2004 (10) TMI 255 - AT - Central Excise

Summary

Issues:
1. Demand of duty on Sulphuric Acid used in the manufacture of Phosphoric Acid.
2. Interpretation of Notification No. 81/75-C.E. exempting Sulphuric Acid for use in fertilizer manufacture.

Analysis:

Issue 1: The appellant appealed against the Order-in-Appeal demanding duty on Sulphuric Acid used in the production of Phosphoric Acid for fertilizer manufacturing. The appellant contended that they cleared the Sulphuric Acid to IFFCO for fertilizer production, availing the benefit of Notification No. 81/75-C.E. exempting duty on Sulphuric Acid intended for fertilizer manufacturing. They cited a Ministry of Finance clarification supporting their position and a previous Tribunal decision. The Revenue argued that the appellant was actually clearing Phosphoric Acid, not Sulphuric Acid, to the fertilizer manufacturer, thus disqualifying them from the Notification's benefit.

Issue 2: The Tribunal examined Notification No. 81/75-C.E., which provides an exemption for Sulphuric Acid intended for fertilizer production. The Tribunal found that the appellant converted Sulphuric Acid into Phosphoric Acid, which was then used by fertilizer manufacturers. The Revenue disputed this factual aspect. However, a 1986 Ministry of Finance clarification stated that the exemption applies even if Sulphuric Acid is used in Phosphoric Acid production for subsequent fertilizer manufacturing, as long as it is ultimately utilized in fertilizer production. Relying on this clarification and the Notification's provisions, the Tribunal concluded that the demand for duty on Sulphuric Acid was unsustainable and set it aside, allowing the appeal.

In conclusion, the Tribunal ruled in favor of the appellant, holding that the Sulphuric Acid converted into Phosphoric Acid for fertilizer manufacturing was eligible for the duty exemption under Notification No. 81/75-C.E. The judgment emphasized the importance of the intended use of the Sulphuric Acid in fertilizer production, as clarified by the Ministry of Finance, to determine the applicability of duty exemptions.