Custom, Excise & Service Tax Tribunal
Icmc Corporationltd vs Tiruchirapalli Ce&St on 3 May, 2024
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. III
Excise Appeal No. 41449 of 2014
(Arising out of Order-in-Appeal No. 24/2014 dated 21.03.2014 passed by Commissioner of
Customs & Central Excise (Appeals), No. 1, Williams Road, Cantonment, Tiruchirappalli - 620
001)
M/s. ICMC Corporation Limited ...Appellant
No. 1/3, Industrial Estate,
Ariyamangalam,
Tiruchirapalli - 620 010.
Versus
Commissioner of GST and Central Excise ...Respondent
Tiruchirapalli Commissionerate, No. 1, Williams Road, Cantonment, Tiruchirapalli - 620 001.
And Excise Appeal No. 41450 of 2014 (Arising out of Order-in-Appeal No. 25/2014 dated 21.03.2014 passed by Commissioner of Customs & Central Excise (Appeals), No. 1, Williams Road, Cantonment, Tiruchirappalli - 620
001) M/s. IACL Private Limited ...Appellant No. 1/5, Industrial Estate, Ariyamangalam, Tiruchirapalli - 620 010.
Versus Commissioner of GST and Central Excise ...Respondent Tiruchirapalli Commissionerate, No. 1, Williams Road, Cantonment, Tiruchirapalli - 620 001.
APPEARANCE:
For the Appellants : Shri S. Gokernesan, Advocate For the Revenue : Shri Anoop Singh, Authorised Representative CORAM:
HON'BLE MS. SULEKHA BEEVI C.S., MEMBER (JUDICIAL) HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) 2 E/41449&41450/2014 FINAL ORDER Nos. 40519-40520 / 2024 DATE of HEARING: 07.12.2023 DATE of DECISION: 03.05.2024 Order :- [Per Mr. VASA SESHAGIRI RAO] Excise Appeal No. E/41449/2014 has been filed by M/s. ICMC Corporation Limited, Trichy aggrieved by the Order-in-Appeal No. 24/2014 dated 21.03.2014 passed by Commissioner of Customs & Central Excise (Appeals), Trichy upholding the Order-in-Original No. 07/2013 dated 06.09.2013 which confirmed the duty demand of Rs.2,28,211/- payable on the Sulphuric Acid procured between April 2011 to March 2012 under Rule 6 of Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 determined in terms of Section 11A(10) of Central Excise Act, 1944 (ACT) besides levy of applicable interest under Section 11AA read with Rule 6 ibid. The Order-in-Original ordered for recovery of amounts payable by enforcing the bond and bank guarantee executed by the Appellant with the jurisdictional authorities.
2. The brief facts of the case are as detailed below:-
2.1 M/s. ICMC Corporation Ltd., holders of Central Excise Registration AAAC17030DXM001 were engaged in the manufacture and clearance of agricultural grade Zinc Sulphate falling under CTH 28332990 of the Central Excise Tariff Act, 1985 (CETA) which was exempted from payment of duty vide Sl.No. 51A of Notification No. 04/2006-CE. For the manufacture of the Zinc Sulphate, they have procured Sulphuric Acid without payment of duty by availing exemption under Notification No. 3 E/41449&41450/2014 04/2006-CE (S.No. 32) and following the procedure prescribed under Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable goods) Rules, 2001 (CERGCR for short).
2.2 The Notification No. 04/2006-CE dated 01.03.2006 which was effective upto 16.03.2012 and superseded by Notification No. 12/2012-CE dated 17.03.2012, vide Sl.No. 32 exempted sulphuric acid from payment of Central Excise duty, if it was used in the manufacture of fertilisers. As per the condition 2 of the Notification, if the use of sulphuric Acid was elsewhere than in the factory of the production, the procedure laid down under CERGCR should be followed. Since the Appellant did not manufacture Sulphuric Acid but procured it from others, they followed the procedure laid down under CERGCR and in this regard executed a bond with the jurisdictional Excise authorities and maintained relevant records intimating the receipt of goods and filed periodical monthly returns as per the said Rules.
