Collr. of C. Ex. Vs. Gujarat State Fertilizer Co. Ltd. - Court Judgment

Excerpt:
1. the issue for determination in this appeal filed by the revenue is the eligibility of raw naphtha (sic) into the respondents' factory under chapter x procedure for intended use of manufacture of fertilizer, to the benefit of concessional rate of duty under notification no. 187/61-c.e, dated 23-12-1961 as amended and notification no. 75/84-c.e., dated 1-3-1984 as amended.2. the brief facts necessary for the purpose of understanding the scope of the dispute are that the respondents herein had brought raw naphtha under (sic) rate of duty for the manufacture of di-ammonium phosphate, (sic) sulphate and urea. since it appeared to the department that these (sic) products were cleared and sold for industrial use as chemicals and were (sic) put to use as fertilizer for agricultural purposes, the department was of the (sic) that the condition of the notification above mentioned, regarding end use was not satisfied, and therefore, demands were raised under rule 196 of the central excise rules, 1944 for payment of differential duty on such quantity of (sic) naphtha as was used in the manufacture of the three products cleared and used as chemicals. the period of demands ranges for november, 1981 to october, 1989. the notices were adjudicated upon and demands were con-(sic) by the assistant collector vide his order-in-original dated 15-5-1992/19-6-1992 on the ground that the three products namely di-ammonium (sic)hosphate, ammonium sulphate and urea were cleared by the respondents (sic) industrial/commercial use and not as fertilizer.the collector (appeals) allowed the appeal vide the impugned order, holding that the subject goods (sic) for classification as fertilizer even though they could be used for in-(sic) purposes and therefore, the conditions of notification no. 187/61 and notification no. 75/84 were satisfied. hence this appeal by the revenue.3. we have heard shri a.k. madan, learned dr and shri willingdon christian, learned counsel. we find that the issue of eligibility to the benefit of notification no. 75/84 had come up before the hon'ble supreme court in the (sic) of same assessees, as seen from [1997 (91) e.l.t. 3 (s.c.)]. the apex court as held that the assessees were using raw naphtha in the manufacture of ammonia and captively using the ammonia for manufacture of molten (sic) which in turn was used for manufacture of melamine which was not a fertilizer; molten urea was classifiable as a chemical fertilizer and since (sic) urea had emerged as a result of captive consumption of ammonia, the end us condition of the notification no. 75/84 was satisfied and the assessees (sic) eligible for the benefit of the notification. the supreme court held that the benefit was hot deniable by bringing in supposed intention of the government and reading 'soil fertilizer' in place of 'fertilizer' in the notification. the court further held that the fact of further use of molten urea in the manufacture (sic) melamine in a continuous process also did not detract from the fact the fertilizer had emerged out of the process of manufacture. the appeal of the assessees was allowed by the hon'ble supreme court holding that they (sic) entitled to the benefit of the notification.4. in the present case, the raw naphtha procured by the respondents first utilised in the manufacture of ammonia and ammonia in turn is captive consumed in the manufacture of di-ammonium phosphate, ammonium st. phate and urea which are admittedly fertilizers. the fact that the respondent sold the three items in question for further use by their buyers, either fertilizers or chemicals cannot be used against the respondents to deny the (sic) benefit of notification since the condition of the notification is satisfied them. following the ratio of the judgment of the hon'ble supreme court cited supra, we see no infirmity in the order passed by the collector (appeals) an accordingly uphold the same and reject the appeal.

Judgment:
1. The issue for determination in this appeal filed by the Revenue is the eligibility of raw naphtha (sic) into the respondents' factory under Chapter X Procedure for intended use of manufacture of fertilizer, to the benefit of concessional rate of duty under Notification No. 187/61-C.E, dated 23-12-1961 as amended and Notification No. 75/84-C.E., dated 1-3-1984 as amended.

2. The brief facts necessary for the purpose of understanding the scope of the dispute are that the respondents herein had brought raw naphtha under (sic) rate of duty for the manufacture of Di-ammonium Phosphate, (sic) Sulphate and Urea. Since it appeared to the department that these (sic) products were cleared and sold for industrial use as chemicals and were (sic) put to use as fertilizer for agricultural purposes, the department was of the (sic) that the condition of the Notification above mentioned, regarding end use was not satisfied, and therefore, demands were raised under Rule 196 of the Central Excise Rules, 1944 for payment of differential duty on such quantity of (sic) naphtha as was used in the manufacture of the three products cleared and used as chemicals. The period of demands ranges for November, 1981 to October, 1989. The notices were adjudicated upon and demands were con-(sic) by the Assistant Collector vide his Order-in-Original dated 15-5-1992/19-6-1992 on the ground that the three products namely Di-ammonium (sic)hosphate, Ammonium Sulphate and Urea were cleared by the respondents (sic) industrial/commercial use and not as fertilizer.

The Collector (Appeals) allowed the appeal vide the impugned order, holding that the subject goods (sic) for classification as fertilizer even though they could be used for in-(sic) purposes and therefore, the conditions of Notification No. 187/61 and Notification No. 75/84 were satisfied. Hence this appeal by the Revenue.

3. We have heard Shri A.K. Madan, learned DR and Shri Willingdon Christian, learned Counsel. We find that the issue of eligibility to the benefit of Notification No. 75/84 had come up before the Hon'ble Supreme Court in the (sic) of same assessees, as seen from [1997 (91) E.L.T. 3 (S.C.)]. The Apex Court as held that the assessees were using raw naphtha in the manufacture of ammonia and captively using the ammonia for manufacture of molten (sic) which in turn was used for manufacture of melamine which was not a fertilizer; molten urea was classifiable as a chemical fertilizer and since (sic) urea had emerged as a result of captive consumption of ammonia, the end us condition of the Notification No. 75/84 was satisfied and the assessees (sic) eligible for the benefit of the Notification. The Supreme Court held that the benefit was hot deniable by bringing in supposed intention of the Government and reading 'soil fertilizer' in place of 'fertilizer' in the Notification. The Court further held that the fact of further use of molten urea in the manufacture (sic) melamine in a continuous process also did not detract from the fact the fertilizer had emerged out of the process of manufacture. The appeal of the assessees was allowed by the Hon'ble Supreme Court holding that they (sic) entitled to the benefit of the Notification.

4. In the present case, the raw naphtha procured by the respondents first utilised in the manufacture of ammonia and ammonia in turn is captive consumed in the manufacture of Di-ammonium Phosphate, Ammonium St. phate and Urea which are admittedly fertilizers. The fact that the respondent sold the three items in question for further use by their buyers, either fertilizers or chemicals cannot be used against the respondents to deny the (sic) benefit of Notification since the condition of the Notification is satisfied them. Following the ratio of the judgment of the Hon'ble Supreme Court cited supra, we see no infirmity in the order passed by the Collector (Appeals) an accordingly uphold the same and reject the appeal.