The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside a Central Excise duty demand of ₹6.08 crore raised against M/s Miracle Sands and Chemicals on alleged manufacture and clearance of titanium concentrates, holding that though the process amounted to “manufacture”, the entire demand was barred by limitation. 

The bench of Justice P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member), held that the processes undertaken by the assessee converted ores into concentrates falling under CETH 26140020 after insertion of Note 4 to Chapter 26 of the Central Excise Tariff Act, 1985. However, it simultaneously ruled that the Revenue failed to justify invocation of the extended period under Section 11A(4) of the Central Excise Act, 1944. 

The dispute arose from an Order-in-Original dated March 15, 2018 confirming excise duty of ₹6,08,35,533 along with interest and equivalent penalty on “concentrated ores” manufactured and cleared during the period from March 1, 2011 to June 7, 2012. 

According to the Department, the assessee procured ilmenite and rutile sands, both indigenously and through imports, and subjected them to mineral separation processes using mechanical equipment. The Revenue alleged that these activities resulted in “high-grade sands” containing 70% and 80% mineral concentration and therefore amounted to manufacture after insertion of Chapter Note 4 in Chapter 26 with effect from March 1, 2011. 

The Department also alleged suppression of manufacture, clandestine removals and wrongful non-payment of excise duty, contending that the evasion came to light only during departmental audit conducted in January 2014. 

Before the Tribunal, the assessee argued that no chemical treatment, roasting or metallurgical transformation was undertaken and only physical and mechanical separation processes were used to segregate mineral sands from naturally occurring beach sand. It contended that the chemical composition of the material remained unchanged and therefore no “concentrate” emerged. 

The assessee further relied on earlier judicial precedents and CBEC circulars to argue that levy could arise only when ores underwent special treatment resulting in concentrates. It also claimed that clearances to 100% Export Oriented Units (EOUs) should not be denied exemption merely because CT-3 procedures were not followed, especially when substantive receipt and utilization of goods stood established. 

The Tribunal examined several precedents including the Kolkata Bench ruling in Indian Rare Earths Ltd., Chennai Bench rulings in V.V. Minerals and Beach Minerals Company, and the Supreme Court’s judgment in Tata Steel Ltd. It observed that after insertion of Note 4 to Chapter 26, the legal fiction created by the tariff entry specifically treated conversion of ores into concentrates as “manufacture”. 

Rejecting the assessee’s contention that only chemical treatment or roasting could produce concentrates, the Tribunal held that physical and mechanical beneficiation processes such as washing, magnetic separation and gravity separation were sufficient to convert ores into concentrates under the tariff scheme. 

The Bench observed that the processes carried out by the assessee removed foreign matter from beach sand and aided further metallurgical operations while also ensuring economical transportation, thereby satisfying the HSN explanatory definition of “concentrates.” 

Accordingly, the Tribunal held that the activities undertaken by the assessee amounted to manufacture and the goods were correctly classifiable under CETH 26140020. 

However, on limitation, the Tribunal came down heavily on the Department.

The Bench noted that there existed prolonged litigation and interpretational uncertainty regarding whether physical and mechanical separation processes alone could amount to manufacture. It also recorded that even government entities such as Indian Rare Earths Ltd. and Kerala Minerals & Metals Ltd. had allegedly started paying duty only from June 2012. 

The Tribunal observed that the assessee had amended its registration certificate in 2012 after becoming aware of the tariff amendment and had started paying duty from June 8, 2012 onwards. It further noted that departmental officers themselves appeared unaware of the tariff amendment despite the assessee filing amended registration details and statutory returns. 

In a significant observation, the Tribunal stated that the Department should have informed registered assessees about changes introduced in the tariff rather than “catching an unsuspecting assessee later and slapping the charge of duty evasion.” 

The Bench held that mere non-disclosure in returns could not automatically establish suppression where the assessee was acting under a bona fide belief arising from a disputed and interpretational legal position. 

It further rejected allegations of clandestine removal, observing that there was no allegation of unaccounted production or removals without invoices and that all transactions were reflected in books of accounts. 

On clearances made to 100% EOUs, the Tribunal ruled that substantive exemption benefits could not be denied merely for procedural lapses like non-submission of CT-3 certificates, especially when receipt and intended use of goods by EOUs stood demonstrated. Applying the legal maxim Lex non cogit ad impossibilia, the Bench held that law cannot compel compliance with procedures where the assessee itself believed the goods were non-dutiable. 

The Tribunal also accepted the assessee’s plea for exclusion of “as such” sales from turnover computation, observing that the Department failed to conduct proper investigation or produce evidence disproving the assessee’s claim that certain mineral sands were sold without processing. 

The Tribunal held that the extended period under Section 11A(4) was wrongly invoked and since the show cause notice dated April 1, 2016 covered the period March 1, 2011 to June 7, 2012, the entire demand was time-barred. Consequently, the duty demand, interest and penalty were all set aside.

Case Details

Case Title:  M/s.Miracle Sands and Chemicals Versus The Commissioner of GST & Central Excise

Citation: JURISHOUR-1128-CES-2026(CHE) 

Case No.: Excise Appeal No. 40741 of 2024

Date:  06.05.2026

Counsel For  Appellant: S. Jai Kumar, Advocate

Counsel For Respondent: Sanjay Kakkar, Authorized Representative

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