2.3 The Department has entertained the view that the Appellant was in to manufacture of Zinc Sulphate though of agriculture grade which is a separately defined chemical compound, falling under Tariff Head 28332990 of CETA and not classifiable under fertilisers which are specifically covered under Chapter 31 of CETA. Therefore, it appeared that the exemption from payment of duty could not be extended to sulphuric acid used in the manufacture of Zinc Sulphate and the duty payable on the Sulphuric Acid procured duty free appeared to be recoverable along with interest under the provisions of Rule 6 of CERGCR read with Section 11A and 11AA of Act ibid. 4
E/41449&41450/2014 2.4 A Show Cause Notice No. 02/2012 dated 02.05.2012 was issued to the appellant proposing to deny the exemption availed under Sl.No. 32 of the Notification No. 04/2006-CE and to demand duty of Rs.2,28,211/- on Sulphuric Acid procured during the period from April 2011 to March 2012, under Rule 6 of CERGCR read with Section 11A of Act ibid along with applicable interest under Section 11AA of Act ibid and in this regard enforce the bond executed and to encash the bank guarantee to recover the said duty and interest.
2.5 After due process of law, the Adjudicating Authority vide Order-
in-Original No. 07/2013 dated 06.09.2013 confirmed the demands put forth in the Show Cause Notice. Aggrieved, the Appellant filed an appeal before the Commissioner of Customs & Central Excise (Appeals), Trichy who vide Order-in-Appeal No. 24/2014 dated 21.03.2014 upheld the Order-in-Original and rejected the appeal. Aggrieved, the Appellant filed an appeal before this forum vide E/41449/2014.
3. Excise Appeal No. E/41450/2014 has been filed by M/s. IACL Private Limited, Trichy aggrieved by the Order-in-Appeal No. 25/2014 dated 21.03.2014 passed by Commissioner of Customs & Central Excise (Appeals), Trichy upholding the Order-in-Original No. 08/2013 dated 16.09.2013 which had confirmed the duty demand of Rs.1,71,289/- payable on the Sulphuric Acid procured between April 2011 to March 2012 under Rule 6 of Central Excise (Removal of Goods at Concessional rate of duty for Manufacture of Excisable goods) Rules, 2001 determined in terms of Section 11A(10) of 5 E/41449&41450/2014 Central Excise Act, 1944 (ACT) besides levy of applicable interest under Section 11AA read with Rule 6 ibid. The Order-in-Original ordered for recovery of amounts payable by enforcing the bond and bank guarantee executed by the Appellant with the jurisdictional authorities. Aggrieved, the Appellant filed an appeal before this forum in E/41450/2014.
4. As both the appeals involve an identical issue, they are being taken up together for disposal by this common order.
5. The arguments of appellants as evident from the grounds of appeal are summarised as below:-
i. The classification of fertiliser under a particular tariff heading 31 is not a pre-condition for eligibility of exemption under serial number 32 of Notification No. 04/2006-CE.
ii. In the absence of any specific condition in the said entry number 32, the exemption is available irrespective of the tariff heading under which the fertiliser may be classified.
iii. The classification of „fertiliser‟ has no relevance and the only condition to be satisfied is the input „Sulphuric Acid‟ should be used in the manufacture of fertiliser.
iv. Agricultural Grade Zinc Sulphate, though classified under Chapter 28, still the same is used as „fertiliser‟ in the field of agriculture. v. Agricultural Grade Zinc Sulphate is procured by the agricultural departments of various state Governments for further distribution to farmers for agricultural use as "fertilisers‟‟.6
E/41449&41450/2014 vi. In the absence of specific explanation for fertiliser in entry number 32, the word fertiliser based on the end use of the product and also based on various decisions cited by the Appellant should be the basis for extending the benefit of the Notification No. 4/2006-CE dated 01.03.2006.
vii. Serial No. 32 and Serial No. 35 of the Notifications are independent and conditions specified in one serial number cannot be applied to another.
viii. Had it been the intention of the Government to give exemption only for fertilisers falling under Chapter 31 falling under Chapter 31, then the Government would have mentioned the condition as "used in the manufacture of fertilisers falling under Chapter31".
ix. The issue is no more res integra in view of the settled law following various decisions of appellate/ higher forums.
a. Punjab Micro Nutrients Ltd. Vs. Commissioner of Central Excise reported in [1990 (48) ELT 603-Tribunal] b. Commissioner of Central Excise, Chandigarh Vs. India Phospate and Carbonite reported in [1998 (98) ELT 634 (Tribunal)] c. Castrol India Limited Vs. Commissioner of Central Excise, Calcutta reported in [2005 (181) ELT 367 (Supreme Court)] x. The reliance placed on the CBEC Circular No. 392/25/98-CX dated 19.05.1988 by the lower authorities have no relevance in the present issue as the Appellant has established through case laws that Classification of fertiliser under a particular tariff heading was not a pre-condition for eligibility under exemption notification and also further established that „Zinc‟ is to be considered as a fertiliser being essential for plant growth and development.
xi. The first appellate authority heavily relied on the decision of the Hon‟ble Tribunal in the case of Jyothi Chemicals [2010 (253) ELT 343 7 E/41449&41450/2014 (Tribunal)] which is distinguishable to the facts of the present case and hence not applicable.
