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2020 (2) TMI 1253 - AT - Central ExciseDemand of duty on Sulphur purchased - N/N. 12/2012-CE dated 17 March 2012 - use of Sulphur for manufacture of Sulphuric Acid/Oleum which in turn is used in the Urea Plant for manufacture of Molten Urea - Revenue’s objection is that the some quantity of Molten Urea is used as input for the manufacture of Malamine and therefore, the appellants are not entitled to benefit of notification. HELD THAT:- Molten Urea which comes into existence is itself a chemical fertilizer, as held by Hon’ble Apex Court in the appellant’s own case GUJARAT STATE FERTILIZERS CO. VERSUS COLLECTOR OF CENTRAL EXCISE [1997 (2) TMI 105 - SUPREME COURT] - there are no merit in the Revenue’s case in so far as the use of Sulphur in manufacture of Urea is concerned - Exemption in respect of Sulphur used in manufacture of Urea is allowed. Use of Sulphur in the manufacture of Sulphuric Acid/Oleum which in turn used in Caprolactam Plant - HELD THAT:- Caprolactam is manufactured along with Ammonium Sulphate, which is undisputedly a chemical fertilizer, and therefore, the appellant would be entitled to avail benefit of Notification No. 12/2012-CE in respect of use of Sulphur which in turn used in the manufacture of 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. Revenue neutrality - HELD THAT:- A small quantity of Hydrozylamine Sulphate (HX/HAS) sold by the appellant and they have admitted their liability in respect of duty free Hydroxylamine Sulphate sold by them in the open market on payment of duty and their argument is only Revenue neutrality - in 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. Use of Sulphuric Acid in maintaining PH balance in cooling towers - HELD THAT:- Issue decided in INDO GULF FERTILIZERS & CHEMICALS VERSUS COMMISSIONER OF C. EX., ALLAHABAD [1999 (6) TMI 80 - CEGAT, NEW DELHI] where it was held that the benefit of Notification 81/75-C.E. in respect of sulphuric acid used in the cooling tower in appellants’ unit. Use of Sulphuric Acid in the manufacture of Phosphoric Acid (and Phospho Gypsum) which in turn used to produce Ammonium Phosphate - benefit denied on the ground that bye-product Phospho Gypsum is also manufactured and sold in the open market on payment of duty - HELD THAT:- It is not in dispute that Ammonium Sulphate is fertilizer. In this regard, the arguments in respect of Sulphuric Acid used in the manufacture of Urea would equally apply that Sulphuric Acid was in turn used for production of Ammonium Sulphate - reliance placed in the case of COMMISSIONER OF CENTRAL EXCISE, MUMBAI VERSUS M/S NATIONAL ORGANIC CHEMICAL INDUSTRIES LIMITED [2008 (11) TMI 6 - SUPREME COURT] where it was held that inevitable and automatic emergence of ethane and methane can’t be a ground for denying the exemption - benefit of exemption cannot be denied. There are no merit in the Revenue’s arguments that benefit of Notification No. 12/2012-CE dated 17 March 2012 can be denied on the ground that during manufacture of Phosphoric Acid which in turn used in the manufacture of fertilizer and Phospho-gypsum is manufactured. Penalty u/s 11AC - HELD THAT:- No penalty can be imposed under Section 11AC, as there is no apparent malafide intention and the issue relates to interpretation. However, we find that liability for Central Excise duty would arise nonetheless in respect of Sulphur used in the manufacture of Phosphoric Acid which was cleared on payment of duty. The demand except for the demand within limitation on the quantity of Sulphur used in the manufacture of Hydroxylamine Sulphate (HX/HAS) and Phosphoric Acid sold by them on payment of duty. In these circumstances the benefit of limitation is also extended - Appeal allowed in part.
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