Punjab Micro Nutrients Ltd. vs Collector Of Central Excise>1990(04)LCX0071

1990(04)LCX0071

BEFORE THE CEGAT, SPECIAL BENCH ‘C’, NEW DELHI

S/Shri K.S. Venkataramani, Member (T) and G.P. Agarwal, Member (J)

PUNJAB MICRO NUTRIENTS LTD.

Versus

COLLECTOR OF C. EX.

Order No. 427/90-C, dated 24-4-1990 in Appeal No. C/2218/88-C

Cases Quoted

COLLECTOR v. POULOSE & MATHEN - ORDER NO. 179/86-C, DATED 18-3-1986 [PARA 3]

RADHIKA VITAMALT PVT. LTD. v. COLLECTOR -1985(04)LCX0042 Eq 1985 (021) ELT 0920 (Tri.) [PARAS 2, 4]

Advocated By : Smt. Archna Wadhwa, Advocate, for the Appellants.

Shri A.S. Sunder Rajan, JDR, for the Respondent.

[Order per : K.S. Venkataramani, Member (T)]. - This is an appeal against the order dated 27-4-1988 passed by the Collector of Central Excise (Appeals) New Delhi by which he had upheld the order dated 29-7-1987 passed by the Assistant Collector of Central Excise, Patiala. The facts in brief are that the appellants during the period 1-3-1986 to 9-8-1986 obtained a quantity of 369.225 M.T. of sulphuric acid and used it in the manufacture of zinc sulphate by availing exemption under Notification 81/75 dated 22-3-1975. They also obtained L-6 licence and observed formalities of Chapter X of the Central Excise Rules, 1944, which is a requirement of the notification. The Assistant Collector, however, issued a Show Cause Notice on 28-8-1986 calling upon them to show cause why Central Excise duty of Rs. 74,774.14 be not recovered from them under Section 11-A of the Central Excises & Salt Act, 1944 on the sulphuric acid brought by them for manufacture of zinc sulphate without payment of duty on the ground that with the coming into effect of the Central Excise Tariff Act, 1985, zinc sulphate no longer qualified to be fertilizer under the Central Excise Tariff as zinc sulphate did not conform to any of the fertilizers mentioned in Chapter 31 of Central Excise Tariff Act, 1985. After hearing the appellants and considering their reply to the Show Cause Notice, the demand was confirmed and the Assistant Collector’s order was upheld by the Collector (Appeals).

2. Smt. Archna Wadhwa, the learned counsel appearing for the appellants contended that prior to 1-3-1986, the department had accepted zinc sulphate as fertilizer, but the learned counsel pointed out that there was no change in the wording of the notification which does not mention any chapter or tariff heading in relation to fertilizer. Therefore, so long as the goods in question is known as a fertilizer, according to the appellants, the exemption is available to the goods under the notification. In support of their claim that zinc sulphate is a fertilizer, the appellants relied upon the Fertilizer (Control) Order which includes zinc sulphate as one of the micronutrients. The learned counsel also relied upon the Tribunal’s decision in the case of M/s. Radhika Vitamalt Pvt. Ltd. v. Collector of Central Excise, Meerut - 1985(04)LCX0042 Eq 1985 (021) ELT 0920 (Tri.) = 1985 ECR 2109 (Cegat) in which it was held by the Tribunal that agricultural grade zinc sulphate is classifiable as a fertilizer under Item 14-HH of the Central Excise Tariff. The learned counsel further argued that the recovery of duty from the appellants under Rule 196 of Central Excise Rules can be only for non-use of the material procured for the purpose for which it was so procured under duty concession. This was not the case with the appellants as admittedly, they have used the sulphuric acid in the manufacture of zinc sulphate only and in such an event, there will be no question of following the Chapter X procedure and the duty short-levied if any, as then to be demanded only from the manufacturer and not from the appellants.

3. Shri Sunder Rajan, the learned DR appearing for the department contended that under the Central Excise Tariff Act, Chapter Note 2 of Chapter 31 lays down that the term fertilizer applies only to a product of the kind used as fertilizer and containing as essential constituents atleast one of the fertilising elements, namely, nitrogen, phosphorus and potassium. None of these elements are present in zinc sulphate and cannot, therefore, be treated as fertilizer for the purposes of exemption under Notification 81/75. The decision of the Tribunal in M/s. Radhika Vitamalt Pvt. Ltd. case was with reference to the erstwhile Central Excise Tariff Item 14-HH, whereas presently, we are concerned with the fertilizer as falling under Chapter 31 of Central Excise Tariff Act, 1985 under which the Chapter Note 2 to Chapter 31 clearly excludes zinc sulphate from the ambit of fertilizer. He also referred to the letter of the Director of Agriculture, Punjab dated 3-2-1986 available in the paper-book which treats micronutrients separately from fertilizers. On liability to duty, the learned DR relied upon the CEGAT Order No. 179/86-C dated 18-3-1986 in the case of Collector of Central Excise, Cochin v. Poulose & Mathen, in which it was held that L-6 licence holder was liable to pay duty.