5.1 The Ld. Advocate Shri Gokarnesan appeared for the appellants and his arguments are that:-
i. Exemption for Sulphuric Acid used in the manufacture of agricultural grade zinc sulphate has been given consistently from 1994 through various Notifications.
ii. In the decision pertaining to M/s. Jyothi Chemicals and Fertilisers relied upon by lower authorities is „per incurium‟ in as much as the Appellants in the cited case failed to present before the Hon‟ble Tribunal the decisions in the cases of:-
a. Punjab Micro Nutrients Ltd. Vs. Commissioner of Central Excise which was affirmed by the Hon‟ble Supreme Court [1996 (88) ELT A72 (SC)] b. Commissioner of Central Excise, Chandigarh Vs. India Phospate and Carbonite [1998 (98) ELT 634 (Tribunal)] and c. Castrol India Ltd. Vs. Commissioner of Central Excise, Calcutta [2005 (181) ELT 367 (Supreme Court)]. Hence it was averred that the said decision is not a binding decision.
5.2 The Ld. Advocate placed reliance on the ratio of the following decisions:-
a. Page Industries Vs. Commissioner of Customs, Chennai reported in [2022 (382) ELT 130 (Tri.- Chennai)] affirmed by the Hon‟ble Supreme Court in [2023 (6) Centax 158 (SC)] b. Hyundai Motors India Ltd. Vs. Department of Revenue, Ministry of Finance reported in [2017 (355) ELT 342 (Mad.)] 8 E/41449&41450/2014
6. The Ld. Authorised Representative Shri Anoop Singh, Joint Commissioner reiterated the findings of the lower Adjudicating Authority and prayed for dismissing the appeals filed by the Appellants.
7. Heard both sides and carefully considered the submissions and evidences on record.
8. The only issue that arises for consideration in these appeals is:-
Whether the Sulphuric Acid procured without payment of duty in terms of Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 and used in the manufacture of Agricultural Grade Zinc Sulphate classifiable under 28332990 of CETA, is eligible for the benefit of exemption Notification No. 04/2006-CE (Sl.No. 32) dated 01.03.2006 when the product manufactured is not classified as fertiliser under Chapter 31 of CETA?
9. The Department had taken a stand that Zinc Sulphate (Agriculture Grade) manufactured by the Appellant, is a separate defined chemical compound, falling under Chapter Heading 28333290 and not classifiable under Chapter 31 as fertiliser, hence the Sulphuric Acid procured duty free is not entitled for exemption under Sl.No. 32 of Notification No. 4/2006. Further, Notification No. 12/2012-CE dated 17.03.2012 which superseded the Notification No. 04/2006, mentioned the same under Sl.No. 86 and hence Sulphuric Acid does not qualify for exemption.
9E/41449&41450/2014
10. The Appellants have contested that Classification of fertiliser under a particular tariff heading 31 is not a pre-condition for eligibility of exemption under serial number 32 of Notification No. 04/2006-CE, hence exemption is available irrespective of the tariff head under which such fertiliser was classified. It was averred that classification of fertiliser is not the moot point as the only condition to be satisfied is that the input should be used in the manufacture of fertiliser. It was pointed out that Sulphuric Acid utilised in the manufacture of Agricultural Grade Zinc Sulphate falling under Chapter 28 is used as a fertiliser for distribution to farmers through Agricultural department of State Governments. It was also averred that the exemption for Sulphuric Acid utilised in the manufacture of the Agricultural Grade Zinc Sulphate was given consistently from 1994 through various Notifications. The Appellants cited various decisions supporting their contentions.
