1986 (3) TMI 181 - AT - Central Excise

Disinfectants - Insecticides pesticides weedicides and fungicides not synonymous but particular formulations with well-defined uses -

Summary

Issues Involved:
1. Whether disinfectant fluids qualify for exemption under notification No. 55/75-CE as amended by notification No. 62/78.
2. Whether the extended time-limit under Rule 9(2) was applicable for duty demand.

Issue-Wise Detailed Analysis:

1. Qualification for Exemption:

Majority Opinion:
The primary issue was whether disinfectant fluids manufactured by the appellants qualify for exemption under notification No. 55/75-CE as amended by notification No. 62/78, which exempts "Insecticides, pesticides, weedicides, and fungicides." The appellants claimed that their disinfectant fluids should be exempt as they act as pesticides or fungicides.

The Assistant Collector initially rejected this claim, but the Collector (Appeals) allowed it. The department appealed against this decision.

The respondents argued that their disinfectant fluids destroy bacteria and fungi, thus qualifying as fungicides and bactericides, and therefore, as pesticides. They supported this with letters from hospitals and reference books, including Kirk Othmer's Encyclopaedia, which stated that disinfectants destroy bacteria and fungi on inanimate objects.

The department contended that disinfectants are used on inanimate objects, unlike insecticides, pesticides, weedicides, and fungicides, which are used on living organisms. They also pointed out that disinfectants were not listed in the Schedule to the Insecticides Act, 1968.

The majority found that disinfectant fluids, being used to destroy bacteria and fungi, qualify as fungicides and bactericides. Therefore, they fall under the exemption for fungicides and pesticides. The letters from hospitals confirmed that the disinfectants were used for medical purposes to destroy bacteria and fungi, supporting the respondents' claim.

Minority Opinion (President's View):
The President disagreed with the majority, stating that disinfectants should not be deemed included under "insecticides, pesticides, weedicides, and fungicides." He emphasized that the terms in the notification should be given their specific meanings to avoid redundancy. He argued that disinfectants are commonly understood and marketed as separate from insecticides, pesticides, and fungicides. The President also noted that exemption notifications should be construed strictly, and the burden of proof lies on the claimant.

2. Applicability of Extended Time-Limit:

Majority Opinion:
The respondents argued that the demand for duty could not exceed the normal limitation period of six months, as they had informed the department of their entitlement to exemption immediately after the notification was issued. The department was fully aware of the manufacture of disinfectant fluids and their intention to cease payment of duty.

The majority agreed with this contention, finding no grounds for invoking the extended time-limit, as there was no fraud or suppression by the respondents. Therefore, the demand for duty should be limited to the normal period of six months.

Minority Opinion (President's View):
The President also agreed that the extended time-limit was not applicable. He noted that the respondents had placed the facts before the department, which had knowingly accepted that the goods were exempt from duty. Therefore, the demand should be limited to six months, and the penalty should be set aside.

Conclusion:
The majority concluded that disinfectant fluids qualify for exemption under the notification as fungicides and bactericides. The extended time-limit for duty demand was not applicable. Consequently, both appeals were dismissed, and the orders of the Collector (Appeals) were upheld.

The President, however, concluded that disinfectants do not qualify for the exemption and the orders of the Assistant Collectors should be restored, with the modification that the duty demand should be limited to six months, and the penalty should be set aside.

In summary, the majority opinion prevailed, and the appeals were dismissed, confirming the exemption for disinfectant fluids.