1986 (12) TMI 204 - AT - Central Excise

Tribunal decision: Naphtha duty demands upheld, Ammonium Chloride exemption confirmed.

The Tribunal partly allowed the appeals, upholding duty demands on Naphtha used for non-fertilizer purposes and confirming time-bar relief. It ruled that ... Naphtha - Concessional rate of assessment, when used for manufacture of fertilizer Issues Involved:1. Whether the use of Naphtha for manufacturing Ammonia and Ammonium Chloride entitles the appellants to concessional duty rates.2. Whether the demands for duty are time-barred.3. Classification and duty applicability of Ammonium Chloride sold to battery manufacturers.4. Liability to duty for Naphtha used in Ammonia sold for non-fertilizer use.Detailed Analysis:1. Concessional Duty Rates for Naphtha Used in Manufacturing Ammonia and Ammonium Chloride:The appellants, FACT, procured Naphtha at a concessional duty rate under Notification No. 187/61-C.E., intended for manufacturing fertilizers. The Superintendent of Central Excise issued demands for duty on the grounds that Naphtha was used for non-fertilizer products, thus not eligible for the concessional rate. The Appellate Collector confirmed these demands, stating that Ammonia and Ammonium Chloride, although generally used as fertilizers, were sold as non-fertilizer products and thus fell outside the scope of Tariff Item No. 14HH - CET. The Tribunal upheld this view, noting that Ammonia, when not marked and sold as fertilizer, does not qualify for the concessional rate under the notification.2. Time-Barred Demands:The appellants contended that certain demands were time-barred. The Appellate Collector modified the demands to exclude amounts hit by the time bar, applying Rule 10 read with Rule 173J of the Central Excise Rules. The Tribunal noted that the correct provision should have been Rule 196, which has no time limitation. However, since the Appellate Collector's order was not challenged by the Revenue, the Tribunal upheld the limitation benefit granted to the appellants, making it final.3. Classification and Duty Applicability of Ammonium Chloride Sold to Battery Manufacturers:The appellants argued that Ammonium Chloride, being a fertilizer, should not attract duty even when sold to battery manufacturers. They contended that the Department artificially created two classes of Ammonium Chloride-technical grade and fertilizer grade-without tariff basis. The Tribunal agreed with the appellants, citing Notification No. 164/69-C.E., which exempts Ammonium Chloride used in dry cell batteries from duty. The Tribunal referenced previous orders and concluded that Ammonium Chloride, irrespective of grade, qualifies for the exemption when used in battery manufacturing.4. Duty Liability for Naphtha Used in Ammonia Sold for Non-Fertilizer Use:The appellants claimed that Ammonia, being a fertilizer, should entitle the Naphtha used in its manufacture to concessional duty rates. The Tribunal rejected this argument, stating that Ammonia sold for non-fertilizer purposes cannot be considered a fertilizer under the notification. The Tribunal emphasized that the notification's clear wording requires Naphtha to be used in the manufacture of fertilizer, and Ammonia sold for non-fertilizer use does not meet this criterion.Conclusion:The appeals were partly allowed and partly rejected. The Tribunal upheld the duty demands on Naphtha used for non-fertilizer purposes and confirmed the time-bar relief granted by the Appellate Collector. It also ruled that Ammonium Chloride sold to battery manufacturers should be exempt from duty under Notification No. 164/69-C.E.