TaxTMI 
TaxTMI 
2009 (7) TMI 37
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....Gases on the other hand were classified under Tariff Item 14 H. By virtue of a notification dated 30.06.1966, the Central Government exempted sulphuric acid, falling in TI 14G of the First Schedule to the Excise Act, intended for use in the manufacture of fertilizers from the whole of the duty of excise. This was subject to the condition that the Assistant Collector of Central Excise was satisfied that such sulphuric acid was so used and in respect of such use elsewhere than in the factory of production, of sulphuric acid, the procedure set out in Chapter X of the Central Excise Rules was followed. 3. The petitioner, a public sector agency of the State of Gujarat primarily manufacturers fertilizers. In 1974 it set up a plant for manufacture of Caprolactum in the premises where fertilizers were manufactured by it. The petitioner mentions having a plant for manufacture of sulphuric acid including Oleum. According to the petitioner, Oleum is classifiable as a sulphuric acid and is known as "fuming sulphuric acid". The process of manufacture of Caprolactum by the petitioner was known as the "Inventa Process" which used benzene as raw material. Additionally the process involved use of....
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.... furnished in February 1974 in respect of sulphuric acid and Oleum was duly approved by the Superintendent of Central Excise on 28.02.1974; which too clearly mentioned the use of Oleum 23% in the manufacture of fertilizers. It is contended that between the period July 1974 and August 1981, 66 show cause notices were issued to the petitioner in almost similar terms as the one dated 04.09.1974 invoking the same provisions of law. On 12th August, 1976 by a show cause notice, the petitioner was required to explain why duty under Rule 9 of the Excise Rules should not have recovered, by reason of their alleged contravention of Rule 192. This too was resisted, by the petitioner, on 16.09.1976. Ultimately on 17.05.1977 the Superintendent of Central Excise directed the petitioner to clear Oleum only on payment of duty; this was appeal against. The Appellate Collector remanded the matter for decision; to the Collector of Central Excise. 6. The issue was considered by the Assistant Collector before whom the petitioner produced various materials including a note on the description regarding manufacture of Caprolactum with a flow sheet, copy of the chemical examiner's letter; an affidavit by t....
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....atute, there is a presumption that it has the same meaning. Reliance is placed for this purpose on the judgment of the Supreme Court reported as Steel Authority of India Limited Vs. Collector of Central Excise, 1997 (91) ELT 529. It is thus contended that the principal statute i.e. the Excise Act having given an extended meaning to the expression sulphuric acid, to include fuming acid, which in turn would comprehend Oleum a class of fuming acid, there would be no justification in cutting down the amplitude and effect of that expression identically used in the exemption notification which too is a part of the statute. The petitioner also relies upon an extract of Kirk Othmer Encyclopaedia of Chemical Technology, to say that Oleum is described as a fuming sulphuric acid. The petitioner also relies upon the Harmonized system of nomenclature Form II, Section VI, under Chapter 28, Heading 28.07 where Oleum is drescribed as "fuming and sulphuric acid and sulphuric acid charged with an access upto 80% of sulphuric trioxide". 9. It is next urged by Mr. Dushyant Dave learned senior counsel, that the words used in exemption notifications are to be determined in terms of heading, section an....
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....by the quasi judicial orders which were not set aside. The authorities, therefore have approved recovery of dues without following the procedure established by law. 12. The respondent argues that though TI 14G talks about Nitric, Hydrochloric and Sulphuric Acids (including fuming acids and anhydrides thereof) of all sorts, significantly the exemption notification restricts itself only to the uses of Sulphuric Acid. The second limb of the exemption notification, say the respondents, makes its mandatory that the Assistant Collector should be satisfied that the Sulphuric Acid has been so used i.e. it has been used for manufacturing Chemical Fertilizers. The respondent submits that the petitioner has been clearing the Oleum (and not Sulphuric Acid) without payment of duty under the Exemption Notification for use in the manufacture of Caprolactum (which is not a chemical fertilizers) where, during this process of manufacturing Caprolactum, a bye-product, i.e a fertilizer namely Ammonium Sulphate is obtained. 13. It is submitted that the petition averments show that the manufacturing process undertaken in this case results in 5.1 tonnes of Ammonium Sulphate as a bye-product per ton o....
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....ed out, such as the petitioner's training manual, and the collaboration agreement, with the foreign company, to say that the object of establishing the plant was caprolactum production, and not of fertilizer. 16. It is further submitted that any exemption notification has to be construed strictly. In this regard reliance is placed on State of Jharkhand & ors. v. Ambay cement & Anr. (JT 2004 10 SC 93); Novopan India Ltd. v. Collector of Central Excise (1994 73 ELT 769 SC) and M/S Healthway Dairy Products v. The Union of India (1978 ELT J 457). The respondents also cite Manglam Cement v. Asstt. Collector (47 1992 DLT 313 DB) and Dhampur Sugar v. State of Uttaranchal & ors. (2007 8 SCC 418). 17. Before embarking on the merits of the rival contentions it would be necessary to extract the two exemption notifications i.e. 1966 and 1975, they are as follows: "NOTIFICATION 14 G : (8) Under Government of India, Ministry of Finance (Department of Revenue and Insurance), Notification No.74/66 - Central Excise, dated the 30th April, 1966, the Central Government hereby exempts sulphuric acid falling under this item used in the manufacture of Chemical Fertilizers from the whole of the dut....