11. The relevant extracts of Notification No. 04/2006-CE is reproduced below for the sake of convenience:-
Notification New Delhi, the 1st March 2006. No. 4 /2006-Central Excise10 Phalguna, 1927 (Saka)G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts excisable goods of the description specified in column (3) of the Table below read with the relevant List appended hereto, as the case may be, and falling within the Chapter, heading or sub-heading or tariff item of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the Central Excise Tariff Act), as are given in the corresponding entry in column (2) of the said Table, from so much of the duty of excise specified thereon under the First Schedule to the Central Excise Tariff Act, as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said Table and subject to the relevant conditions specified in the Annexure to this notification, and the Condition number of which is referred to in the corresponding entry in column (5) of the Table aforesaid.
Explanation.-For the purposes of this notification, the rates specified in column (4) of the said Table are ad valorem rates, unless otherwise specified.
10 E/41449&41450/2014 Table Sl.No. Chapter or heading or Description of the Rate Condition No. (1) sub-heading or Tariff Excisable Goods (4) (5) item of the First (2) (3) 32 28 Sulphuric acid, Nil 2 oleum, oxygen and ammonia used in the manufacture of fertilizer Annexure Condition no. Condition 2 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 The above Notification has exempted Sulphuric Acid falling under Chapter 28 used elsewhere in the factory of production, in the manufacture of fertiliser, by following the procedure laid down under CGEGIR. In the instant case, sulphuric acid is procured duty free by following the procedure laid down under CGEGIR and used by the Appellants in manufacture of Agricultural grade Zinc Sulphate which is distributed to farmers as a fertiliser and prima facie, it appears that the appellants are entitled to the exemption. Whereas the contention of the Department for not extending the benefit of the Notification for manufacture of Zinc Sulphate is that it is classifiable under Chapter 28 instead of as fertiliser under Chapter 31 of Central Excise Act, 1985.
12. Both the Adjudicating Authority and the lower Appellate Authority have confirmed the demand by relying on the decision of the Hon‟ble Tribunal in the case of Jyoti Chemicals & Fertilisers Vs. 11 E/41449&41450/2014 Commissioner of Central Excise, Chandigarh [2010 (253) E.L.T. 343 (Tri.-
Del.)], which reads as follows:-
"17. The fact that the appellants manufacture Zinc Sulphate which is a micro-nutrient classifiable under sub-heading 2833 26 10 is not in dispute. It is true that under Circular No. 79/79/94-CX dated 21st November, 1994, the Board had clarified that Micronutrients listed under Serial No. 1(F) of Schedule 1 Part (A) of the Fertilizer (Control) Order, 1985 and their mixtures (with or without N, P, K) as notified by the Central Government or a State Government would be appropriately classifiable under Heading 31.05 as "Other Fertilizers".
Equally it is true that the Supreme Court in the case of Ranadey Micronutrients v. Collector of Central Excise, reported in 1996 (87) E.L.T. 19 (S.C.), had held that, "if the later circular is contrary to the terms of the statute, it must be withdrawn. While the later circular remains in operation, the Revenue is bound by it and cannot be allowed to plead that it is not valid". The ratio of the decision is that, the Circular issued by the Board in exercise of powers under Section 37-B of the said Act till it remains in force, is binding upon the Department. It is pertinent to note that the Board, subsequent to the said decision of the Supreme Court, issued another Circular No. 392/25/98-CX., dated 19th May, 1998 clarifying that :
"3. The matter has been re-examined in the light of Supreme Court judgment in the case of Ranadey Micronutrients v. Collector of Central Excise - Civil Appeal No. 5404 of 1993, decided on 10-9-1996 - 1996 (87) E.L.T. 19 (S.C.). Micronutrients are basically salts of elements such as Zinc, Boron, Manganese, Molybdenum, Iron etc., known as trace elements. These are essential for plant growth in small amounts only and there absence leads to stunted growth. These elements are supplied in minor quantities to regulate the formation of hormones etc., which in turn alter life processes of the plant so as to accelerate growth, enhance yield and improve quality, thus indirectly contributing to regulate plant growth.
4. According to HSN Explanatory Notes, plant growth regulators are applied to alter the life process of the plant so as to accelerate or retard growth, enhance yield, improve quality of facilitate harvesting, etc. Plant hormones are one type of plant growth regulators. Synthetic organic chemicals are also used as plant growth regulators.
