Customs, Excise and Gold Tribunal - Delhi
Andhra Sugar Limited vs Collector Of C. Ex. on 6 January, 1987
Equivalent citations: 1989(42)ELT613(TRI-DEL)
ORDER
V.P. Gulati, Member
1. This is an appeal against the order of the Collector of Central Excise (Appeals) who has upheld the levy of Central Excise duty on Oleum manufactured by the appellants claimed to be an intermediate product for die manufacture of chlorosulphonic acid.
2. The brief facts of the case are that the appellants had got approved a classification list in respect of Oleum which was described in the classification list so chargeable to duty under 14-G, but later in a subsequent classification list No. 7/81-82 dated 30.9.81, they included the item Oleum in the list for other good which was listed as non-excisable. They were issued a show cause notice in this regard and they were called upon to show as to why Oleum described as non-excisable should not be classified under item 14-G as Oleum was nothing but sulphuric acid. The appellants main plea before the lower authorities was that Oleum produced by them was an intermediate product which was not marketable and, as such, it was intended for captive consumption and being an intermediary product, was not leviable to Central Excise duty. The appellants gave a technical write-up about the process of manufacture of Oleum and its utilisation in the manufacture of chlorosulphonic acid. The position as emerged from the reply was that it was actually sulphur-trioxide which was finally used in the process of manufacture of chlorosulphonic acid and what the appellants had described as Oleum was only sulphur-trioxide. For the purpose of clarity, the process of manufacture as stated by the appellants is reproduced below:
"Solid sulphur of 99.5 - 99.8% purity is melted in a Melter pit using steam coils. Molten sulphur overflows to a settling compartment for removal of impurities. Settled sulphur is pumped to a sulphur burner which is operated at 900° - 950°C and is converted to sulphurdioxide, on reaction with oxygen in air. This being an exothermic reaction gases are cooled in a waste heat boiler. Steam from boilers is sent to consuming units. Cooled 8 - 9% sulphurdioxide gas at 420 + 5°C is sent to a converter through a hot gas filter. Sulphurdioxide is converted to Sulphur-trioxide in four stages. Gases from converter containing 8 - 9% SO3 are cooled and sent to Oleum tower wherein 30% Oleum is formed. Depleted gases from Oleum tower containing 4 - 5% SO3 and rest oxygen and nitrogen are passed through an absorption tower wherein 98.4% to 98.6% sulphuric acid is in circulation. Concentration of acid raiser which is readjusted with water and part of HaSO3 is withdrawn and stored. Unabsorbed gases are let out to atmosphere through a stack.
Part of 30% Oleum in circulation across Oleum tower is sent to an evaporator wherein it is heated using Hot gases from converter. Cold gases are returned to mainstream. Depleted Oleum of 20% strength is returned to Oleum boot/tower for reconcentration.
Sulphur trioxide gas (100% Oleum) from evaporator and Hydrogen chloride gas from Caustic Soda Plant react in the presence of Chlorosulphonic Acid which is in circulation across C.S.A. Reacter and form Chlorosulphonic Acid. This being an endothermic reaction C.S.A. is cooled and recirculated. Part of Chlorosulphonic Acid is withdrawn, stored and marketed."
3. Shri K. Narasimhan, Counsel for the appellants, stated that there has been some confusion in the understanding of the issues involved. He stated that issue involved is not chargeability of duty of the goods captively consumed claimed as intermediate products, but as to what are the goods which have to be subjected to duty. According to him, the product involved for the purpose of levy is sulphurtrioxide and not sulphuric acid or Oleum as held by the lower authorities. He said that it would be seen from the write-up on the process of manufacture given that fuming sulphonic acid-Oleum manufactured is used to absorb sulphur trioxide and which is ultimately released therefrom for reaction to form chlorosulphonic acid. He stated that Oleum manufactured remains in continuous circulation and does not participate in the reaction for the manufacture of chlorosulphonic acid. He pleaded that levy of duty on sulphurtrioxide under 14-G is not maintainable as the form in which sulphurtrioxide is released form Oleum and utilised is not marketable and known as Oleum or Acid Anhydride and hence these cannot be considered as an item falling under 14G GET. He drew our attention to the Condensed Chemical Dictionary. Page 758 where Oleum has been defined as fuming sulphuric acid. He pleaded that full facts had been placed before the Assistant Collector and the Appellate Collector, but they have not taken note of the fact that it is sulphur-trioxide which hi fact is sought to be charged to duty. He stated that sulphuric acid, Oleum and its anhydride fall under T.I. 14G for the purpose of assessment. He has stated that anhydride is sulphur trioxide but the form in which it comes into existence in the appellants unit is not recognised commercially and technically and utilised as anhydride. He stated further that for anhydride of sulphuric acid to be in marketable form and for it to be considered as goods, it has to be in liquid or solid form. He gave extracts (photocopy) of pages 242, 243, 758, 982, 983 of the The Condensed Chemical Dictionary': Tenth Edition Revised by Gessner G. Hawley. For convenience of reference sulphur-trioxide as described in the Condensed Chemical Dictionary is set out as under:
"Sulphur trioxide (sulfuric anhydride) SO3; (SO3). Properties : Exists in three solid modifications; alpha, m.p. 62°C, beta.m.p. 32.5°C, gamma, m.p. 16.8°C. The alpha form appears to be the stable form but the solid transitions are commonly slow, a given sample may be a mixture of the various forms, and its m.p. not constant. The solids sublime easily. All three forms boil at 45°C. Derivation : Passing a mixture of SO2 and O2 over a heated catalyst such as platinum or vanadium pentoxide, See sulfuric acid. Hazard: Highly toxic; strong irritant to tissue. Oxidizing agent. 'Fire risk in contact with organic materials. An explosive increase in vapaur pressure occurs when the alpha form melts. The anhydride combines with water, forming sulfuric acid and evolving heat. Containers. (Stabilised, liquid) 750-lb drums; tanks cars."
