TMI Blog2020 (2) TMI 1253X X X X Extracts X X X X X X X X Extracts X X X X ..... e, 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 Phosp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Excise duty if the same are used for manufacture of fertilizer subject to the condition that where such use is elsewhere than in the factory of production, the exemption shall be allowed if the procedure laid down in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 is followed. Entry 55 to the table of Notification No. 12/2012-CE dated 17 March 2012 reads as follows:- Sl. No. Table Sl. No. Chapter of heading or sub-heading or tariff item of the First Schedule Description of excisable goods Rate Condition 1 2 3 4 5 55 25030010 All goods for manufacture of fertilizers Nil 2 Learned Counsel pointed that there is no dispute regarding following the condition specified in the said notification and therefore, the only issue before the Tribunal is if the goods, namely Sulphur, procured by them availing benef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ric Acid is used to manufacture Caprolactam and Ammonium Sulphate. He pointed out that Amonnium Sulphate is fertilizer. He pointed out that Sulphur used in Caprolactam Plant (HX Plant) which in turn used in the manufacture of HAS. He further pointed out that a part of Hydroxyamine Sulphate (HAS) is also cleared on payment of duty. He pointed out that in respect of Hydroxyamine Sulphate sold by them they are admitting their duty liability. He further pointed out that whatever duty is payable on Sulphar used in the manufacture of HAS, the same is available to them as Cenvat credit and therefore the situation is Revenue neutral. As regards the sulphur used in the manufacture of Caprolactam which in turn used for Ammonium Sulpahte is concerned, they are entitled for the benefit of Notification No. 12/2012-CE. He pointed out that the issue is squarely covered by Hon ble Delhi High Court decision in their own case reported at 2009 (241) ELT 190 (Delhi). In the said case, identical issue was dealt in respect of Sulphuric acid used to manufacture of fertilizers exempted under Notification Nos. 74/66-CE and 81/75-CE. He pointed out that the said decision of single Member Bench of Delhi High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the benefit of notification has been denied on the ground that a product, other than fertilizers, namely Phospho Gypsum is manufactured. He pointed out that as far as production and clearance of Phospho Gypsum is concerned, the issue is covered by the following judgments:- (a) 2008 (232) ELT 193 (SC) CCE vs. National Organic Chemical Industries Limited (b) 2007 (211) ELT 193 (SC) CCE vs. Chennai Petroleum Corpn. Limited (c) 2011 (207) ELT 200 (Guj.) CCE vs. Sterling Gelatin (d) 1997 (92) ELT 294 (SC) Indian Petrochemicals Corpn. Limited vs. CCE. 3.5 Learned Counsel also pointed that penalty has been imposed under the provisions of Section 11AC which is improper as they are entitled exemption of Notification No. 12/2012-CE in respect of Sulphur used in manufacture of fertilizers. He pointed out that in respect of Sulphur used in manufacture of Hydroxyl Amine Sulphate and Phosphoric Acid sold on payment of duty, they are entitled to Cenvat credit therefore, there is no intention to evade payment of duty. 4. Learned Authorised Representative relies on the impugned order. He pointed out that impugned order differentiate the case laws relied on by the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture 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. It is noticed 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 reported at 1997 (91) ELT 3 (SC). The Hon ble Apex Court observed as under:- 10 . Then next we turn to exemption Notification No. 40 of 1985, dated 17-3-1985. As per the said notification, as amended from time to time, it had been laid down that the Central Government was pleased to exempt goods of the description mentioned in column (2) of the Table and falling under Chapters 25, 27, 28, 29 and 31 or 32, as the case may be, of the Schedule to the Tariff Act, from the whole of the duty of excise leviable thereon under Section 3 of the Central Excises and Salt Act, 1944, subject to the conditions, if any, laid down in the corresponding entry in column (3) thereof. column (2) of the Table referred to the description of goods and at Sl. No. 3 is mentioned ammonia. Thus ammonia which was manufactured by the appellant out of raw naph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear language of the condition mentioned in the exemption notification. Same view was reiterated in the case of Prince Khadi Woollen Handloom Prod. Coop. Indl. Society v. Collector of Central Excise [1996 (88) E.L.T. 637 (S.C.)]. 