5. Fertilizers are materials added to soil and, sometimes to foliage to supply nutrients to sustain plants and promote their abundant and fruitful growth. The elements that constitute these plant foods are divided into three classes - (1) Primary-Nitrogen (N), Phsphorous (P) and Potassium (K), (2) Secondary - Calcium (Ca), Magnesium (Mg) and Sulphur (S) and (3) Minor or so called micronutrients - Iron (Fe), Manganese (Mn), copper (cu), Zinc (Zn), Boron (B) and Molybdenum (Mo). However, for the purpose of classification of micronutrients as „Other Fertilizers‟ in Heading 31.05 CET, the scope of the term „Other Fertilizers‟ has to be determined in the light of Note 6 of Chapter 31. Further, the specific exclusion of separate chemically defined compounds as laid down in the HSN Explanatory Notes to Heading 3105.90, must also be borne in mind. If, the micronutrient is a separate chemically defined compound, it will be classifiable under Chapter 28/29. If not so, and if in accordance with Note 8 to Chapter 31, it contains N, P or K, it will be classifiable under Chapter Heading 31.12
E/41449&41450/2014
6. Further it is also stated that notification under F.C.O. is irrelevant for deciding classification under the Central Excise Tariff and regardless of such notification, the appropriate consideration should be :
(i) whether or not the micronutrient in question is a separate chemically defined compound. If it is, then classification under 31.05 is ruled out; and
(ii) if it is not, whether it contains N, P or K as laid down in the Explanatory Notes.
7. Therefore, it is clarified that classification of micronutrients may be done in accordance with the above guidelines.
8. The above clarification may be brought to the notice of the lower field formations and the trade interests may also be suitably advised.
9. Board‟s earlier Circular No. 79/79/94-CX, dated 21-11-1994 stands modified accordingly."
19. The difference between „micronutrient‟ and „fertilizer‟ for the purpose of classification under the Excise Law was well explained by this Tribunal in the said case of Ranadey Micronutrients Pvt. Ltd. v. Collector of Central Excise, Pune, reported in 1995 (75) E.L.T. 139 (T). Therein it was held thus :
"7. Considered. The contention of the appellants that the Micronutrients are regarded in the trade as fertilisers and hence this classification should be preferred over in other classification as also held by the department in the past is not tenable because the criterion of trade parlance will only apply subject to the tariff definition. In this case w.e.f. 1-3-1986 when the new Central Excise Tariff was introduced, the Chapter Note 6 made it very clear that term x other fertilisers‟ will only include those which contain at least one of the major nutrients, namely, N, P or K. which condition was not fulfilled in the case of micronutrients. Moreover, in terms of the rules of interpretation specific category has to prevail over a more general heading. Hence, if the term "plant growth regulators‟ is found to cover micronutrients then that heading being more specific will prevail over the more general heading fertilisers. As seen from the explanatory notes to HSN on which the Central Excise Tariff is based and which can therefore, be relied upon in absence of any contrary indicatory factors; plant growth regulators‟ are applied to alter the life process of plant so as to enhance yield, improve quality or facilitate harvesting etc. Micronutrients are admittedly used albeit in trace quantities to accelerate the growth and enhance the yield and hence these would be covered by "plant growth regulators."
8. As seen from the Kirk-Othmer Encyclopedia of Chemical Technology - Third Edition "The use of plant growth regulators may be the cause of the most important quantitative yields yet achieved in agriculture. The principal aim of the agrochemical industry has been to provide chemicals that control the competition to the crop, i.e. the weeds, insects, fungi and nematodes that reduce yield or quality or that interfere with harvesting." This is only the principal aim and not the only aim of plant growth regulator. As seen further from the heading plant growth substances „ plant growth substances or regulators are used to modify the crop "and further," plant growth regulators other than nutrients usually are organic compounds‟. Thus nutrients are also covered under the term plant growth regulators. The scope of the term "nutrients" in the said quotation obviously includes, viz. regulation of competition to the main crop, refers to micronutrients since major nutrients like N, P and K are covered under 13 E/41449&41450/2014 the scope of the term „fertilisers‟ as had been contended by the appellants in support of their claim that micronutrients were also fertilisers.
9. They had claimed that certain nutrients like N, P, K are required by the plant in large quantities and are traditionally known as fertilisers. Others are required in smaller quantities, and the treace elements like Fe, Cu, Zn, Mn, Mo etc. are required only in very small quantities and are called as micronutrients."
It is pertinent to note that the Apex Court in its order reported in 1996 (87) E.L.T. 19 (S.C.) (supra) allowed the appeal against the said order of the Tribunal on the point of applicability of the later circular, without disturbing the observations of the Tribunal in relation to the differentiation between „micronutrients‟ and „fertilizers‟.
