TaxTMI 
TaxTMI 
TaxTMI 
2020 (2) TMI 1253
X X X X Extracts X X X X
X X X X Extracts X X X X
....le Goods) Rules, 2001 is followed. Entry 55 to the table of Notification No. 12/2012-CE dated 17 March 2012 reads as follows:- Sl. No. Table Sl. No. Chapter of heading or sub-heading or tariff item of the First Schedule Description of excisable goods Rate Condition 1 2 3 4 5 55 25030010 All goods for manufacture of fertilizers Nil 2 Learned Counsel pointed that there is no dispute regarding following the condition specified in the said notification and therefore, the only issue before the Tribunal is if the goods, namely Sulphur, procured by them availing benefit of Notification No. 12/2012-CE dated 17 March 2012 is used in the manufacture of fertilizers or otherwise. Learned Counsel pointed out that there are four different issues involved. Learned Counsel produced a flow chart which indicates the use of Sulphur in four different streams in the factory. He pointed out that each one of different stream is used and being dealt differently to establish the used of Sulphur for the manufacture of fertilizer. 3. The first issue relates to the use of Sulphur for manufacture of Sulphuric Acid/Oleum which in turn is used in the Urea Plant for manufacture o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he situation is Revenue neutral. As regards the sulphur used in the manufacture of Caprolactam which in turn used for Ammonium Sulpahte is concerned, they are entitled for the benefit of Notification No. 12/2012-CE. He pointed out that the issue is squarely covered by Hon'ble Delhi High Court decision in their own case reported at 2009 (241) ELT 190 (Delhi). In the said case, identical issue was dealt in respect of Sulphuric acid used to manufacture of fertilizers exempted under Notification Nos. 74/66-CE and 81/75-CE. He pointed out that the said decision of single Member Bench of Delhi High Court was challenged before the Division Bench of Delhi High Court by Revenue and the Division Bench dismissed the appeal of Revenue as reported at 2010 (252) ELT 339 (Del.). He argued that the said decisions were wrongly distinguished by the Adjudicating Authority on the ground that the said decision relates to use of Sulphuric Acid and not Sulphur. It is also argued that in this process, Ammonium Sulphate is only a bye-product and the Caprolactam is the main product manufactured. He pointed out that if 5 ton of Ammonium Sulphate is produced, the production of Caprolactam is just 1-ton theref....
X X X X Extracts X X X X
X X X X Extracts X X X X
....alty has been imposed under the provisions of Section 11AC which is improper as they are entitled exemption of Notification No. 12/2012-CE in respect of Sulphur used in manufacture of fertilizers. He pointed out that in respect of Sulphur used in manufacture of Hydroxyl Amine Sulphate and Phosphoric Acid sold on payment of duty, they are entitled to Cenvat credit therefore, there is no intention to evade payment of duty. 4. Learned Authorised Representative relies on the impugned order. He pointed out that impugned order differentiate the case laws relied on by the appellants. He pointed out that they are seeking to deny benefit of Notification No. 12/2012-CE on Sulphuric Acid directly used in the manufacture of Urea. He also pointed out that the said decision relates to use of raw naphtha in manufacture of Urea and not in respect of Sulphur used in the manufacture of Urea. He pointed out that in so far as Sulphuric Acid claimed to be used in the manufacture of Urea is concerned, the use of Sulphur for maintaining PH balance of cooling towers does not amount to use of Sulphur in manufacture of fertilizers. 4.1 In so far as the issue No. 2 is concerned, learned Authorised Represen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....alt Act, 1944, subject to the conditions, if any, laid down in the corresponding entry in column (3) thereof. column (2) of the Table referred to the description of goods and at Sl. No. 3 is mentioned ammonia. Thus ammonia which was manufactured by the appellant out of raw naphtha came under the sweep of the said exemption notification. The condition for earning exemption from excise duty on ammonia as laid down in column (3), which is relevant for our present purpose, is Condition No. (ii) which provides that ammonia should be used in the manufacture of fertilisers. It is not in dispute that ammonia was captively consumed by the appellant in manufacturing molten urea. Therefore, the moot question is whether ammonia could be said to have been utilised for manufacturing any fertiliser. It is no doubt true that molten urea in its turn became an input for producing the final product, namely, melamine which admittedly was not a fertiliser. But as required by the express language of the notification we have to find out whether molten urea which was manufactured out of ammonia was a fertiliser or not. It is now well settled by a catena of decisions of this Court that for deciding whether....