TMI Blog1997 (2) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... a. The condition for earning concessional rate of duty under Notification No. 75 of 1984 on raw naphtha and total exemption from duty as per Notification No. 40 of 1985 on ammonia must be held to have been fully satisfied by the appellant. Hence show cause notices were clearly incompetent and were liable to be quashed and were rightly vacated by the Assistant Collector. Appeal allowed. - 3041-46 of 1991 - - - Dated:- 28-2-1997 - S.P. Bharucha and S.B. Majmudar, JJ. [Judgment per : S.B. Majmudar, J.]. - These six appeals are preferred by the common appellant, M/s. Gujarat State Fertilisers Company, against the central excise authorities, being aggrieved by common judgment and order dated 19-4-1991, rendered by the Customs and Gold (Control) Appellate Tribunal (`CEGAT' for short). The appellant contends that it is entitled to concessional rate of excise duty on raw naphtha consumed by it at its factory at Vadodara for manufacturing ammonia which was captively consumed for manufacturing molten urea. That claim for concessional rate of duty is based on Notification No. 75 of 1984, dated 1-3-1984, as amended from time to time, issued by the Central Government in exercise of it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ammonia manufactured by it which falls under Chapter 28 of the Schedule to the Central Excise Tariff Act, 1985 (`Tariff Act' for short) was captively consumed by it in its Urea Plant for manufacture of molten urea. It was submitted by the appellant that molten urea was classified by the excise authorities under Chapter 31, which refers to fertilisers and duty was paid on molten urea as a chemical fertiliser under Heading 31.02 which covers nitrogenous mineral and chemical fertiliser. The molten urea was then captively consumed in its Melamine Plant for the manufacture of melamine which was not a fertiliser. The case of the appellant was that though molten urea was not used for manufacture of fertiliser, it still remained classifiable as a fertiliser, regardless of its use. Relevant chapter notes were relied upon by the appellant in this connection. 3.The Assistant Collector of Central Excise after considering the appellant's case came to the conclusion that raw naphtha was utilised by the appellant in manufacturing ammonia which in its turn was utilised for manufacturing molten urea and that as molten urea was a chemical fertiliser, the benefit of both the aforesaid notifications ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel appearing for the appellant on diverse grounds. In the first instance, Shri Dave submitted that the CEGAT had patently erred in law in taking the view that raw naphtha utilised by the appellant in manufacturing ammonia did not earn the concessional rate of duty as per Notification No. 75 of 1984. It was submitted by him that raw naphtha was utilised by the appellant in manufacturing ammonia and also fertiliser, namely, molten urea which is a chemical fertiliser and that the notification nowhere lays down any condition for its applicability, that the raw naphtha should be soil fertiliser and not chemical fertiliser. Similarly, it was contended that the appellant was entitled to the benefit of total exemption from excise duty as per Notification No. 40 of 1985, dated 17-3-1985 as amended from time to time as ammonia covered by the said notification was captively consumed in manufacture of fertiliser, namely, molten urea which was a chemical fertiliser. Shri Dave submitted that even though molten urea might have ultimately resulted in the manufacture of melamine which was admittedly not a fertiliser, on the express language of these exemption notifications, the appellant had ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view that as raw naphtha which was utilised for manufacturing ammonia and ammonia which in its turn was utilised in manufacturing molten urea could not get the benefit of the aforesaid exemption notifications as molten urea was not a soil fertiliser and the exemption notifications were issued only with a view to making soil fertilisers cheaper so as to get them within the reach of farmers in a more advantageous manner. That it was not the intention of the exemption granting authorities to give any benefit to the consumers of final product like melamine which was not a fertiliser at all. 8.Having given our anxious consideration to these rival contentions, we have reached the conclusion that the CEGAT had erred in not accepting the contention of the appellant canvassed before it. Reasons are obvious. It is not in dispute between the parties that the appellant, which is a public limited company is engaged in manufacturing fertiliser ammonia and chemicals at its factory situated on the outskirts of Vadodara in Gujarat State. That one of the raw materials used by it for manufacture of ammonia is raw naphtha which is purchased by it from open market. During the relevant period, ammonia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... phtha 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 of the CEGAT for not extending the benefit of concessional rate of duty on raw naphtha to the appellant cannot be sustained. However, as discussed hereinafter, raw naphtha can also be said to have been utilised in manufacturing molten urea which is a chemical fertiliser covered by the term `fertiliser' as employed by this very condition in column (4). Thus this condition can be said to have been fully complied with by the appellant. 