2009 (12) TMI 750 - AT - Central Excise

Summary

Issues:
1. Duty exemption eligibility under Notification No. 40/85-C.E. for agriculture grade zinc sulphate
2. Duty exemption eligibility under Notification No. 81/75-C.E. for sulphuric acid
3. Imposition of penalty under Rule 173Q(1) of the Central Excise Rules, 1944

Analysis:

Issue 1: Duty Exemption Eligibility under Notification No. 40/85-C.E. for Agriculture Grade Zinc Sulphate:
The Appellant manufactured agriculture grade zinc sulphate claiming full duty exemption under Notification No. 40/85-C.E. The central excise officers took samples to ascertain the grade, and the chemical examiner's reports indicated non-agricultural grade zinc sulphate. However, the Appellant argued that subsequent tests by other authorities confirmed agricultural grade, challenging the reliability of initial reports. The Tribunal noted discrepancies in the test reports, emphasizing the lack of specific parameters and the absence of cross-examination of chemical examiners. Given the conflicting reports and procedural irregularities, the Tribunal concluded that the goods were indeed agricultural grade zinc sulphate, making them eligible for duty exemption.

Issue 2: Duty Exemption Eligibility under Notification No. 81/75-C.E. for Sulphuric Acid:
The dispute also involved the eligibility of sulphuric acid, used in manufacturing zinc sulphate, for duty exemption under Notification No. 81/75-C.E. The Appellant's argument rested on the classification of zinc sulphate as a micronutrient covered by the Fertilizer Control Order, 1985. The Tribunal agreed that since the zinc sulphate was deemed agricultural grade, the sulphuric acid used in its production qualified for duty exemption under the notification.

Issue 3: Imposition of Penalty under Rule 173Q(1) of the Central Excise Rules, 1944:
The Commissioner had imposed a penalty on the Appellant for alleged contravention of various rules. However, the Tribunal, after considering the submissions and evidence from both sides, found in favor of the Appellant on the primary issues of duty exemption eligibility. Consequently, the Tribunal set aside the impugned order, ruling in favor of the Appellant and allowing the appeal.

In conclusion, the Tribunal's detailed analysis highlighted procedural lapses, inconsistencies in test reports, and the Appellant's compliance with relevant standards and regulations to establish the eligibility of their products for duty exemptions under the specified notifications.