1985 (4) TMI 302 - AT - Central Excise

Summary

Issues Involved:

1. Classification of Zinc Sulphate.
2. Applicability of Central Excise Duty.
3. Limitation Period for Demand Notice.
4. Interpretation of Fertilizer under Central Excise Tariff.

Summary:

1. Classification of Zinc Sulphate:
The primary issue was whether zinc sulphate (agricultural grade) manufactured by the appellants falls under Item No. 14-HH of the CET as a fertilizer or under Item No. 68 as a micronutrient. The Collector concluded that zinc sulphate is a micronutrient, not a fertilizer, as it aids plant growth but does not enhance soil fertility. The Collector's decision was supported by definitions from various authorities and the Gujarat and Madras High Court decisions, which emphasized that the tariff heading should not be interpreted broadly unless specified in the item.

2. Applicability of Central Excise Duty:
The appellants were charged with manufacturing and removing zinc sulphate without a central excise license and without paying excise duty, valued at Rs. 57,51,675.00 from 1-10-1978 to 31-12-1979. The Collector classified the product under Item 68, CET, and calculated the duty liability at Rs. 1,83,767.20, considering applicable exemptions. However, no penalty was imposed due to the circumstances of the case.

3. Limitation Period for Demand Notice:
The appellants argued that the demand notice dated 13-1-1981 was a fresh notice and was time-barred as it pertained to the period from 1-10-1978 to 31-12-1979, beyond the six-month limitation period. The Collector rejected the plea of limitation, applying the extended period of five years u/s 11-A due to alleged suppression of facts. However, the tribunal found no suppression of material facts, as confirmed by the Senior Departmental Representative, and held that the extended period did not apply.

4. Interpretation of Fertilizer under Central Excise Tariff:
The tribunal noted that "fertilizer" was not defined in Item No. 14-HH CET and should be understood in its commercial and industrial sense. Evidence from Indian Standards and the Fertilizer Control Order indicated that micronutrients, including zinc sulphate, are considered fertilizers. The tribunal found that the Collector's reliance on the Gujarat and Madras High Court decisions was misplaced, as these decisions did not pertain to the classification of micronutrients as fertilizers. The tribunal concluded that agricultural grade zinc sulphate is a micronutrient classifiable under Item No. 14-HH of the CET.

Conclusion:
The tribunal set aside the impugned order, holding that agricultural grade zinc sulphate is a fertilizer under Item No. 14-HH CET. The demand notice dated 13-1-1981 was found to be time-barred, and no duty liability was fastened on the appellants. The appeal was allowed with consequential relief.