From the above, he pointed out, it would be seen that for sulphur trioxide to be charged to duty under item 14G as anhydride of sulphuric acid, it has to be in the solid or liquid form after it has been duly stabilised by use of stabilisers.
4. Shrimati Chander, the learned JDR for the Department pleaded that the appellants have raised new issue and stated that issue before lower authorities was in respect of levy of duty on Oleum and not on sulphur-trioxide. The appellants filed a classification for Oleum and the Write-up given was also in respect of Oleum. She stated plea taken earlier was that the product was used as intermediary product and that duty should not be charged in respect of Oleum. She pleaded even if goods are in continuous process under Rules 9 and 49 as these stand amended, duty would be leviable on the goods and the marketability is not the criterion for the purpose. She pleaded the goods involved for the purpose of levy is Oleum and not sulphuric-trioxide. Shri Narasimhan in reply, however, reiterated that the issue before the Appellate Collector and the lower authorities was in respect of levy of duty on sulphur trioxide and not Oleum as such.
5. We observe that there is some confusion as to the product which is being charged to duty. From the manufacturing process set out earlier and the facts of the case which are not in dispute, it is clear that Oleum which is understood technically as fuming sulphuric acid is one of the products manufactured. The Oleum of 30% strength comes into existence and the appellants have pleaded that for the same to be marketable as recognised by ISI, it should be 65% Oleum. The point of contention in the pleading before us between the Revenue and the appellants is that while the appellants plead that it is sulphur-trioxide which is released from 30% Oleum is the one which is actually utilised for the manufacture of Chlorosulphonic acid, the end-product manufactured by them in the continuous manufacturing process as claimed, the Revenue contends that the duty is on that component of the weight of the Oleum by which the Oleum gets reduced by the release of sulphur-trioxide from Oleum 30% on its heating and when it gets reduced to the strength of Oleum 20%. The reason given by the Assistant Collector's finding in this regard as set out in paras 13 and 14 are reproduced below for proper appreciation of the view held by the Department.
"13. The Oleum in the evaporator after liberating pure SO3 depletes and depleted 20% Oleum returns to Oleum tower to absorb SO3 5 to 8% strength originating from the sulphuric acid plant which is a cyclic process. In the process depleted Oleum is definitely less hi weight than the Oleum drawn from the Oleum boot/tower to the extent it was depleted and contributed to the manufacture of chlorosulphonic acid. This portion of depleted Oleum is directly in proportion of 80/116.5 by weight of the chlorosulphonic acid manufactured from the part of Oleum contributed. This part of Oleum is now being charged to duty."
"14. From the above it is observed that the assessees are manufacturing 30% Oleum in the Oleum tower wherein less than 30% Oleum is present. This forms the point of manufacture of 30% Oleum. Simultaneously part of the 30% Oleum in the tower is withdrawn and heated in a closed system to obtain pure SO3. Hence it is evident that the product being manufactured in the Oleum Unit is 30% Oleum. Oleum is commercially known as fuming sulphuric acid falling under Tariff Item 14-G of Central Excise Tariff. The material i.e. removed from the oleum unit is pure SO3 which is present in 30% Oleum. The pure SO3 obtained after heating the oleum is anhydride of sulphuric acid falling under item 14-G of Central Excise Tariff. The tariff description under item 14-G includes fuming acids and anhydrides thereof, all sorts. Thus, the oleum manufactured by the assessees is rightly classifiable under item 14-G of Central Excise Tariff."