20. It is not the case of the appellants that the product manufactured by the appellants contains any of the essential constituent of the fertilizers, namely, nitrogen, phosphorous or potassium.
21. The entire case of the appellants is based on the contention that the final product manufactured by them is Agro Grade Zinc Sulphate and it is nothing but Zinc Sulphate Hepta Hydrate (Agro Grade) and the same is accordingly certified by National Testing Centre and, therefore, it is „fertilizer‟ within the meaning of the said expression under the Fertilizer (Control) Order, 1985.
22. Under clause 2(h) of the Fertilizer (Control) Order, 1985, the term „fertilizer‟ has been defined as under :
"2(h) ‟fertilizer‟ means any substance used or intended to be used as a fertilizer of the soil and/or crop specified in Part A of Schedule I and includes a mixture of fertilizer, and a special mixture of fertilizers."
23. In the schedule to the said Fertilizer (Control) Order, 1985, the specification of the micronutrients, zinc sulphate, hepta hydrate (ZnSO4.7H2O) have been described as under :
(i) [OMITTED]
(ii) Matter insoluble in water per cent by 1.0
weight, Maximum
(iii) Zinc (as Zn) per cent by weight, minimum 21,0
(iv) Lead (as Pb) per cent by weight, maximum 0.003
(v) Copper (as Cu) per cent by weight, 0.1
maximum
(vi) Magnesium (as Mg) per cent by weight, 0.5
maximum
(vii) pH not less than 4.0
(viii) Sulphur (asS), per cent by weight, 10.0
minimum
(ix) Cadmium (as Cd), per cent by weight, 0.0025
Minimum
(x) Arsenic (as As), per cent by weight, 0.21
minimum
As already observed above, it is neither the case of the appellants that the product manufactured by the appellants contain any of the essential 14 E/41449&41450/2014 constituents like nitrogen, phosphorous or potassium, nor the certificate produced by the appellants discloses any such constituents therein.
24. Lastly, it was sought to be contended on behalf of the appellants that even applying the common parlance theory, the product would be classifiable as the „fertilizers‟. Firstly, this point was never raised either before the adjudicating authority or before the Commissioner (Appeals) and hence the party is not entitled to raise the same for the first time in the appeal before the Tribunal. Secondly, the point has not been raised in the Memorandum of Appeal. The party is not entitled to raise the point at the eleventh hour and that too without any advance notice in that regard to the opposite party. Thirdly, the point is not a pure question of law. It requires factual, matrix which is totally absent in the case in hand."
The above decision of the Tribunal has been affirmed by the Hon‟ble Supreme Court in [(2023) 9 Centax 322 (SC)].
13. The above decision was rendered on the legal plea raised by the appellant therein as to whether the explanation regarding the term "fertilisers" appended to entry No. 35 of the said Notification No. 04/2006- CE dated 01.03.2006 is applicable to the term „fertilisers‟ appearing in entry No. 28 of the table under the Notification. In the explanation to entry No. 35 of the Notification, it is expressly stated that „fertilisers‟ shall have the same meaning assigned to it under Fertiliser Control Order, 1985. The appellants‟ contention is that Zinc Sulphate is a fertiliser in common parlance and is a micro nutrients and is used in agriculture and even they sold the entire product to State Government for being supplied to the farmers that even by applying the common parlance theory, the product would be classifiable as fertilisers and the Notification mentions simply as a fertiliser and there is no condition for according the benefit of the Notification that Zinc Sulphate should be classifiable under Chapter 31 of the Central Excise Tariff Act, 1985 which deals with fertilisers. The appellants have relied on the decision in the case of Punjab Micro Nutrients Ltd. vs. Collector [1990 (48) E.L.T. 603 (Tri.-Del.)] in support of their contention that the benefit of 15 E/41449&41450/2014 exemption Notification No. 04/2006-CE dated 01.03.2006 is available for procuring Sulphuric Acid without payment of duty. The Tribunal in the order has held as follows:-
"4. We have carefully considered the submissions made by the learned counsel and the learned Departmental Representative. The question is whether the sulphuric acid used in the manufacture of zinc sulphate would be eligible for exemption Notification No. 81/75 dated 22-3-1975. The notification runs as follows:-
"In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 and in supersession of the notification of the Government of India in the Ministry of Finance (D.R. & I) No. 74/66-CE dated 30-4-1966, the Central Government hereby exempts sulphuric acid falling under Sub-heading No. 2802.20 of the schedule to the Central Excise Tariff Act, 1985 (5 of 1986) intended for use in the manufacture of fertilizers, from the whole of the duty of excise leviable thereon :
Provided that :-
(i) the Assistant Collector of Central Excise is satisfied that the said sulphuric acid has been so used; and
(ii) in respect of such use elsewhere than in the factory of production of sulphuric acid, the procedure set out in Chapter X of the said Rules shall be followed".
