1987 (8) TMI 218 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility of Dibutyl Phthalate (DBP) and Dimethyl Phthalate (DMP) for exemption as insecticides under Notification No. 62/78.
2. Interpretation of the term "insecticides" as per the Insecticides Act, 1968.
3. Application of the longer time limit for raising demand due to alleged wilful misstatement and suppression of facts by the respondents.
4. Use of DBP and DMP as plasticizers and its impact on their classification as insecticides.
5. Consistency of the Revenue's stand on the interpretation of the notification.

Detailed Analysis:

1. Eligibility of Dibutyl Phthalate (DBP) and Dimethyl Phthalate (DMP) for exemption as insecticides under Notification No. 62/78:
The primary issue in this appeal is whether DBP and DMP qualify for exemption as insecticides under Notification No. 62/78, dated March 1, 1978. The Assistant Collector of Central Excise, Calcutta, held that these products did not qualify as insecticides because they were not listed in the Schedule annexed to the Insecticides Act, 1968, and the respondents did not hold the requisite registration or license under Sections 9(1) and 13(1) of the Act. However, the Collector of Central Excise (Appeals) Calcutta, relying on authorities cited by the respondents and a certificate issued by D.G.S.D., held that the products could be considered insecticides within the meaning of the notification, even if part of the product was sold as plasticizers.

2. Interpretation of the term "insecticides" as per the Insecticides Act, 1968:
The Assistant Collector's decision was based on the definition of insecticides as per the Insecticides Act, 1968. However, the respondents argued that the list of insecticides in the Schedule to the Act was not exhaustive and that the products should be considered insecticides based on their commercial understanding and usage. The Tribunal referred to a previous decision in M/s. Agromore Limited Bangalore v. Collector of Central Excise, Sangalore, where it was held that the interpretation of the notification should not be governed by the Insecticides Act and its Schedule. The Tribunal emphasized that the term "insecticides" should be understood as it is in ordinary parlance and by people conversant with the subject matter.

3. Application of the longer time limit for raising demand due to alleged wilful misstatement and suppression of facts by the respondents:
The Assistant Collector applied the longer time limit for raising demand, citing wilful misstatement and suppression of facts by the respondents. However, the respondents argued that the Excise authorities were fully aware of the nature of the products and their usage, and the classification lists were approved from time to time after thorough scrutiny. The Tribunal did not find it necessary to delve into this issue in detail, as the appeal was dismissed on other grounds.

4. Use of DBP and DMP as plasticizers and its impact on their classification as insecticides:
The Assistant Collector also argued that since part of the products was used in the plastic industry as plasticizers, they should not be treated as insecticides. The respondents countered this by stating that the primary use of the products was as insect and mite repellents, especially by the Ministry of Defence, which consumed 90% of their production. The Tribunal found that repellents, even though they might not actually kill insects or pests, would still be treated as insecticides or pesticides if they are commercially understood as such.

5. Consistency of the Revenue's stand on the interpretation of the notification:
The Tribunal noted the inconsistency in the Revenue's stand. In a previous case (Agromore Limited), the Revenue argued that the Insecticides Act and its Schedule should not govern the interpretation of the notification. However, in the present appeal, the Revenue took the opposite stand, arguing that the products must be included in the Schedule to qualify for exemption. The Tribunal held that the Revenue could not be permitted to take such inconsistent and diametrically opposite stands about the interpretation of the same notification.

Conclusion:
The Tribunal dismissed the appeal, holding that the Insecticides Act, 1968, or the Schedule thereto would not govern the meaning of expressions in Serial No. 18 of the notification. The products DBP and DMP, being commercially understood as insecticides or pesticides, were eligible for exemption under the notification, even though they were not listed in the Schedule to the Insecticides Act. The appeal was dismissed for reasons slightly different from those found by the lower Appellate authority.