Customs, Excise and Gold Tribunal - Bangalore
Coromandel Fertilizers Ltd. vs The Commissioner Of Customs And Central ... on 13 October, 2006
Equivalent citations: 2007(116)ECC45, 2007ECR45(TRI.-BANGALORE)
ORDER S.L. Peeran, Member (J)
1. This appeal arises from Order-in-Original No. 28/2005 dated 22.12.2005 passed by the Commissioner of Central Excise, Visakhapatnam holding that the imported molten sulphur in crude form falling under Chapter Heading 2503 undergoing a process of mixing with Bentonite powder falling under Chapter Heading 2508.10 and Magnesium Oxide to bring into existence Sulphur Bentonite would fall under Chapter Heading 3824.90 and 3824 90 90 (from 1.3.2005) of Central Excise Tariff subject to duty at the rate of 16%.
2. The appellant's contention is that the classification adopted by the Commissioner is not justified and that the item has to be classified at nil rate of duty under Chapter Heading 25.05 in terms of Chapter Note 1 of Chapter 25 of Section V of Schedule to Central Excise Tariff Act 1985. They contended that the issue is fully covered in their favour in terms of Tribunal's ruling rendered in the case of Deepak Fertilizers and Petrochemicals Ltd. v. CC, Nhava Sheva . It has been contended that the mixing of Bentonite is only for safe application of sulphur and to prevent its hazards while using it as a pesticide. The Bentonite powder is used only as a filler and such mixing will not bring into existence a new product. There is no process of manufacture in mixing Bentonite Clay and Magnesium Oxide, as there is no chemical reaction and the trade also does not recognize the item as a different one, on such mixing. The item continues to carry the same name. There is no change in the name, characteristics and physical properties and hence, the judgment rendered by the Tribunal on the same product in the case of Deepak Fertilizers (supra) is not distinguishable.
3. The learned Counsel submits that the Tribunal in the case of Andhra Cements v. CCE, Visakhapatnam relying on 23 judgments have clearly held that mere mixing of certain items does not bring into existence a new product, as there is no physical change or chemical change and change in the characteristics of the product on such mixing or grinding. He submits that the ratio of these judgments is not distinguishable. He has also filed a chart which shows the similarity between the facts of Deepak Fertilizers (supra) and their case.
3. The learned JDR defended the order on the ground that mixing of the filler Bentonite clay and Magnesium Oxide would bring into existence new product as held by the Commissioner. However on a specific query from the Bench as to whether any evidence has been produced by the Revenue to prove that unrefined Sulphur on being mixed Bentonite Clay and Magnesium Oxide has become a new product as known in the trade and as to whether there is any Chemical Examiners reports, the learned JDR submitted that there is no such evidence produced by Revenue in terms of the impugned order. However, he reiterated the Commissioner's findings.
4. On a careful consideration, we notice that the ruling rendered in the case of Deepak Fertilizers (supra) by the Tribunal cannot be distinguished. The Tribunal in the Deepak Fertilizers (supra) has held in Para 2 to 11 as follows.
2. The short point thus for consideration is whether the contested goods merit benefit of the relevant entry of the Notification which reads as under:
S. No. Chapter or heading No. or sub-heading No. Description of the goods
19. 25.03 Crude or unrefined sulphur.
3. There is no dispute that the goods are covered under There is no heading 25.03 which reads as under:
Sulphur of all kinds, other than sub-limed sulphur, precipitated sulphur and colloidal sulphur.
4. Both the lower authorities have held that the phrase Both the crude or unrefined would apply only to the sulphur which is mined and not subjected to any of the other processes. The description in the tariff entry is capable of covering refined as well as unrefined sulphur. Sub-notes to the tariff entry in the HSN prescribe the scope of the goods falling thereunder. The relevant part is reproduced below:
(4) recovered as by-products in Unrefined sulphurs the purification of coal gas, by the scrubbing of sulphurous furnace gases, from sour, natural gas and from the refining of sour crude mineral oils, etc. These recovered sulphurs, sometimes referred to as "purified sulphur" or "precipitated sulphur", must not be confused with the precipitated sulphur defined in the Explanatory Note to heading 28.02.
5. The Assistant Commissioner had relied upon the origin of the sulphur from which the contested product is manufactured. The literature shows that the liquid sulphur is brought from Aramco refinery. This liquid sulphur is mixed with powdered bentonite at the ratio of 9:1.
6. Shri Sridharan, the learned Counsel submitted that the refinery was engaged in refining petrochemicals from which the liquid sulphur was obtained as a by-product from sour natural gas. In terms of the sub-note (4) referred to above he claimed that this sulphur at the molten stage was unrefined. On examination of the literature and the HSN sub-notes we find that this claim has merit.
7. Whether the unrefined nature of the sulphur would be Whether the taken away by blending it with the bentonite clay is the next question that is to be decided.