It is seen that the notification, while specifying the Sub-heading 2802.20 for sulphuric acid does not do so in respect of fertilizer i.e. the notification does not spell out the exemption in terms of sulphuric acid used in the manufacture of fertilizer falling under Chapter 31 of the Central Excise Tariff Act, 1985 which means, the exemption is available irrespective of the tariff heading under which the fertilizer may be classified. It is also admitted fact that the appellants had been availing of the exemption prior to 1-3-1986 and also there was no change in the characteristic of either the raw material or the final product. The only change was in the classification of the product due to the coming to the effect of the Central Excise Tariff Act, 1985 from 1-3-1986. In such a situation, what is to be seen is whether zinc sulphate would at all be called a fertilizer. In this context, the Tribunal‟s decision in the case of M/s. Radhika Vitamalt Pvt. Ltd. v. Collector of Central Excise, Meerut relied upon by the appellants is relevant because in that decision the Tribunal had considered the same material, namely, zinc sulphate and the fact whether it will be a fertilizer or not. It had also considered the aspect of the distinction between nitrogen, phosphorus and potassium, which are to be found in major fertilizers and micronutrients. The Tribunal in that case had observed thus in para 11 of the decision, "Micronutrients are a group of nutrients which are essential for plant growth and development but are required by plants in small quantities. Iron, zinc, manganese, copper, boron, molybdenum and chlorine fall in this category. It is seen from the "Handbook on Fertilizer Usage", brought out by the Fertilizer Association of India, New Delhi, that the distinction between nitrogen, phosphorus and potassium which are to be found in the major fertilizers and micronutrients, lies in the fact that nitrogen, phosphorus and potassium are used in large quantities by plants. These are, therefore, called major or primary nutrients. Calcium, magnesium and sulphur are required relatively in small but inappreciable quantities and are called secondary nutrients. Iron, zinc, manganese, copper, boron, molybdenum and chlorine are required by plants in small quantities for their growth and development. Hence these are referred to as micronutrients or trace elements. If nitrogen, phosphorus, 16 E/41449&41450/2014 potassium bearing products which are used for growth and development of plants are fertilizers, it stands to reason that micronutrient bearing products are also fertilizers. Both supply essential nutrients to plants, the former to a larger extent and the latter to a smaller extent, the difference being, however, dictated by the requirements of plants for their growth and development".
Besides the above, the Tribunal had also considered the ISI Glossary of Terms and other Technical Works to come to the conclusion that zinc sulphate can be considered as fertilizer, besides noting the inclusion thereof in the Fertilizer (Control) Order as another supporting evidence. In the same decision the Tribunal had further observed that the fact that micronutrients are dealt with separate from nitrogenous, phosphatic and potassic fertilizers in technical book like „Manures and Fertilizers‟ cannot be an argument to say that trace elements (micronutrients) are not fertilizers. The Tribunal‟s decision is one which had considered whether micronutrients can be called fertilizer or not in general, in trade parlance and also technically. Therefore, the scope of its decision is not to be confined only to Item 14-HH of-Central Excise Tariff and its relevance in the present case is because of the fact, as we have pointed out above, Notification 81/75 does not specify the Chapter or the Tariff Heading with reference to the fertilizers. In this view of the matter, we see a lot of force in the contentions of the appellants and accordingly, hold that sulphuric acid used in the manufacture of zinc sulphate is eligible for exemption under Notification 81/75 dated 22-3-1975. The appeal is, therefore, allowed"
We find that the above decision has been affirmed by the Hon‟ble Supreme Court as Civil Appeal No. 261 of 1991 filed by the Collector of Central Excise, Chandigarh against the above CEGAT order was dismissed as reported in [1996 (88) ELT A72 (SC)].
