1987 (12) TMI 239 - AT - Central Excise

Summary

Issues:
1. Interpretation of whether Low Sulphur Heavy Stock (LSHS) used for drying rock phosphate and gypsum qualifies as "used as feed stock for the manufacture of fertilizer" for exemption under specific Notifications.
2. Determination of whether LSHS can be considered as feed stock based on the definition provided in the Glossary of Petroleum Terms and Chemical Dictionary.
3. Assessment of whether the LSHS used for drying rock phosphate and gypsum can be classified as feed stock for the manufacture of fertilizer and hence eligible for the exemption Notification.

Analysis:
1. The case revolves around the interpretation of whether the usage of Low Sulphur Heavy Stock (LSHS) for drying rock phosphate and gypsum qualifies as being "used as feed stock for the manufacture of fertilizer" under specific Notifications. The Collector of Central Excise (Appeals) had initially ruled in favor of the respondents, stating that drying of the raw materials is an essential part of the manufacturing process of fertilizer, thus making the use of LSHS eligible for exemption.

2. The appeal filed against the Collector of Central Excise (Appeals) argued that according to the Glossary of Petroleum Terms, feed stock refers to the primary material introduced into a plant for processing, which must become a component of the finished product. It was contended that since LSHS did not become a component of the fertilizer, it cannot be considered as feed stock, rendering the Notification benefits inapplicable.

3. The Tribunal, after considering the definitions of "feed stock" in various sources, including the Chemical Dictionary and Glossary of Petroleum Terms, concluded that the LSHS used for drying rock phosphate and gypsum did not meet the criteria to be classified as feed stock for the manufacture of fertilizer. The Tribunal referenced a previous order where it was held that similar usage of Furnace Oil and LSHS for steam generation did not qualify as feed stock. Consequently, the Tribunal upheld the demand for duty on the LSHS and allowed the appeal filed by the Revenue, setting aside the Collector of Central Excise (Appeals) order.

4. Additionally, a penalty of Rs 1,500 was imposed on the respondents by the Deputy Collector under Rule 226 of the Central Excise Rules. The Tribunal found no grounds to interfere with this penalty, as the respondents did not provide any arguments challenging it.

In conclusion, the Tribunal ruled in favor of the Revenue, determining that the LSHS used for drying rock phosphate and gypsum did not qualify as feed stock for the manufacture of fertilizer under the specific Notifications, thereby upholding the duty demand and penalty imposed on the respondents.