copper, iron which are electronegative to zinc.

While the gamma crystalline structured MnCh is used for batteries where heavy drain current is required (e.g. flash light batteries), alpha and beta types are known to be used where slow-drain current is required (e.g. radio batteries).

24. Now, the question arises whether such type of MnO2-battery grade MnO2- conforms to the requirements in Note 2 to Chapter 26 of the CTA, 1975. As we have already noted, it is common ground that the goods are "ore", belonging to known mineralogical species. (We are, therefore, refraining from entering into a discussion on the not inconsiderable arguments addressed by Shri Ravinder Narain in support of these contentions). Shri Sunder Rajan contends that the mineralogical species to which battery grade MnO2 belongs are not normally used in the metallurgy industry for extraction of metal. This argument is based on the fact that only about 5% of Moanda ROM. ore is suitable for use in manufacture of dry batteries. The trade and industry recognise the battery grade ore as distinct and different from the metallurgical grade, as borne out by technical literature, the Indian Standard Specification, the United States Stockpile Specifications, etc.

However, the position which emerges from the authorities placed before us is that it is not so much the mineralogical species that determines whether a given MnO2 ore is suitable for manufacture of dry batteries.

We have already noted from the Comilog literature itself that, at Moanda, the battery grade ore comes from the same ore-body from which metallurgical grade ore is produced. So, it cannot be the mineralogical species that really decide the matter. In fact, even at present, it appears that clear-cut criteria do not exist to distinguish battery grade MnO2 from other MnO2. The distinction is made by the trial and error method based on sampling-including preparation of sample batteries for appraisal of ore performance. The performance itself is stated to depend on diverse characteristics of the ore as crystalline structure, porous nature, high oxygen availability and relative freedom from specified metallic impurities. Ores with high MnO2 content have been reported to perform sometimes not as well as ores with relatively low MnO2 content.

25. Against the above background, it seems to us reasonable to hold that Moanda battery grade MnO2 ore, not being the metallurgical grade, is not likely to be used for the extraction of metal. It is marketed, sold and bought for its special characteristics which make it suitable for manufacture of dry batteries-characteristics which are not required for the metallurgical grade. We have also noted that, at Moanda, the battery grade ore is selected from out of the run-of-mine ore by the method of spot sampling including test-manufacture of dry batteries.

And, if tests fail, the ore is diverted to the metallurgical stockpile.

Thus, both grades-battery grade and metallurgical-come from the same ore-body in the Moanda mine. We are of the opinion that though the battery grade ore has come from out of the same ore body at Moanda as the metallurgical grade, once it has been identified as the battery grade, it can no longer be said to be of a species actually used in the metallurgical industry for extraction of metal. The species stand identified with reference to the particular characteristics referred to earlier. Shri Sunder Rajan is right when he says that the use of the ore for extraction of metal should be real rather than theoretical and probable. He is supported in his contention by 61-ITR-1966-154 Note 2 to Chapter 26 would, no doubt, cover an ore of mineralogical species which is actually used for extraction of metal though the importer may have imported it for a non-metallurgical properties, his been identified as fit for manufacture of dry batteries which properties are not required for the metallurgical ore (as in the present cases) and is not used in extraction of metal but for a non-metallurgical purpose: manufacture of dry batteries. 26. Thus, the imported goods would not appear to fall under heading No. 26.01 of the C.T.A. 1975 as a "metallic ore". It is an agreed position that the goods are ore concentrates. Shir Ravinder Narain has argued that Note 2 to Chapter 26 defines only "Metallic ores" and not concentrates. Therefore, even if the present goods are held to be not "metallic ores", they should be held to be concentrates covered by the heading. This contention, in our view, has no force. IT is obvious that the concentrates specified in the heading are concentrates of metallic ores". And if a given product is not a "metallic ore" because of Note2, that concentrates of that ore also would not come with in the heading> Now, battery grade MnO2. is a mineral substance and it is not specified anywhere other than in Chapter 25 [Heading 25.01/32(3)]. It is not specified in terms in Chapter 26. Nor does is get covered by the general description "metallic ores not elsewhere specified" in heading 26.01(1) because it does not conform to Note 2 to Chapter 26 "Except where the context otherwise requires, this Chapter is to be taken to apply only to goods which are in the crude state, or which have been washed (even with chemical substances eliminating the impurities with- out changing the structure of the product), crushed, ground, powdered, levigated, sifted, screened; concentrated by flotation, magnetic separation or other mechanical, or physical processes (not including crystallisation) but not calcined or subjected to any further process other than a process specially mentioned in respect of the goods described in Note 3." The ore in the present cases conforms to the requirements laid down in the said note and, being a mineral substance, falls under the heading 25.01/32(3).

28. Some arguments were addressed touching on the scope and coverage of heading 25.01/32(3). Shri Ravinder Narain, referring to extracts from the book "Manganese Ores, Alloys, Metals and Compounds" by Roskill Information Services Ltd., London, said that there are five possible routes to MnO2 suitable for use as the depolariser in Leclanche cells :- (iii) Natural ore chemically treated to give improved characteristics.

