TMI Blog1985 (4) TMI 302X X X X Extracts X X X X X X X X Extracts X X X X ..... pellants was that they were engaged in the manufacture of zinc sulphate without applying for and obtaining a central excise licence and had manufactured and removed the product valued at ₹ 57,51,675.00 during the period from 1-10-1978 to 31-12-1979 without payment of excise duty, without cover of proper documents and without following the procedure prescribed under the Central Excise Rules (hereafter referred to as the Rules ). The case, thereafter took a chequered turn. The matter was adjudicated by the Collector. However, the Order was set aside by the appellate authority, the Central Board of Excise Customs, who remanded the matter to the Collector for de novo adjudication after affording the party an opportunity to present their case. In its Order of remand, the Board observed that the important considerations to determine the classifiability of a product should be the commercial meaning assigned to the goods, the technical definition and categorisation of the product as available in various technical books of references or statutory Acts and Orders and the fact of actual marketing or marketability. 3. The impugned order is the result of the de novo adjudication o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertilizer by the Indian Standards Institution. The Collector added that since Central Excise Notification No. 71/70, dated 4-4-1970 exempting micronutrients was rescinded by Notification No. 170/78, dated 30-9-1978 and the instant dispute pertained to a period subsequent to 30-9-1978, the question of exemption under that notification did not arise. As regards the plea of limitation, the Collector rejected it because the goods were manufactured without obtaining Central Excise licence, and removed without observance of Central Excise Rules and without payment of duty. In the instant case, said the Collector, duty was not levied by the authorities due to the assessee s contravention of the provisions of the excise rules with intent to evade payment of duty and, therefore, the extended period of 5 years provided for in Section 11-A would apply. The demand notice issued on 14-4-1980 for the period 1-10-1978 to 31-12-1979 was, therefore, in order. The Collector, however, after classifying the goods under Item 68, CET made due allowance for the exemption admissible to the assessee in terms of Notification No. 176/77, dated 18-6-1977 and its successor notification and computed the duty li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I marking. Shri Narasimhan also referred to the book published by the Fertilizer Association of India showing micronutrients as a kind of fertilizer. Reliance was placed by Shri Narasimhan also on the affidavits of certain dealers and farmers to the effect that zinc sulphate agricultural grade was known as a fertilizer. With reference to the show cause notices issued to the appellants, it was submitted that the notice issued on 13-1-1981, though it was termed a corrigendum to an earlier show cause notice, was actually a fresh show cause notice and was hit by limitation because the period for which the demand was made, namely, 1-10-1978 to 31-12-1979, was beyond the prescribed limit of six- months. If the first show cause notice dated 14-4-1980 was taken into account, a substantial part of the period of the demand would be time-barred. Shri Narasimhan then referred to the appellants letter dated 26-9-1978 to the Assistant Collector which was received by the latter on 3-10-1978. Despite reminders, the licence was issued on 14-4-1980 on which date itself the first show cause notice was issued. The Department was aware of the happenings and nothing was suppressed from the Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T 1192. 7. We have given careful consideration to the arguments of both sides. Item No. 14-HH of the Central Excise Tariff Schedule reads as follows :- 14-HH. Fertilizers, all sorts, but excluding natural animal or vegetable fertilizers when not chemically treated . The question for determination is whether agricultural grade zinc sulphate manufactured by the appellants is a sort of fertilizer falling under item No. 14-HH as contended by the appellants or it falls under the residual heading item No. 68 of the Schedule. 