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TMI Blog2001 (11) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... heptene/nonene at Kandla. They were using these chemicals for manufacture of oxo chemicals at their factory. There was a dispute with regard to the classification as to whether heptene/nonene could be classified as "ATF/Motor Spirit" or "otherwise". According to the opinion of the Chief Chemist, C.R.C.L., New Delhi, if end use and flash point criteria are taken into consideration, then heptene/nonene should be classified as "Raw Naphtha". However, on the basis of smoke point and final boiling point criteria laid down under Heading 2710.21 heptene/nonene may be considered as ATF. On the basis of the Chief Chemist's opinion, it was decided by the Central Board of Excise and Customs that heptene/nonene could be classified and assessed as "Raw Naphtha" under Customs Tariff Heading 2710.00 and "A.T.F." under Central Excise Tariff Heading 2710.21. The respondent from 18-5-1992 to 28-12-1992 filed bills of entry Nos. 3101, 2679, 6574, 2206, 4212, 4395, 6771 and 5566 claiming classification as A.T.F. for both basic Customs duty and CVD but they were assessed as "Motor Spirit" for purposes of Customs duty with benefit of Notification 35/90-Cus. For the period from 17-3-1993 to 12- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner by his order dated 29-11-1996 ordering classification of the goods i.e. heptene and nonene as "raw naphtha" under Heading 2710.00 of the Customs Tariff Act and as "Aviation Turbine Fuel" under Heading 2710.21 of the Central Excise Tariff and order finalisation of the provisional assessment accordingly. He further allowed the respondents : - benefit of Customs Notification 35/90 under Sr. No. 14 for the period 1990-91 and 1991-92. - benefits of Notification 46/92 under Sr. No. 9 for the period 1992-93 - for the period 1993-94 tariff rate was applicable since no notification was available - for the period 1994 till date benefits of Notification 19/94 was extended. For the CVD purpose, the respondents were allowed to avail the relevant notifications as applicable to ATF. The Assistant Commissioner confirmed the demand of Rs. 22,57,65,172/-. Against the finalisation of the provisional assessment by the Assistant Commissioner the respondents filed an appeal before the Commissioner of Central Excise and Customs (Appeals) who by the impugned order set aside the above order of the Assistant Commissioner inter alia holding that basic conditions of Notification 158/76 were ful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to paragraph 9 of the said judgment especially following words "now a mere look at the said notifications, shows that raw naphtha was used in the manufacture of fertilisers and ammonia. It would earn the concessional rate of duty." He specifically argued that it is not uncommon for the courts to hold that the word "and" used in the statute are sometimes used to be read as "or". He cited the decision of Jay Kay & Company v. CC [1988 (38) E.L.T. 709] and ITC Ltd. v. CC,. Madras [1997 (89) E.L.T. 90]. He also cited the decisions in Consolidated Petrotech Industries Ltd. v. CC [1992 (57) E.L.T. 81] and the judgment of Supreme Court in Ishwar Singh Bindra v. State of UP reported in AIR 1968 SC 1450 at para 11 thereof. 7. In reply to the said argument learned SDR stated that Consolidated Petrotech Industries case facts are different with the facts in this case. As far as ITC Ltd. case was concerned he stated that again that was the case of interpretation of tariff heading in respect of the Customs matter. As far as the third case viz. Jay Kay & Co.'s case is concerned, especially in para 4 thereof, he stated that was the case of interpretation of the ITC Policy which is not strictl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner it is specified by Assistant Commissioner of Customs. (c) He shall produce the extract of such account duly certified by the manufacturer evidencing receipt of the imported goods in the premises or the place of manufacturer within a period of three months or such extended period as the Assistant Commissioner may allow. (d) He shall pay on demand in the event of his failure to comply with (a), (b) or (c) above an amount equal to the difference between the duty leviable on such quantity of the said imported goods but for the exemption contained therein and that already paid at the time of importation. Provided further that where raw naphtha is to be processed before being supplied for use in the manufacture of fertiliser and petrochemicals such quantity of raw naphtha as is proved to the satisfaction of the Assistant Commissioner to have been lost or used during such process or returned to any other refinery for further processing of petroleum products shall be deemed to have been used for the aforesaid purpose. Further importer has never furnished an undertaking to the effect that conditions laid down in the above notification would be fulfi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot satisfied this condition. The second condition of notification is that the party has to maintain an account of the said imported goods received and consumed in the place of the manufacturer for the manufacture of petrochemicals. It has to be done as specified by Assistant Commissioner of Customs. The party has not produced any such account. Secondly, they have never asked Assistant Commissioner of Customs about the manner on which such account should be maintained. Therefore, this portion of notification is not followed by the party. According to third condition of aforesaid notification, they shall produce the extract of such account duly certified by the manufacturer evidencing receipt of the imported goods in the premises of the place of manufacturer within a period of 3 months or such extended period as Assistant Commissioner may allow. The party has not fulfilled this condition also. The fourth clause of this notification clearly states that the party shall pay on demand in event of his failure to comply with above mentioned conditions. The amount will be equal to the difference between the duty leviable on such quantity of the said imported goods but for the exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of stripping of one product, the balance of input continues to be raw naphtha. The technical information of raw naphtha from the Hawley's Chemical Dictionary at page 206, clearly indicates that several products can be extracted of each product, what is left over is considered as residue. The residue in