4. We have carefully considered the submissions made by the learned counsel and the learned Departmental Representative. The question is whether the sulphuric acid used in the manufacture of zinc sulphate would be eligible for exemption Notification No. 81/75 dated 22-3-1975. The notification runs as follows :-

“In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 and in supersession of the notification of the Government of India in the Ministry of Finance (D.R. & I) No. 74/66-CE dated 30-4-1966, the Central Government hereby exempts sulphuric acid falling under Sub-heading No. 2802.20 of the schedule to the Central Excise Tariff Act, 1985 (5 of 1986) intended for use in the manufacture of fertilizers, from the whole of the duty of excise leviable thereon :

Provided that :-

(i) the Assistant Collector of Central Excise is satisfied that the said sulphuric acid has been so used; and

(ii) in respect of such use elsewhere than in the factory of production of sulphuric acid, the procedure set out in Chapter X of the said Rules shall be followed".

It is seen that the notification, while specifying the Sub-heading 2802.20 for sulphuric acid does not do so in respect of fertilizer i.e. the notification does not spell out the exemption in terms of sulphuric acid used in the manufacture of fertilizer falling under Chapter 31 of the Central Excise Tariff Act, 1985 which means, the exemption is available irrespective of the tariff heading under which the fertilizer may be classified. It is also admitted fact that the appellants had been availing of the exemption prior to 1-3-1986 and also there was no change in the characteristic of either the raw material or the final product. The only change was in the classification of the product due to the coming to the effect of the Central Excise Tariff Act, 1985 from 1-3-1986. In such a situation, what is to be seen is whether zinc sulphate would at all be called a fertilizer. In this context, the Tribunal’s decision in the case of M/s. Radhika Vitamalt Pvt. Ltd. v. Collector of Central Excise, Meerut relied upon by the appellants is relevant because in that decision the Tribunal had considered the same material, namely, zinc sulphate and the fact whether it will be a fertilizer or not. It had also considered the aspect of the distinction between nitrogen, phosphorus and potassium, which are to be found in major fertilizers and micronutrients. The Tribunal in that case had observed thus in para 11 of the decision, “Micronutrients are a group of nutrients which are essential for plant growth and development but are required by plants in small quantities. Iron, zinc, manganese, copper, boron, molybdenum and chlorine fall in this category. It is seen from the ”Handbook on Fertilizer Usage", brought out by the Fertilizer Association of India, New Delhi, that the distinction between nitrogen, phosphorus and potassium which are to be found in the major fertilizers and micronutrients, lies in the fact that nitrogen, phosphorus and potassium are used in large quantities by plants. These are, therefore, called major or primary nutrients. Calcium, magnesium and sulphur are required relatively in small but inappreciable quantities and are called secondary nutrients. Iron, zinc, manganese, copper, boron, molybdenum and chlorine are required by plants in small quantities for their growth and development. Hence these are referred to as micronutrients or trace elements. If nitrogen, phosphorus, potassium bearing products which are used for growth and development of plants are fertilizers, it stands to reason that micronutrient bearing products are also fertilizers. Both supply essential nutrients to plants, the former to a larger extent and the latter to a smaller extent, the difference being, however, dictated by the requirements of plants for their growth and development".

Besides the above, the Tribunal had also considered the ISI Glossary of Terms and other Technical Works to come to the conclusion that zinc sulphate can be considered as fertilizer, besides noting the inclusion thereof in the Fertilizer (Control) Order as another supporting evidence. In the same decision the Tribunal had further observed that the fact that micronutrients are dealt with separate from nitrogenous, phosphatic and potassic fertilizers in technical book like ‘Manures and Fertilizers’ cannot be an argument to say that trace elements (micronutrients) are not fertilizers. The Tribunal’s decision is one which had considered whether micronutrients can be called fertilizer or not in general, in trade parlance and also technically. Therefore, the scope of its decision is not to be confined only to Item 14-HH of-Central Excise Tariff and its relevance in the present case is because of the fact, as we have pointed out above, Notification 81/75 does not specify the Chapter or the Tariff Heading with reference to the fertilizers. In this view of the matter, we see a lot of force in the contentions of the appellants and accordingly, hold that sulphuric acid used in the manufacture of zinc sulphate is eligible for exemption under Notification 81/75 dated 22-3-1975. The appeal is, therefore, allowed.

Equivalent 1990 (48) ELT 603 (Tribunal)