13 . That takes us to the consideration of the main submission canvassed by Shri Bhat, learned Additional Solicitor General, that the CEGAT had taken the view that ammonia which was utilised by way of captive consumption by the appellant for manufacture of molten urea was subjected to a continuous process of manufacturing which had resulted in the end product melamine which was admittedly not a fertiliser. That may be so. However, the question remains whether ammonia could be said to have been used in the manufacture of molten urea which was a chemical fertiliser. We have to recall that molten urea itself is an excisable commodity even though it might have been exempted from payment of excise duty by a notification issued by the Central Government. But for the said exemption notification molten urea would have been required to bear the full duty. As seen earlier, it has been classified as a chemical fertiliser under Heading 31.02 by the authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in turn used in Caprolactam Plant. 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 issue is also covered by the decision of Single Member Bench of Hon ble Delhi High Court in their own case reported at 2009 (241) ELT 190 (Del.) and approved by Division Bench of Hon ble Delhi High Court reported at 2010 (252) ELT 339 (Del.). The Division Bench of Hon ble Delhi High Court observed as follows:- 7 . Admittedly, the Respondent uses Oleum in the manufacture of Ammonium Sulphate and Caprolactum but according to the Appellant Ammonium Sulphate is only a by-product and as such Oleum is not used in the manufacture of fertilizers. There is no dispute that Ammonium Sulphate is nothing but a chemical fertilizer. The learned Single Judge rightly held that the exemption notifications, on a plain reading, make no mention of a by-product or a primary product. All that is to be seen is whether the use of fuming sulphuric acid results in the manufacture of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appears to be a case of the proverbial tail wagging the dog. The Court cannot be unmindful, here of the object of the notification which was to make fertilizers less expensive, and more widely accessible. The innovative use of a relatively less known technology to achieve production of ammonium sulphate concededly a fertilizer, cannot be denied the benefit of the exemption notification, which contains no support for the distinction between main product and by-product relied upon by the revenue. Consequently, this question too has to be answered against the revenue. In these circumstances, we find merit in the arguments of the appellant. However, we find 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. We find, 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. Accordingly, demand in so far as Sulphur used in the manufacture of Sulphuric Acid/Oleum used for manufacture of Ammo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lizer. 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. 9.1 Another objection raised, is in respect of use of Sulphuric Acid and Phosphoric Acid consumed for production of Phopho-gupsum which is a bye-product and sold in the market on payment of duty. The appellant have relied on the extracts of Year Book 2016 (Part-III) wherein following has been stated:- Phospho-gypsum is produced as a by-product during the manufacture of phosphoric acid by wet process. Presently, most phosphoric acid plants dispose the phospho-gypsum generated, by way of stacking it within the plant premises. These stacks are subsequently sold off when demand arises for them. Phospho-gypsum generated from phosphoric acid plants contains three types of impurities such as residual acid, fluorine compounds and trace elements, including those that are radioactive that are considered to be potentially harmful. The appellant have also relied on various decisions of Hon ble Apex Court and High Courts as referred to in Para 3.4 above. In the case of National Organic Chemic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered view, no interference is called for in the well-reasoned judgment/order of the Tribunal. The appeal being devoid of any merit is accordingly dismissed. However, in view of the facts circumstances of the case, the parties are directed to bear their own costs. We find that ratio of aforesaid decision squarely apply to the instant case. 9.2 Thus, we find 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. We find that appellant have admitted liability in respect of Sulphur which is used in the manufacture of Sulphuric Acid and sold in the open market on payment of duty. They have contended that it is Revenue neutral situation. 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. 10. In this background, we find no penalty can be imposed under Section 11AC, as there is no apparent malafide intention and the issue relates to interpre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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