2009 (7) TMI 37 - HC - Central Excise

Exemption Notification End use In revision proceedings central government held that, Oleum was used by the petitioners for the manufacture of Caprolactum and not for fertilizers and therefore, not entitled to the exemption notification held that The revenue s contention is premised on its understanding that the normal or known method of manufacturing ammonium sulphate does not result in production of Caprolactum and that the process in which the petitioner engages itself results in ammonium sulphate as a merely a bye-product user of bye product to manufacture in caprolactum does not disentitle the assessee to claim exemption decision in favor of assessee.

Issues Involved:
1. Whether Oleum qualifies for exemption under the notifications issued under the Central Excise and Salt Act, 1944.
2. Whether the use of Oleum in the manufacture of Caprolactum and subsequent production of Ammonium Sulphate entitles the petitioner to the benefit of the exemption notifications.
3. Interpretation of the term "sulphuric acid" in the context of exemption notifications.

Issue-wise Detailed Analysis:

1. Whether Oleum qualifies for exemption under the notifications issued under the Central Excise and Salt Act, 1944:

The court examined whether Oleum, classified under Tariff Item 14G, qualifies for exemption under the notifications dated 30.06.1966 and 22.03.1975. The notifications exempted sulphuric acid used in the manufacture of fertilizers from excise duty. The court noted that Tariff Item 14G includes "Nitric, Hydrochloric and Sulphuric Acids (including fuming acids and anhydrides thereof)". The petitioner argued that Oleum, being a fuming sulphuric acid, falls within this classification and thus qualifies for exemption. The court referenced the Supreme Court's judgments in Steel Authority of India Limited Vs. Collector of Central Excise and Gujarat State Fertilizers Company Vs. Collector of Central Excise, affirming that the term "sulphuric acid" in the notification should include all forms of sulphuric acid classified under TI 14G. Consequently, the court held that the term "sulphuric acid" in the exemption notifications includes Oleum.

2. Whether the use of Oleum in the manufacture of Caprolactum and subsequent production of Ammonium Sulphate entitles the petitioner to the benefit of the exemption notifications:

The court examined the manufacturing process where Oleum is used as a catalyst in producing Caprolactum, which also results in the production of Ammonium Sulphate, a chemical fertilizer. The petitioner argued that the exemption should apply as the process results in the production of a fertilizer. The court noted the absence of restrictive terms in the notifications distinguishing between primary and secondary products. The court emphasized that the notifications intended to make fertilizers cheaper and more accessible, and the innovative use of technology to produce fertilizers should not be denied the benefit of the exemption. The court referenced the Supreme Court's ruling in Hansraj Gordhandas Vs. H.H. Dave, which established that in a taxing statute, the clear meaning of the words governs the matter. Therefore, the court held that the petitioner's use of Oleum, resulting in the production of Ammonium Sulphate, entitles it to the exemption.

3. Interpretation of the term "sulphuric acid" in the context of exemption notifications:

The court addressed whether the term "sulphuric acid" in the exemption notifications includes Oleum. The revenue authorities argued that Oleum is distinct from sulphuric acid and does not qualify for exemption. The court referenced various technical sources and previous tribunal decisions, including Andhra Sugar Limited Vs. Collector of Central Excise and Dhanbad Chemical Pvt. Ltd. Vs. Commissioner of Central Excise, which classified Oleum as a form of fuming sulphuric acid. The court concluded that Oleum is indeed a type of sulphuric acid and falls within the scope of the exemption notifications.

Conclusion:

The court held that Oleum is classifiable under TI 14G and that the petitioner's use of Oleum in the manufacturing process, which leads to the production of Ammonium Sulphate, entitles it to the benefit of the exemption notifications. The court quashed the impugned assessment orders and directed the refund of the amounts paid as duty, with interest.

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