According to the Counsel, active natural ore (the present goods) would fall within Chapter 26 and the other 4 types, or, at any rate, types 3 and 4 would fall under heading 25.01/32(3). These two latter types would be ores subjected to processes not normal to metallurgical industry and, therefore, would be out of Chapter 26 because of Note 2.

In support of this point, reference was made to "Chemically prepared manganese \dioxide for dry cells" by H. Tamura, Faculty of Engineering, Osaka University, Japan.

29. We do not think we are called upon in these proceedings to determine the entire scope and coverage of heading 25.01/32(3). We have already found that the present goods-battery grade manganese ore-fall under the said heading.

30. A point has been taken up that the goods have been imported in lumpy form and have to be subjected to some processing like powdering.

This would not, in our view, change the essential character of the goods warranting a different classification.

31. We shall now refer to the decisions cited before us. The decisions cited by Shri Sunder Rajan in support of his submission that the specific heading 25.01/32(3) should be preferred to the general heading 26.01/(1) do not need to be referred to and discussed by us. It is a well settled proposition of law that the specific should prevail over the general.

32. In the M.M.T.C. case reported in AIR 1972 S.C. 2551 the question before the Supreme Court was whether Wolfram Ore concentrate (65% WO3) fell within Item 26 of the First Schedule to the 1934 Tariff Act as a metallic ore as the assessee contended or under Item 87 ("all other articles not elsewhere specified") as contended by the Department. The Court held that the ore concentrate containing 65% WO3 (as against the ore as mined containing 0.5% to 2% and, in some cases, 7%WO3) was only ore of the merchantable quality and known commercially as such.

Further, in that case, the ore concentrate was admittedly imported for the extraction of metal which is not so in the case before us. More importantly, unlike the 1934 Act, the Customs Tariff Act, 1975 has its own scheme of interpretation of the headings, comprising, Section notes, Chapter notes and rules for interpretation, all of which have statutory force. Therefore, the M.M.T.C. decision is of no help or direct relevance or application to the facts of the present case.

33. The Gujarat High Court decision in the G.S.F.C. case-SCA No. 658/74 decided on 14-12-1976 was again concerned with the interpretation of Item No. 35 of the 1934 Tariff Act vis-a-vis Item No. 87 thereof. Apart from supporting the proposition that the specific should prevail over the general heading, the decision is of no direct relevance or application to the facts of the present cases involving interpretation of the headings in the Import Tariff Schedule of the Customs Tariff Act, 1975.Union of India and Ors. v. Tata Iron and Steel Company Ltd., 1978 E.L.T. (J 439) in support of his contention that the present goods were known in commercial parlance as Battery Grade Manganese Dioxide. In that case, the Supreme Court was concerned with the interpretation of Item No.26AA of the Central Excise Tariff Schedule. It has to be noted that the Central Excise Tariff Schedule, unlike the Customs Tariff Schedule of 1975, has no scheme of statutory notes and rules as aids to interpretation. While, therefore, the commercial parlance test has to be resorted to in the matter of interpretation of the Central Excise Tariff Schedule in the absence of any statutory definition in the Tariff Entry or the item being couched in scientific or technical terms, we are presently concerned, as already noted, with an entirely different scheme under the Customs Tariff Schedule, 1975. The decision in 1978 E.L.T 439 is again, therefore, of no application to the facts of the present case.

35. M/s J.K. Batteries have, in their reply to the Central Government's show cause notice taken up two preliminary points, they are that- (a) The Order-in-Appeal sought to be reviewed is dated 3-5-1980 whereas thercviewshowcau.se notice is dated 05-09-1981. Section 131(5) of the Customs Act, 1962 provides that where the Central Government is of the opinion that any duty of Customs has not been levied or has been short levied, no order levying or enhancing duty shall be made under that Section, unless the person affected by the proposed order is given notice to show cause against it within the time limit specified in Section 28. J.K. Batteries, therefore, argue that the review notice is hit by limitation. This contention is without any force as a similar situation arose with reference to a review notice issued by the Central Government to M/s Gcep Flash Light Industry Ltd., Delhi. The Supreme Court in its judgment dated 28-10-1966 reported in 1983 E.LT. 1596 held that since no refund pursuant to the Order-in- Appeal sought to be reviewed had, in fact, been paid, the limitation in Section 28 would not apply to the notice under Section 131(3). That decision squarely applies to the facts of the present case, (b) M/s J.K. Batteries submit that, in any event, the provisions of Section 131(4)(b) of the Customs Act are applicable to the show cause notice, it having been issued beyond the period of one year from the date of the order sought to be annulled or modified.

36. The aforesaid Section provides that no order enhancing any penalty or fine in lieu of confiscation or confiscating goods of greater value shall be passed under the Section, unless the person affected by the proposed order has been given notice to show cause against it within one year from the date of the order sought to be annulled or modified.

37. In the present case, the show cause notice issued by the Central Government does not propose either enhancement of any penalty or fine in lieu of confiscation or confiscation of goods of greater value. It is obvious that the Section referred to above does not apply to the present case.

38. In the result, we hold that the imported goods, namely, Moanda Natural Battery Grade MnO2 Ore fell for classification under heading No. 25.01/32(3) of the Customs Tariff Schedule of 1975 and not under heading No. 26.01(1) ibid.

39. Consequently, the impugned orders are set aside and the appeals allowed.


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