8. Elemental sulphur has wide use as a fertiliser. Elemental Elemental sulphur has to be oxidised to sulphate before it can be absorbed by the plant. The rate of oxidisation depends upon the surface area of the sulphur particles. Rapid oxidisation is possible where the particle size is small. The fine particles, however, create handling problems. They provide irritation to the eyes and lungs. They can also be blown away by wind. They may float on the irrigation water. To enable the sulphur to be applied in a safe manner it is mixed with other fertilisers such as phosphate, etc., or with inert fillers such as bentonite clay. Such mixture is applied to the plants. On application of water bentonite expands and disintegrates the sulphur particles surrounding it. Over the years 10% bentonite in the mixture has been established as appropriate.
9. The addition of bentonite clay chemical properties of the sulphur particles. Therefore does not alter the even in admixture of the bentonite the sulphur does not merit classification under any other tariff entry. The sulphur component of such mixture also continues to fall under the term 'unrefined sulphur'. Therefore such unrefined sulphur tracing its origin in refinery processing natural gas, etc. of which it is a by-product would continue to merit the title 'unrefined sulphur' with or without mixture with bentonite.
10. The report of the chemical examination conducted by. The report the SGS indicate the existence of 10% inert filler. The same is the finding of the National Establishment for Agricultural and Industrial Sulphur at Dammam. We thus find that the contested goods would merit benefit under the relevant entry of the cited notification.
11. The appeal thus succeeds and is allowed with consequential relief.
4.1 The appellants have shown the similarity of the case of Deepak Fertilizers (supra) with that their case by producing a chart. The same is reproduced herein below.
S. No. Facts in Deepak Fertilizer & Petrochemicals Corporation Ltd. case Facts in the appellant's case
01. Goods imported Goods locally manufactured
02. Nomenclature Brimstone 90" (brand name) Nomenclature --
"Gromor" -- Brand name
03. Agriculture sulphur is also called elemental sulphur Used for Agriculture is also called elemental sulphur
04. Briefly the product was manufactured by mixing clay (Bentonite) to molten sulphur. The ratio of sulphur to Bentonite is 9:1 (Para 5 of the decision) Briefly the imported molten sulphur is mixed with Beritonite clay and small amount of binding agent The ratio of sulphur to bentonite is 9:1 (90% to 10%) vide para buy) of the impugned order.
05. The 10% Bentonite clay is an inert filler (para 10 of the decision) The bentonite is an inert filler -- vide para 10(xv) of the impugned order.
06. Brief facts on 'manufacture' on admitted position stated in the decision. Liquid sulphur (molten sulphur) was brought from outside, then mixed with powered bentonite at the ratio of 9:1 As per this para the processes involved heating, mixing filtration and other processes (para 1 of the decision of Tribunal) Brief facts on 'manufacture' as contained in the impugned order: Molten sulphur is imported assessed under heading 25.03 of customs tariff. Mixed with Bentonite and magnesium oxide. Here also processes involved heating in a vessel the mixture of sulphur and bentonite and mag. oxide to get homogenous mixture and formation of pastilles.
07. Use: in agriculture (application to plants and soil.
Use: in agriculture (application to plant & soil)
08. Decision of Tribunal concludes that the product continued to be 'unrefined sulphur' with or without mixture with bentonite. Classification under heading 25.03. Bentonite clay does not alter the chemical properties of sulphur particles.
The molten sulphur, when imported, was classified under heading 25.03 and continues to be classifiable under the heading 25.05 of sulphur in CE T after mixture with bentonite clay which does not alter the chemical properties of imported molten sulphur.
The above Chart was also furnished to the authorities below, however, he has attended to distinguish the judgments of Deepak Fertilizers (supra).
4.2 On our careful consideration, we find that the appellants have explained the reasons for mixing the Bentonite Clay and Magnesium Oxide. This mixing as held in the case of Deepak Fertilizers (supra) does not alter the chemical properties of the sulphuric peroxides. The Tribunal in the Deepak Fertilizers case (supra), as per the findings extracted above have clearly held that no new product has arisen on such mixing. The same Bentonite and Magnesium Oxide are fillers and their mixing is necessary for the purpose to avoid handling problems as noted in Para 8 of the Deepak Fertilizers (supra) case. We have also notice that Revenue has not produced any evidence to prove that on mixing of these two products, the unrefined crude sulphur has changed its properties and new product has come to be known in the market. The Revenue has not established through evidence and discharged their burden that mixing of Bentonite clay and Magnesium Oxide with imported unrefined/crude sulphur has brought into existence new product. Therefore, the ratio of the judgment rendered in the case of Deepak Fertilizers (supra) is not distinguishable. Respectfully following the ratio therein, the impugned order is set aside and the appeal is allowed with consequential relief, if any.
(Operative portion of this Order was pronounced in open court on conclusion of hearing)