this case after extraction of each item, however, continues to be raw naphtha of different grade. The learned bench has also taken the stand that a product which is not radily usable at the stage of extraction but is still in the nature of raw material capable of being a source of extraction of several products is to be considered as raw naphtha. Considering their letter and the judgment quoted by them, I accept their plea that the left over material (Return Stream) is nothing but Raw Naphtha. Therefore, to avail the benefit of notification they should send this material to another refinery which they are unable to do. Thus the benefit of this notification cannot be extended to the party. In the above referred judgment, the benefit of notification was denied because the party is not using return stream as per conditions of notification. In the present case, the party has not followe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on basis of facts and documents available to the Dept. Since the case has to be decided before the end of November as per Hon'ble High Court of Gujarat's order in case of M/s. Indu Nissan Oxo Chemicals Ind. Ltd. in SCA No. 6540/96, dated 1-10-1996, I decide the issue without giving another opportunity for PH. It is contended by the learned SDR that if any conditions of notifications are very impracticable, on that score party claiming benefit of notifications cannot be held to say that they are difficult to comply. He relies on the judgment of Bombay Oil Industries Pvt. Ltd.'s case [1995 (77) E.L.T 32]. In the said case, there was the colour specification from the table was removed from the specification. The original exemption notification was issued on 2nd August, 1976 colour specification was deleted by notification dated 2-9-1978. It was argued that subsequent notification issued in 1978 was a clarificatory in nature. Even then the Tribunal did not agree with him. The judgment of the Tribunal has been referred to by the Supreme Court in its judgment at page 40 of the reports as follows :- "10. Before parting we may note one submission of the learned counsel. They submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in absolute terms but such exemption is based on fulfilment of conditions mentioned therein about the specification of imported tallow and if the imported tallow does not meet the specification required cannot earn the exemption. It is trite to say that in order to earn the exemption the person claiming the exemption must satisfy that his imported item has fulfilled all the conditions of the exemption Notification as such exemptions are granted in public interest. In connection with such exemption Notification issued under Section 25 of the Customs Act, a Bench of this Court in case of Union of India & Ors. v. Jalyan Udyog & Anr. [AIR 1994 SC 88], speaking through B.P. Jeevan Reddy, J., has made the following observations : "An exemption granted may be an absolute and/or subject to such conditions, as may be specified in the notification and further that the conditions specified may relate to a stage before the clearance of goods or to a stage subsequent to the clearance of goods. Section 25(1) is a part of the enactment and must be construed harmoniously with the other provisions of the Act. The power of species of delegated legislation. Whether it is one or the other, it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rintendent of Central Excise, AR Baroda and the appellants have clearly established not only the goods manufactured are petrochemicals but the imported goods are only used for the said purpose. The other condition laid down in the notification are technical in nature and the appellants cannot be denied the benefit of notification particularly when the CE authorities have confirmed the entry of the imported goods into the factory premises of the appellants situated in Baroda and have been used only for the manufacture of petrochemicals. The proviso to the Notification has no application to the facts of the case as raw naphtha i.e. to say Heptene and Nonene is not required to be processed before being used for the manufacture of these petrochemicals." 10. As far as the exemption Notification is concerned, it cannot be treated in a liberal way as mentioned in Para 24 of the order where the Collector has held as follows : "Liberal and strict instruction of an exemption provision are to be invoked at different stages of interpreting it." However, the Supreme Court in interpreting the exemption notification has held in the case of Novopan India Ltd. [1994 (73) E.L.T. 769] the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which provided that raw naphtha must be intended for use in the manufacture of fertilisers and ammonia. We are not concerned with the proviso to the said condition mentioned in Column (4). Now a mere look at the said notification shows that when raw naphtha was utilised for manufacture of fertilisers and ammonia, it would earn the concessional rate of duty. It is not in dispute between the parties that raw naphtha which the appellant purchased from the open market was in fact utilised by it in manufacture of ammonia even leaving aside the further question as to whether it was utilised for manufacture of any fertiliser. It is, therefore, difficult to appreciate as to how the CEGAT could persuade itself to hold that because ammonia manufactured out of raw naphtha had resulted in molten urea which was not a soil fertiliser, the benefit of the aforesaid notification could not be made available to the appellant which had utilised raw naphtha in its Plant. Moment it was shown that raw naphtha was wholly utilised by the appellant for manufacturing ammonia, the condition laid down in Column (4) of the notification got fully satisfied. On this short ground, the reasoning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what was contained in Notification 75/84. It was a case of manufacture of molten urea and the case before us is in respect of utilisation of imported material in the manufacture of fertilisers and ammonia. Here it is not so. Here the item is not utilised in the manufacture of fertilisers and chemicals. The facts admittedly is that they have not used for manufacture of the items as mentioned in the notification. According to us the conditions mentioned in the Notification 158/76 were never complied viz. utilisation of the imported material in the manufacture of fertiliser and ammonia and keeping of accounts. 