8. Central Excise Notification No. 71/70, dated 4-4-1970 is reproduced below : In exercise of the powers conferred by Rule 8(1) of the Central Excise Rules, 1944, the Central Government hereby exempts fertilizers of the kind known as agricultural fritted trace elements or micronutrients or soils stabilizers falling under item 14-HH, from the whole of the duty of excise leviable thereon. It is thus clear from the notification that micronutrients were understood and recognised as a sort of fertilizer by the Central Government and the Central Excise Department. If agricultural grade zinc sulphate of the kind produced by the appellants is a micronutr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntended to be used as a fertilizer of the soil and specified in column 1 of Schedule I and includes a mixture of fertilizers and special mixture of fertilizers . The Fertilizer Control Order, though it is ostensibly for the purpose of controlling the production and distribution of fertilizers, has a vital bearing and, therefore, is considerably relevant to the understanding of how the Governmental authorities, the industry and trade understand the term Fertilizer . One could broadly say that a product which is a fertilizer for the purpose of the Control Order ought to be accepted prima facie as a fertilizer for the purpose of item No. 14-HH CET unless, of course, the wiording of the item implicitly or explicitly excludes the product from its purvew or if the product is classifiable under a more appropriate tariff description. The converse may not necessarily be true because the Central Excise Tariff Item covers all kinds of fertilizers with specific exceptions whereas a product to be accepted as a fertilizer for the purpose of the Control Order must be one which is specified in column 1 of the 1st Schedule to the Order. Turning to Schedule I to the Order, we find at Serial No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... samples of the markings on the bags in which the appellants market their zinc sulphate. These are marked as Zinc sulphate-agricultural grade khad (fertilizer) and bear ISI marking. It is clear that the product is marketed as fertilizer . 13. Turning to the scientific or technical understanding of the expression fertilizer , we see from page 459 of the Condensed Chemical Dictionary by Gestner H. Hawley that fertilizer is a substance or mixture that contains one or more of the primary plant nutrients and sometimes also secondary and/or trace nutrients. Smt. Zutshi has cited certain technical books in support of her contention that micronutrients cannot be classed along with fertilizers. The book Chemistry and Technology of Fertilizers by Vincent Sauchelli, referred to by the SDR, says that it is not always feasible to introduce all the microcelement-bearing materials into the primary basing operation because the soil and crop requirements may vary from farm to farm. For example, recommended use of zinc sulphate may vary from 10 to 80 Lbs. and even more per ton of fertilizer. Since it is necessary to prepare and store the fertilizers having varying quantities of microelements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of item 23A would not mean that sheet glass and plate glass would cover other glasses as well. The ratio of the decision is that merely because the heading of the entry is wide it would not mean that it would cover all types of commodities which would be covered by the general heading unless specific provision is made for those different types of commodities in the body of the entry or in the item itself. We do not think that this decision is relevant to the instant case. Here, we have already found that micronutrients are understood and accepted as fertilizers by the Indian Standards Institution, the Fertilizer Control Order and by the Central Government as well as the Department (by the latter, at any rate, till notification No. 71/70 was rescinded in 1978). 18. The Collector also relied upon the Madras High Court decision in the case of M/s Parry Confectionery -1980 E.L.T. 468. We have carefully perused this judgment but we do not see how it helps the Department s case. From the material available before it, the Court said that lozenges would not fall within the description of candy. On the contrary, this decision goes against the Department. In coming to its conclusion, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication No. 111/78, dated 9-5-1978. Consequently, there was no duty cast on them to maintain records in accordance with Central Excise Rules and procedures. Still, the appellants, after claiming that their product was exempt from duty, chose to apply for a licence if required . In these circumstances, the duty liability, if any, of the appellants can be only for a period of six months prior to the date of the show cause notice. The extended period of 5 years would not apply as erroneously decided by the Collector. We must here take notice of the fact that the Senior Departmental Representative has fairly stated that there was no suppression of material facts in the present case. 21. There were two show cause notices. The period covered by both is the same, namely, from 1-10-1978 to 31-12-1979. The first notice dated 14-4-1980 demands duty at 71/2% ad valorem amounting to ₹ 4,26,638.38 under tariff item No. 14-HH. The rule under which the duty is demanded is 9(1). The second show cause notice dated 13-1-1981 puts the duty amount at ₹ 4,52,944.40. Again, the rule quoted is 9. This notice which is styled as a corrigendum is nothing but an independent show cause notice ..... X X X X Extracts X X X X X X X X Extracts X X X X
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