Sulphuric acid for agricultural zinc sulphate manufacturing qualifies for exemption under N/N. 04/2006-CE

CESTAT Chennai held that sulphuric acid used in manufacturing agricultural grade zinc sulphate qualifies for exemption under N/N. 04/2006-CE. The tribunal followed precedents from Punjab Micro Nutrients Ltd. and Himgiri Metal Pvt. Ltd., ruling that the product meets fertilizer definition under Fertilizer (Control) Order, 1985. The classification dispute between Chapter 31 (fertilizer) and heading 28332990 was resolved in appellant's favor, allowing duty exemption benefits. The impugned order was set aside and appeal allowed.

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Issues Involved:
1. Whether the Sulphuric Acid procured without payment of duty and used in the manufacture of Agricultural Grade Zinc Sulphate is eligible for the benefit of exemption Notification No. 04/2006-CE when the product manufactured is not classified as fertilizer under Chapter 31 of CETA.

Summary:

Issue 1: Eligibility of Exemption for Sulphuric Acid
Background: The appeals were filed by M/s. ICMC Corporation Limited and M/s. IACL Private Limited, challenging the orders confirming duty demands on Sulphuric Acid procured without payment of duty and used in the manufacture of Agricultural Grade Zinc Sulphate. The Department contended that Zinc Sulphate, classified under Chapter 28, does not qualify for exemption as it is not classified as fertilizer under Chapter 31 of CETA.

Arguments by Appellants:
- Classification of fertilizer under a particular tariff heading 31 is not a pre-condition for eligibility of exemption under serial number 32 of Notification No. 04/2006-CE.
- The only condition to be satisfied is that the input 'Sulphuric Acid' should be used in the manufacture of fertilizer.
- Agricultural Grade Zinc Sulphate, though classified under Chapter 28, is used as a fertilizer in agriculture.
- Various case laws support that the classification of fertilizer is not relevant for exemption purposes.

Arguments by Revenue:
- Zinc Sulphate (Agriculture Grade) is a separate defined chemical compound, falling under Chapter 28 and not classifiable under Chapter 31 as fertilizer.
- The benefit of the exemption Notification cannot be extended as the product is not classified as fertilizer.

Judgment:
- The Tribunal noted that the relevant Notification No. 04/2006-CE exempts Sulphuric Acid used in the manufacture of fertilizer, without specifying that the fertilizer must be classified under Chapter 31.
- The Tribunal referred to several precedents where it was held that the classification of fertilizer under a particular tariff heading is not a pre-requisite for exemption.
- The Tribunal found that Agricultural Grade Zinc Sulphate is used as a fertilizer and distributed to farmers, fulfilling the condition of the exemption Notification.
- The Tribunal set aside the impugned orders and allowed the appeals, granting consequential relief to the appellants.

Conclusion:
The appeals were allowed, and the orders confirming the duty demands were set aside, recognizing that the Sulphuric Acid used in the manufacture of Agricultural Grade Zinc Sulphate qualifies for the exemption under Notification No. 04/2006-CE, irrespective of the product's classification under Chapter 28 or Chapter 31 of CETA.

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