14. In this connection it is relevant to mention that the conditions which are very onerous have to be fulfilled if any person claims exemption. This is what the judgment of the Supreme Court in the case of Bombay Oil Industries Ltd. [1995 (77) E.L.T. 32] vide Paragraph 8 thereof which we have extracted earlier. Here it is not a case of type of fertiliser whether it is a soil fertiliser as was the case in the Gujarat State Fertilisers Co. decided by the Supreme Court. In fact in Paragraphs 12 to 15 of the judgment in GSFC case (supra) it is very clear that the Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption/Effective raters of duty for goods falling under Chapter 27. - In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts goods of the description specified in Column (2) of the Table hereto annexed and falling under Chapters 22 or 27 or 29 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), from so much of the duty of excise leviable thereon under the Central Excises and Salt Act, 1944 (1 of 1944), at the rate specified in the said Schedule, as is in excess of the amount calculated at the rate specified in the corresponding entry in Column (3) of the said Table, subject to the intended use, or the conditions, if any, laid down in the corresponding entry in Column (4) thereof : Provided that where any such exemption is subjected to the intended use, the exemption in such case shall be subject to the following conditions namely :- (i) that it is proved to the satisfaction of an officer not below the rank of an Asst. Collector of Central Excise that such goods are cleared for the intended use specified in Column (5) (now Column 4) of the said Table; (ii) where such use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said Act is different from the scheme of the Customs Act. The Customs Act is a revenue earning legislation viz. taxing statute whereas Drug Act is a regulatory Act. Hence the decision in the said case may not be made applicable to the facts of this case. In this connection, it will be useful to refer to judgment of Mac Beth v. Chislett [1910 appeal case page 220] where the court has held as follows : "It would be new terror in the construction of acts of parliament if we were required to limit the word to an unnatural sense because in some act which is incorporated referred to such an interpretation is given to it for on the basis of that act." Above observation of the Houses of Lords have been approved by the Supreme Court in Ujagar Prints (I) Ltd. v. U.O.I. [1988 (38) E.L.T. 535 (S.C.) = AIR 1989 SC 516 at 530]. Above judgment will also be equally applicable to the judgment referred by Shri Gulam Vahanvati to case of Gujarat Fertiliser's case. Firstly the facts of this case are not identical to the facts in the instant case. The content of both the notifications under consideration are entirely different. The notification specifically requires certain conditions. Those con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the sentence 'fertilisers and petrochemicals' and the word "and" occurring in this Clause is to be read with conjunctively that is to say in the commodity manufactured has been for the fertiliser and petrochemical. 24. Apart from anything else, this line of reasoning would result in the word 'petrochemicals' occurring in the notification redundant. Fertiliser manufactured out of naphtha the same chemical and it is a petrochemical. In that it is manufactured out of naphtha. 25. Hawley's Condensed Chemical Dictionary defines the word petrochemical as follows : "an organic compound for which petroleum or natural gas is the ultimate raw material". It says that the term is also applied to substance such as ammonia, because the hydrogen used to form the ammonia is derived from natural gas. Thus synthetic fertilisers are considered to be petrochemicals. 26. Therefore in the manner in which the expression 'fertilisers and petrochemicals' have been interpreted, it would result in the word petrochemical being rendered redundant. The framers of the notification, being aware of the term 'petrochemicals' would necessarily include fertilisers, have considered it necessary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment. 29. We must distinguish between substantive condition in the notification and a procedural one. There does not seem to be dispute that the naphtha was received by the manufacturer and was used in the manufacture of finished product although admittedly it has not been established in the manner prescribed by the notification. It was however contended before us that account had been maintained and could be produced. I am therefore of the view that the matter should be remanded and the appeal should be allowed on the substantive point of utilisation of the naphtha for the manufacture of the end product and the matter should be remanded to the Commissioner to satisfy himself that account has been maintained to show the utilisation of the imported goods in the manufacture of the finished products. Sd/-(Gowri Shankar)Member (T) 30. Accordingly the matter may be referred to a third member to resolve the following points of difference. (i) Whether the term 'fertiliser and petrochemical' occurring in the notification should be interpreted to mean only so as to include petrochemicals other than fertilisers. (ii) I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner thereby disallowing the benefit of the notification to cups without cones. The Supreme Court in Paragraph 10 of the order observed as follows : "10. In our view, the Tribunal mis-directed itself. There is no question of reading the word "and" disjunctively here. The Exemption Notification must be read plainly, as an ordinary man would read it, and, so read, Sl. No. 6(a) says that cups of roller bearings are liable to the duty applicable to the bearings of which they are part and cones of roller bearings are liable to the rate of duty applicable to the bearings of which they are part. There is no justification for reading the entry conjuctively in the sense that the rate of duty applicable to the bearings of which they are part will apply only when the cups and cones of roller bearings are imported together but not if they are imported separately." 34. Oxo chemicals manufactured by the assessee are petrochemicals and admittedly not utilised as fertilisers. If the intention of the Ministry was to exempt fertilisers alone then there was no reason for those two terms to have been used. In fact during the currency of the Notification 158/76 another notification was in fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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