TMI Blog1986 (12) TMI 204X X X X Extracts X X X X X X X X Extracts X X X X ..... fertilizers - is called Naphtha Gasification by partial oxidation . The Naptha required for this purpose is procured from petroleum distributing companies. Under Notification No.l87/61-C.E., the appellants obtained concessional rate of duty by following the procedure set out in Chapter X of the Central Excise Rules, as the Naphtha obtained by them was intended for manufacture of fertilisers. 3. The Superintendent of Central Excise, Alwaye, in whose jurisdiction the appellants factory is situated, issued demands for considerable amounts said to be the duty due in respect of Naphtha procured at concessional rate of duty as per the notification but utilised for purposes other than those intended by the said notification. This demand was based on the ground that quantities of Naphtha had to be considered as having been utilised in the manufacture of non-fertiliser products and, therefore, not eligible for the concessional rate of duty as per the notification, in which case, the appellants represented to the Assistant Collector who confirmed the demand. Ultimately, the matter went up in appeal before the Appellate Collector of Central Excise, Madras. By his orders-in-appeals Nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the ground that some demands were time-barred, the Appellate Collector order as follows :- It has been contended before me that two demands, one for a sum of Rs. 8,65,412.05 and the other for Rs. 1,00,62,835.42, are barred by limitation. From the records, it is seen that the first demand was issued on 20.3.69 and the second on 13.3.72. The appellants contention that the entire amount covered by these two demands is barred by limitation is not entirely correct. If, however, any part of these two demands had been made after expiry of the period of limitation, I hereby direct that the two demands may be modified to exclude that part of the demand as is hit by time bar." 4. Subject to these modifications, the Appellate Collector confirmed all the demands. Thereafter, the appellants filed a revision application to the Government of India. These revision applications were rejected. We reproduce the entire order of the Government in this regard. The Government of India has considered the points raised in the five Revision Applications and those urged at the time of personal hearing on 24.7.1975 at Madras and observes that the expression intended for use in the relevant noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not relevant. The learned Advocate drew our attention to Item 14HH (Fertilisers) and submitted that under sub item (ii)d, Ammonium Chloride, if intended to be used in dry cell batteries, was liable to nil rate of duty. In support of his argument, the learned Counsel relied on an order of the CEGAT in Collector of Central Excise, Cochin v. FACT, reported in 1986(24) E.L.T. 388 , and another order of the Tribunal in FACT v. Collector of Central Excise, reported in 1984 E.C.R. 716 . The learned Advocate submitted that the ISI referred to Technical grade and Fertiliser grade of Ammonium Chloride but the ISI standards are only for quality control and should not be utilised for purpose of classification, when the Tariff itself did not make any difference at any grades of ISI. (iii) The learned Advocate argued that demands against the appellants could be raised only under Rule 10 of the C.E. Rules. He submitted that in view of the time-bar laid down by this rule, read with Rule 173-3, CER, the demands in Appeals Nos. 23(1967-68) and 24(1.4.68 - 31.12.71) are partly and substantially time-barred. 7. The learned JDR - Smt. J.K. Chander - opposing the arguments, submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the appellants given by the Appellate Collector of Central Excise. The order passed by the Government of India in revision application at the instance of the appellants has already been quashed by the Kerala High Court. Thus, the finding as to limitation given in favour of the appellants by the Appellate Collector of Central Excise has attained finality. Even though we might agree with Smt. Chander s contention that correct provision invokable was Rule 196 under which there is no limitation for such demands, on that ground aline, in absence of any proposal to revise it or a cross objection by the Revenue, we cannot set aside this finding in favour of the appellants. 11. One plea of the appellants is that duty should not be charged on ammonia chloride sold to battery manufacturers. They submitted that department created two artificial classes in ammonia chloride, namely, technical grade and fertiliser grade. The appellants drew our attention to item 14-HH of Customs Excise Tariff wherein item 2(d) (Notification No. 164/69) is as follows :- (d) Ammonia chloride (A) if intended to be used in the manufacture of (i) Dry cell batteries, (ii) Yeast Food, (iii) Ice (B) if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... higher purity which is stated to be of chemical grade, which is covered by the exemption provided under Notification 164/69, when such ammonium chloride of lower purity is diverted for use in dry cell batteries. We find that there is no support at all for this interpretation of the Notification. As already stated, ammonium chloride figures in the Notification without reference to purity or grade and any ammonium chloride which is used in the manufacture of dry cell batteries has been specifically exempted. In fact, it can be implied that ammonium chloride, whether of fertilizer grade or technical grade, if used as a chemical in dry cell batteries, is specifically covered for the exemption." 13. We, therefore, accept the appellants plea in this regard and hold that no duty was leviable on ammonium chloride sold to battery manufacturers. 14. Another question that was raised for decision was about the liability to duty in respect of ammonium chloride. The appellants submitted that ammonium chloride is a fertilizer according to Fertilizer (Control) Order, copy of which was filed before us. This question has already been decided in CEGAT Order, dated 27-2-1986 (supra) and, for conv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ride. 16. The second judgement cited by the learned J.D.R. is: 1984 E.C.R. 716 (CEGAT) , Special Bench C Appeal No. ED(SB)(T) A. No. 833/80-C Order No. C-354/83, dated 25-11-1983. In this matter, the Tribunal was examining the scope of Notification No. 164/69. We have already commented on this aspect. There is nothing in this judgement to support the arguments of Revenue. We, therefore, agree with the appellants arguments and order that ammonium chloride should be given the benefit of Notification No. 164/69. 17. Still another question for decision before us is liability of Naphtha used in ammonia, sold directly for non-fertilizer use, to duty. It has been pleaded for the appellants that only a small fraction of ammonia was sold to others for non-fertilizer use. The argument was that ammonia being a fertilizer, the Naphtha used for the manufacture of the same is entitled to the concessions of the notification. We do not agree with this argument. Ammonia cannot be considered as fertilizer. It has not been established before us that it is so used. The appellants were not able to show any reason why ammonia should be considered as fertilizer. 18. The appellants seek benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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