2004 (4) TMI 419 - AT - Central Excise

Summary

Issues:
Appeals against duty demand and penalties imposed for clearing Zinc Sulphate without payment of duty. Appellant's defense based on product being of "agricultural grade" exempt under Notification No. 40/85.

Analysis:
The appeals were filed against duty demand and penalties imposed for clearing Zinc Sulphate without paying duty. The Commissioner alleged duty evasion and imposed penalties, including confiscation of the factory's assets with an option for redemption upon payment of a fine. The appellant argued that the Zinc Sulphate was of "agricultural grade" and therefore exempt under Notification No. 40/85. Evidence was presented to support this claim, including compliance with ISI specifications, sales to agricultural co-operatives, and positive test reports from Agricultural authorities and Customs laboratory.

The key issue in the case was whether the Zinc Sulphate manufactured by the appellant was indeed of "agricultural grade." The Indian Standard specified a minimum zinc content of 21.0% for agricultural grade Zinc Sulphate. The Chief Chemist's report confirmed that the samples tested met the IS specifications for agricultural grade Zinc Sulphate. Additionally, the agricultural authorities of the U.P. Government also conducted tests, with the majority confirming the agricultural grade status of the Zinc Sulphate. The appellant had been producing the item under registration as Zinc Sulphate - 21% (agricultural grade), and purchase orders referred to the goods as per Standard Fertilizer Control Order, further supporting their claim.

After reviewing the evidence and submissions from both sides, the Tribunal found in favor of the appellant. The Tribunal concluded that the findings in the impugned order lacked a basis, considering the comprehensive evidence presented regarding the nature of the product, its technical specifications, commercial identity, and actual use by selling to farmers' co-operatives. As a result, the appeals were allowed, and the impugned order was set aside, ruling in favor of the appellant's claim of the Zinc Sulphate being of "agricultural grade" and exempt from duty under Notification No. 40/85.