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C.)], one of us S.P. Bharucha, J. speaking for a Bench of two learned Judges, while dealing with an exemption notification in connection with raw naphtha laid down in paragraph 5 of the Report that due emphasis had to be given to the 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.)]. 11.In the light of the aforesaid settled legal position, we have, therefore, to confine overselves to the express language employed by the exemption granting authority in its wisdom while it issued Notification No. 40 of 1985. As noted earlier, the notification clearly refers to the goods of description specified in column (3) of the Table annexed to the notification and falling under enumerated chapters of the Tariff Act. One of the chapters mentioned therein is Chapter 31. The said chapter deals with fertilisers. Note No. 1 of the said chapter lays down that Heading Nos. 31.02, 31.03, 31.04 and 31.05 cover mineral or chemical fertilisers, even when they are clearly not to be used as fertilisers. When we turn to Heading No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Shri Bhat, learned Additional Solicitor General that the spirit of the notification was to give the benefit only to soil fertilisers as final product which could be utilised by the cultivator in agriculture and with that end in view the notification was promulgated. On the express language of the notifications, it is not possible for us to agree with this contention. If that was the view of the Central Government while promulgating the said notification, nothing prevented the Central Government from indicating that it was not seeking to cover the goods mentioned in Chapter Heading No. 31 or in not confining the said exemption notification only to soil fertilisers. In the absence of any such restrictive words in the said notification, the express and wide terminology `fertiliser' employed in the notification cannot be curtailed by any process of reasoning about the supposed intention of the Central Government underlying the issuance of the said notification. It is also not possible to agree with the contention of Shri Bhat, learned Additional Solicitor General placing reliance on a decision of this Court in The Tata Oil Mills Co. Ltd. v. Collector of Central Excise [1989 (43) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f. It has also to be noted that the chapter notes of the Chapters referred to by the said notification have to be read as a part and parcel of the said notification. In this connection, we may usefully refer to a decision of this Court in Fenner (India) Ltd. v. Collector of Central Excise, Madurai [1995 (77) E.L.T. 8 (S.C.)] wherein one of us S.P. Bharucha, J. speaking for a two-Member Bench of this Court observed that the Tariff Schedule contained rules for its interpretation which required that for legal purposes classification would be determined on terms of the headings and any relative Section or Chapter Notes. As we have already seen Note to Chapter 31 dealing with fertilisers clearly states that Heading No. 31.02 would cover mineral or chemical fertilisers even when they are not used as fertilisers. Therefore, it must be held that if molten urea as covered by Heading No. 31.02 was not to be used as fertiliser and on the other hand was utilised as an input for producing melamine, still it would remain a chemical fertiliser within the sweep of Chapter 31. If it remained a fertiliser, it could not be said that ammonia which was captively consumed for manufacturing molten urea h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of melamine, it would have borne full duty subject to exemption notification, if any, under Tariff Item 31.02. Only because it was captively consumed in the onward process of manufacture which had resulted into melamine, it could not be said that the final product for the purpose of Excise Act had not emerged in the shape of molten urea by the captive consumption of ammonia. 14.Shri Bhat, for the Revenue, next contended that the term `fertiliser' as employed by the notification must be given its ordinary meaning that is accepted in common parlance. He submitted that to a common man fertiliser would denote only a soil fertiliser which could be utilised by the agriculturist for improving his agricultural yield. It is difficult to appreciate this contention. As noted earlier, the notification in terms seeks to encompass in its coverage goods of the description falling under Chapters 25, 27, 28, 29 and 31 or 32 of the Tariff Act. When there is an express reference in the notification covering the goods, amongst others, those referred to in Chapter 31 and as Chapter 31 in its turn includes chemical fertilisers, it is difficult to appreciate how despite such an express reference in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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