The Collector Central Excise (Appeals) has given his findings as under:-
"In the instant case the sulphur-trioxide gas is known as 100% oleum and it is in anhydride form and accordingly it attracts the Tariff Item 14-G and becomes excisable under that item which has no reference to percentages of purity or strength. As this oleum, an intermediary product is by itself excisable and when consumed in the factory of production is liable to pay appropriate duty (Gujarat High Court dated 10.8.78 in Manaklal Hiralal v. Union of India -1978 ELT J 618) which considering the benefit of Notification 81/75 dated 22.3.75 it was earlier decided that oleum (fuming sulphoric acid, is classifiable under T.I.14 of the Central Excise Tariff and this decision cannot errect any interference in the instant case."
From the above, we observe that what has been manufactured at one stage is Oleum 30% which on heating yields sulphur-trioxide and it is this sulphur-trioxide which is captively consumed for the manufacture of chlorosulphonic acid. The Assistant Collector has taken note of the difference in the weight of Oleum before release of sulphur-trioxide from Oleum 30% and after the release of sulphur-trioxide when the same is reduced to Oleum 20% and has held that this weight represents the weight of Oleum which has been used for captive consumption. The Appellate Collector has held that sulphur-trioxide gas is known as 100% Oleum and as its anhydride form and therefore it attracts duty under Tariff Item 14-G. We observe that both the Assistant Collector and the Appellate Collector are agreed in then- findings that it is sulphur-trioxide which is the one that reacts to form chlorosulphonic acid. The Appellate Collector has held the same to be chargeable to duty holding it as Oleum and as anhydride form of sulphuric acid. The Assistant Collector has held that it is the Oleum that is fuming sulphuric acid which is captively consumed to the extent of the loss of weight due to the release of sulphur-dioxide from Oleum 35%. From the technical point of view, we do not find that there is any authority to describe sulphur-trioxide as Oleum as held by the Appellate Collector. From the facts of the case, we observe that it cannot be stated that the Oleum has been captively consumed as it is only sulphur-trioxide which physically participates in the reaction after its release from Oleum. The Oleum only acts as a vehicle for carrying sulphur-trioxide after absorbing the same during the manufacturing process. The lower authorities have not raised the question of levy of duty on Oleum hi circulation and which acts as a carrier of sulphur-trioxide after its manufacture. We, therefore, observe that the levy of duty has to be considered hi respect of sulphur-trioxide only. The appellants plea in this regard is that the form in which sulphur-trioxide is manufactured in their unit is not marketed nor known in the trade as anhydride and this cannot be considered as goods for the purposes of levy of duty under item 14-G GET,
6. The learned advocate for the appellants relied in this regard on the description of sulphur-trioxide as given in the Condensed Chemical Dictionary, Tenth Edition: Revised by Gessner G. Hawley. His plea that according to this, sulphur-trioxide is to be either hi solid or liquid form for it to be considered as anhydride and that it is in this form, it is bought and sold as anhydride and is known so by those who deal with it in the trade.
7. We observe so far as sulphur-trioxide is concerned, it is described in the technical literature as sulphuric anhydride. In fact, we find in the Encyclopedia of Chemical Technology: Vol. 22 at page 215, Sulfur Trioxide has been described as under.
"The anhydride of sulfuric acid, SO3, is a strong organic sulfonating and dehydrating agent which has some specialised uses (see Sulfonation and Sulfation). Its principal applications are in production of detergents and as a raw material for chlorosulfuric acid (qv) and 65% oleum."
Nowhere it is mentioned that sulphur-trioxide as such is not sulphuric anhydride and cannot be used so. That in the solid and liquid form it is used so does not preclude that it cannot be treated as anhydride in gaseous form. No evidence that SO3 is not known in the trade as anhydride and is not so used, has been produced. Relying upon the evidence produced before us, it is held that sulphur-trioxide is an anhydride of sulphuric acid. Evidence has been produced before us that the Department in their Tariff Advice issued on 15.5.1982 bearing No. 26/82 have held that sulphur-trioxide produced as an intermediate product is chargeable to duty under Item 68 CET. We observe with respect that Tribunal is not bound by the Trade Notice issued by CBEC and in view of the specific inclusion of anhydride in the tariff entry 14-G, sulphur-trioxide would fall for the purpose of assessment under this tariff item. A similar issue had come up before the Tribunal in the case of Dai-ichi Karkaria Pvt. Ltd. v. Collector of Central Excise, Pune in Appeal No. 2307/83-C and Appeal No. 148/85-C and the Tribunal in their Order No. 199-200/85-C have held sulphur-trioxide manufactured is chargeable to duty under item 14G. For the reasons set out above, we are in agreement with these findings of the Tribunal and upheld its levy under 14G CET. The appeal is, therefore, rejected.