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....arabhai M Chemicals Vs. Collector of Central Excise, 2005 (2) SCC 168; State of Jharkhand Vs. Tata Cummins Limited 2006 (4) SCC 57). 20. In the present case the revenue's contention is that the exemption notifications only refer to sulphuric acid but do not make any further reference to the different classes of sulphuric acid. Consequently Oleum, which falls within the inclusive or extended definition of sulphuric acid under TI 14-G would not qualify for exemption. The writ petitioner on the other hand contends that the specific term "falling under this item" in relation to sulphuric acid, necessarily comprehends all such acids classifiable under TI 14G. 21. The judgment of the Supreme Court in Gujarat State Fertilizers (supra) a three Judge Bench decision is an authority for the proposition that where there is express reference in an exemption notification covering the goods amongst others to those referred in the Chapter which in turn includes a class of goods such fertilizers, no other test need to be adopted so long as the specific products or goods fall within the tariff item, to qualify for exemption. More specifically, in Steel Authority of India's case (supra) cited by ....
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....es are understood both in the technical and common parlance as having broad meaning. Therefore, if any goods or items satisfy the test of being covered in either of the expression, then it is entitled to exemption……….." In the Hindustan Platinum case (supra), the Supreme Court illustrated the application of the above rule, stating that: "…….The short question which the authorities below were required to consider was whether the term 'silver' used in the said entry should be confined to ingots which would result in the appellants not getting the benefit of the exemption notification in respect of the various items of silver manufactured by them. The Tribunal took the view that the entry contemplates only the metal and not any other article made out of silver. It rejected the appellant's contention that the term 'silver' includes silver in all forms and not merely silver as a metal pure and simple." XXXXXXX XXXXXXX XXXXXXX XXXXXXX" "………We do not see any reason why the expression 'silver' in Tariff Item 24 should be given a narrow meaning as has been done by the Tribunal. We are, therefore, inclined to think that the expression 'silver' in Tariff Item 24 should ....
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....ic acid really qualifies for exemption thus enabling the authorities to pick and choose as between one and the other kind of sulphuric acid; and two, the specific reference to tariff item 14G, which includes all kinds of description of acids falling within the broad generic term "sulphuric acid", would be rendered meaningless. The Court's finding is also supported by the fact that not all products described in TI 14G qualify for exemption and Nitric, Hydrochloric Acids do not enjoy the same benefit. 24. The second limb of the question is whether Oleum is a sulphuric acid. Here the authorities' appear to have relied upon the Condensed Chemical Dictionary, 9th edition by Gessner G. Hawley and Materials Hand Book, to conclude that sulphuric acid and Oleum were distinct and separate from each other. It was held that as against the description of sulphuric acid, as an oily, highly corrosive liquid of the composition H2SO4, with specific gravity of 1.834 and boiling point 338 degree C, Oleum was described as a mixture of sulphuric trioxide in sulphuric acid which forms fuming sulphuric acid or pyro-sulphuric acid, H2S2O7. The observations in this regard by the Appellate Collector of Ce....
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....r in another decision of the Tribunal i.e. Dhanbad Chemical Pvt. Ltd. Vs. Commissioner of Central Excise, 1999 (105) ELT 80, it was held that "fuming sulphuric acid, broadly speaking well covered the description Oleum" also. It was also observed that merely because "Oleum has been broadly mentioned in tariff heading 287.00 it does not mean that it is not a variety of sulphuric acid known by the trade name "fuming sulphuric acid"", it would be worthwhile mentioning here that in the Central Excise Tariff Act, 1985 Oleum was explicitly mentioned along with sulphuric acid in tariff heading 2807. 26. The above decisions particularly in Andhra Sugar Limited, the 10th revised edition of Condensed Chemical Dictionary by Hawley, was relied upon; in this case the authorities' relied upon older edition of the same work. In view of the above findings by the Appellate Tribunal in the two cases, this Court is inclined to accept the petitioner's contention that Oleum is "fuming sulphuric acid" answering to such description and classifiable under TI 14G. 27. The second question to be decided is the correctness of the revenue's contention - upheld concurrently by the authorities that since th....
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....st under goes on chemical change, it is often altered physically by chemically absorbed molecules of the reactants. He is of opinion that no reference is available in technical literature where is mentioned that ammonium sulphate fertilizer is manufactured by using oleum a comparatively costlier raw material as a source of supplying SO4 radical in the final product." 28. The revenue's contention is essentially that the only object of using Oleum is to produce Caprolactum, by employing the Backman Re-arrangement reaction. It is contended that even though in this process - 5.1 tonnes of ammonia sulphate is produced per every ton of Caprolactum nevertheless the basic or primarily object of this method is the production of Caprolactum. The latter i.e. Caprolactum is the lactum form of e-amino caproic acid a commonly used monomer for a polyamide nylon 6. It is used in fibre and plastics. 29. The revenue's contention is premised on its understanding that the normal or known method of manufacturing ammonium sulphate does not result in production of Caprolactum and that the process in which the petitioner engages itself results in ammonium sulphate as a merely a bye-product. 30. The c....