1986 (3) TMI 180 - AT - Central Excise

Summary

Issues:
Classification of ammonium chloride under Central Excise Tariff - whether as fertilizer or industrial chemical.

Detailed Analysis:
1. The Government issued show cause notices under Section 36 (2) of the Central Excises and Salt Act, 1944 to review Orders-in-Appeal passed by the Appellate Collector of Central Excise, Madras regarding the classification of ammonium chloride. The issue was whether the product should be classified under Item 14HH (fertilizer) or Item 68 (industrial chemical) of the Central Excise Tariff. The Appellate Tribunal considered both matters together as they related to the same issue.

2. The Central Government argued that the high purity of ammonium chloride (99.8%) indicated it should be classified as an industrial chemical under Item 68, not a fertilizer under Item 14HH. The Appellate Collector had initially classified it as a fertilizer, but the Central Government disagreed, stating that commercial parlance recognized it as an industrial chemical. The Department emphasized the end use of the product in determining classification.

3. The Departmental Representative reiterated that the product was marketed and used primarily as a chemical, not a fertilizer. They cited legal precedents highlighting the importance of actual use in classification decisions. The Department argued that the purity and technical grade of the product supported its classification as an industrial chemical.

4. The Advocate for the Appellants contended that the product met the specifications for being classified as a fertilizer under Item 14HH. They argued that the purity of the product did not change its essential character as a fertilizer. The Advocate cited legal decisions supporting the classification under a specific entry rather than a general one, emphasizing that the Department had not proven that the product was not a fertilizer.

5. The Department claimed that the Appellants suppressed facts by not declaring the product as a technical grade, leading to the review under Section 11-A of the Central Excises and Salt Act, 1944. They argued that the product did not contain essential nutrients specified for fertilizers and that its end use as a fertilizer was crucial for classification.

6. The Tribunal analyzed the relevant Notification No. 164/69 and found that all types of ammonium chloride, regardless of purity, were considered fertilizers entitled to exemption. The Tribunal disagreed with the Department's interpretation and emphasized that the exemption covered all types of ammonium chloride used in the manufacture of dry cell batteries. The burden of proof to show the product was not a fertilizer lay with the Department, which they failed to discharge.

7. The Tribunal concluded that the product fell under the exemption as a fertilizer, and the Department's arguments based on purity and end use were unfounded. They highlighted that the Department failed to prove the product was not a fertilizer, and the demands for duty were likely time-barred. The Tribunal upheld the Orders-in-Appeal, dismissing the appeal.

In conclusion, the Tribunal ruled in favor of classifying the product as a fertilizer under the Central Excise Tariff, rejecting the Department's arguments based on purity and end use. The judgment emphasized the importance of specific tariff entries, burden of proof, and adherence to legal principles in classification decisions.