1982 (2) TMI 305 - Board - Central Excise

Summary

Issues:
- Denial of concessional rate of duty on furnace oil and low sulphur heavy stock during trial run and for steam generation.
- Classification of ammonia as fertilizer or chemical.
- Imposition of penalty for contraventions of the law.

Analysis:
1. The appeal was against the denial of concessional duty on furnace oil and low sulphur heavy stock used during the trial run and for steam generation. The Collector held that these did not qualify as feedstock in the manufacture of fertilizers. Additionally, ammonia manufactured and sold as a chemical was not considered part of fertilizer production. A penalty of Rs. 5 lakhs was imposed for contraventions of the law.

2. The appellant argued that the trial run was essential for plant stabilization and commencement of commercial production. They contended that steam generated was used as feedstock in fertilizer production, supported by the plant's design concept and manufacturing process. They asserted that ammonia, even when sold as a chemical, should qualify for concessional duty due to its nature as a fertilizer.

3. During the hearing, the appellant pointed out misinterpretations of relevant Notifications by the Collector. They cited Notification Nos. 147/74, 195/76, and 350/77, which provided exemptions for specific uses of furnace oil and low sulphur heavy stock. The appellant argued that the Collector wrongly applied these Notifications in denying the concessional rate.

4. The Collector's denial was based on three grounds: trial run quantity not qualifying, steam generation not meeting criteria, and ammonia sold as a chemical not being considered fertilizer production. The appellant, with technical support, explained how these elements were integral to fertilizer manufacturing, thus qualifying for concessional duty.

5. The Board found that the trial run and steam generation did meet the requirements for concessional duty, contrary to the Collector's decision. However, the Board disagreed with treating ammonia sold as chemicals as fertilizer, thus denying concessional duty on feedstock used in its production. The penalty imposed was set aside.

6. The Board directed a reconsideration of duty recovery for feedstock used in ammonia production for chemical use. The orders demanding duty for trial run and steam generation feedstock were deemed legally untenable. While no penalty was justified, the Board emphasized adherence to departmental procedures for material use and storage.