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of excise duty by a notification issued by the Central Government. But for the said exemption notification molten urea would have been required to bear the full duty. As seen earlier, it has been classified as a chemical fertiliser under Heading 31.02 by the authorities themselves. For levying excise duty on such a commodity, namely, molten urea, if the department takes the view that it is to be subjected to excise duty as a chemical fertiliser on its clearance even for captive consumption, it is difficult to appreciate the contrary stand of the very same authority that it would cease to be a fertiliser for the purpose of exemption Notification No. 40 of 1985, even though ammonia results in the manufacture of the same excisable item, namely, molten urea. Such a stand cannot be permitted to be adopted by the department, as it would amount to blowing hot and cold at the same time. If molten urea is treated to be an excisable item under Heading 31.02 as a chemical fertiliser, it has to be treated on the same lines while construing the sweep of exemption Notification No. 40 of 1985 which expressly refers to Chapter 31 amongst others. In short, molten urea must be treated to be a fert....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a chemical fertilizer. The learned Single Judge rightly held that the exemption notifications, on a plain reading, make no mention of a by-product or a primary product. All that is to be seen is whether the use of fuming sulphuric acid results in the manufacture of a fertilizer. In this case, the answer must be in the affirmative since the use of Oleum results in the manufacture of Ammonium Sulphate which is nothing but a chemical fertilizer. 8. Under the circumstances, both the ingredients of the exemption Notifications have been met by the Respondent, namely, that it is using fuming sulphuric acid which is included in the expression sulphuric acid falling in T.I. 14G of the First Schedule to the Act and that this fuming sulphuric acid is intended for use in the manufacture and is in fact used in the manufacture of fertilizer that is Ammonium Sulphate." The impugned order seeks to distinguish this decision on the ground that Ammonium Sulphate produced by the appellant in this stream is only a bye-product and Caprolactam is main product. It has been argued that appellant produce 5 ton of Ammonium Sulphate to produce just 1ton of Caprolactam therefore, it cannot be treated as bye....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n so far as demand of duty on Sulphur used in the quantity of Hydroxylamine Sulphate sold by them in the open market needs to be confirmed. Accordingly, demand in so far as Sulphur used in the manufacture of Sulphuric Acid/Oleum used for manufacture of Ammonium Sulphate and Caprolactam, is set-aside. 8. 3rd issue relates to use of Sulphuric Acid in maintaining PH balance in cooling towers. In this context, the appellant relied on various decisions of Hon'ble Apex Court and Tribunal as referred to in Para 3.3 above. In the case of Indo Gulf Fertilizers & Chemicals vs. CCE - 1999 (112) ELT 448 (Tri.) (supra), the issue has been examined and following has been observed:- "4. We find that the issue is covered by the earlier decision of the Tribunal in appellants' own case in appeal No. E/1357/95-C and the Tribunal vide Final Order No. 435/99-C, dated 19-5-1999 allowed the benefit of Notification 81/75-C.E. in respect of sulphuric acid used in the cooling tower in appellants' unit. The Tribunal held as under : "The contention of the appellants is that the sulphuric acid is used in the cooling tower for the control of acid alkaline ratio (pH value) of the water which was later on us....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng those that are radioactive that are considered to be potentially harmful." The appellant have also relied on various decisions of Hon'ble Apex Court and High Courts as referred to in Para 3.4 above. In the case of National Organic Chemical Industries Limited reported at 2008 (232) ELT 193 (SC) (supra), the Hon'ble Apex Court observed as follows:- "6. The respondent manufactures petro chemicals falling under chapters 27 and 29 from raw naptha. Raw Naptha is cracked in cracker containing number of burners and heated upto 800 degree centigrade. After the process of cracking, Ethylene and Propylene gases are produced in the factory. These gases are also captively consumed as a refrigerant for cooling since they have the property of reducing temperatures upto 100 degree c. and 30 degree c. respectively. 7. ...... 8. It is the further case of the appellant that as per Exemption Notification No. 217/86-C.E., dated 2-4-1986, the inputs ethylene and propylene (falling under chapter 29) captively consumed in the manufacture of finished goods falling under chapter 29 are exempted from excise duty. As per the said notification such exemption will not be available to ethylene an....