14. We find that the ratio of the above decision has been followed in the case of Himgiri Metal Pvt. Ltd. Vs. Commissioner of Central Excise, Meerut-I [2014 (308) ELT 735 (Tri.-Del.)] as follows:-
"2. The appellant/assessees are engaged in the manufacture of zinc sulphate (agricultural grade). For the said purpose they were procuring sulphuric acid without payment of duty in terms of Notification No. 4/2006-C.E., dated 1-3- 2006. Serial No. 32 of the said Notification exempts sulphuric acid, along with some other items mentioned and used in the manufacture of fertilizers. The Explanation appears thereunder is to the effect that - "For the purpose of this exemption, „fertilizers‟ shall have the meaning assigned to it under the Fertilizer (Control) Order, 1985".
3. Inasmuch as the zinc sulphate is classified under Chapter Heading 28 of the CETA, 1985, Revenue entertained a view that the same cannot be considered as fertilizers which are classifiable under Chapter Heading 31. Accordingly, they initiated proceedings against the assessee for denial of the 17 E/41449&41450/2014 benefit of Notification and consequent confirmation of demand. The said proceedings resulted in passing of the present impugned orders confirming demand and imposing penalties. As in one case, the Commissioner (Appeal) set aside the penalty, Revenue has filed the present appeal also.
4. The issue involved in all the appeals is as to whether the assessee is entitled to benefit of the Notification No. 4/2006-C.E. in respect of procurement of sulphuric acid without payment of duty, which is being used in the manufacture of zinc sulphate "fertilizer grade". Revenue‟s objection is that inasmuch as zinc sulphate is being classified under Chapter 28, the same cannot be held as fertilizers, which are classifiable under Chapter 31.
5. We find that the said dispute was the subject matter of the earlier decision of the Tribunal, though in the context of the different Notification No. 81/75. In the case of Punjab Micronutrient Ltd. v. C.C.E. - 1990 (48) E.L.T. 603 (Tri.) as also in the case of C.C.E. v. India Phosphate and Carbonate - 1998 (98) E.L.T. 634 (Tri.), it stand held that classification of fertilizer under a particular tariff heading is not a pre-requisite condition for extending the benefit of exemption Notification. Inasmuch as the zinc is essential for growth and development, the same has to be considered as fertilizer. Both the decisions also took note of the fact that zinc sulphate is included in the Fertilizer (Control) Order, 1985. One such decision in the case of Punjab Micronutrient Ltd. also stands upheld by the Hon‟ble Supreme Court reported as 1996 (88) E.L.T. A72 (S.C.).
6. It is seen that at the time of the decision of the Tribunal in above referred case, there was no Explanation attached to the Notification No. 81/75 which was under consideration. However, the Explanation was subsequently included in the said Notification, which is identical to the Explanation as available in the present Notification No. 4/2006. It is further seen that neither in the earlier Notification No. 81/75 nor in the present Notification No. 4/2006, there is any requirement of the fertilizer to be classified under Chapter 31 also. The only requirement in the present Notification which was also introduced in the previous Notification by way of including Explanation is to explain the meaning of fertilizer. It stands mentioned in the Explanation that fertilizer shall have the meaning assigned to it under Fertilizer (Control) Order, 1985. Both the decisions referred to by the ld. Advocate have taken note of the fact that zinc sulphate is included in the Fertilizer (Control) Order, 1985. As such, the said condition of Notification also stands fulfilled by the assessee.
7. In view of the above, we, by following the precedent decisions of the Tribunal as upheld by the Hon‟ble Supreme Court, find no merits in the Revenue‟s stand. Accordingly, the appeals filed by the assessee are allowed and appeal filed by Revenue is rejected. All the four appeals are disposed of in above manner."
15. In Paragraph 24 of Jyothi Chemicals & Fertilisers (supra), the plea raised by appellant that Zinc Sulphate (agricultural grade) is known as fertiliser in common parlance was not considered as the said plea was not raised by appellant therein before earlier forums.
18E/41449&41450/2014
16. Appreciating the ratio of the above decisions as applicable to the facts obtaining in these appeals, the impugned Order-in-Appeal Nos.
24&25/2014 dated 21.03.2014 cannot sustain and ordered to be set aside.
The appeals are allowed with consequential relief, if any, as per the law.
(Order pronounced in open court on 03.05.2024)
Sd/- Sd/-
(VASA SESHAGIRI RAO) (SULEKHA BEEVI C.S.)
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
MK