1995 (4) TMI 59 - SC - Central Excise

Whether disinfectant fluids manufactured by the appellant were entitled to exemption under Notification No. 55/75-C.E., dated 1-3-1975, as amended by Notification No. 62/78, dated 1-3-1978? Held that - Appeal succeeds and is allowed. The order passed by the Tribunal is set aside and it is held that the goods produced by the appellant from phenolic compounds and high boiling tar acid being disinfectant fluids which have the capability of killing bacteria which are nothing but pests, the appellant was entitled to exemption under Item 18 of the notification issued in 1978

Summary

Issues:
Interpretation of exemption under Notification No. 55/75-C.E. for disinfectant fluids manufactured by the appellant.

Detailed Analysis:

1. Issue of Exemption Eligibility: The main issue in this case was whether the disinfectant fluids manufactured by the appellant were entitled to exemption under Notification No. 55/75-C.E., as amended in 1978. The Assistant Collector initially denied the exemption, stating that the disinfectant fluids did not possess the property of killing insects or pests, a requirement for the exemption. The appellate authority disagreed, considering the products as fungicides. The Tribunal also denied the exemption, emphasizing that the notification was specific to certain categories and did not cover general disinfectants used in bathrooms and floors.

2. Tribunal's Reasoning: The Tribunal found that while the disinfectants could kill bacteria and fungi, they did not fit the specific categories mentioned in the exemption notification. It highlighted the distinction between products used for killing insects and those used for general disinfection purposes. The Tribunal analyzed various literature and concluded that the notification intended to cover formulations for killing insects specifically, not general disinfectants like those produced by the appellant.

3. Definition of Disinfectant: The definition of disinfectant was crucial in determining eligibility for exemption. Various dictionaries and sources defined disinfectants as substances that destroy germs and microorganisms. The Tribunal acknowledged that the appellant's products containing high boiling tar acid could kill bacteria, but this alone did not categorize them as fungicides or pesticides under the exemption.

4. Interpretation of Pesticide and Fungicide: The judgment delved into the definitions of pesticides and fungicides to determine the applicability of the exemption. Pesticides were broadly defined as substances to kill pests, including insects, rodents, and bacteria. Fungicides, on the other hand, inhibit fungi growth. The appellant's claim that their disinfectant fluids could destroy fungi of medical importance was considered in this context.

5. Broad Interpretation of Exemption Notification: The Court emphasized a broad interpretation of the exemption notification. It stated that once a product falls within the categories mentioned, such as insecticides, pesticides, weedicides, or fungicides, it should be entitled to exemption. The judgment highlighted that the goods produced by the appellant, capable of killing bacteria and fungi, aligned with the common understanding of pesticides and fungicides, justifying their eligibility for exemption.

6. Final Decision: The Supreme Court allowed the appeal, overturning the Tribunal's decision. It held that the appellant's disinfectant fluids, with the ability to kill bacteria, were covered under Item 18 of the 1978 notification. The Court emphasized that the products' capability to kill germs and bacteria aligned with the broad interpretation of the exemption categories, entitling the appellant to the exemption.

In conclusion, the judgment clarified the eligibility of the appellant's disinfectant fluids for exemption under the specific notification, emphasizing the interpretation of terms like disinfectant, pesticide, and fungicide in the context of the exemption criteria.