2010 (1) TMI 255 - HC - Central Excise

Notification Nos. 74/66-C.E.- Exemption when used in manufacture of fertilizers- Notification exempt sulfuric acid when used in manufacture of fertilizers. Tariff item 14G of erstwhile Central Excise Tariff covers sulphuric acids. Oleum nothing but fuming sulphuric acid. Exemption denied also because oleum used in manufacture of Ammonium Sulphate which a by-product. No dispute that ammonium sulphate a chemical fertilizer. Notification not mentioning by-product or primary product as rightly held by single judge. Both ingredients of notification met namely use of Sulphuric acid and that use in manufacture of fertilizer. No merit s in Revenue appeal.

Summary

Issues:
1. Interpretation of excise duty refund order.
2. Controversy over the use of Oleum for manufacturing fertilizers.
3. Exemption notifications regarding excise duty on Oleum.

Issue 1: Interpretation of excise duty refund order:
The High Court addressed the appeal against an order directing the Appellant to refund excise duty along with interest. The Appellant argued that interest should only be payable from the date of deposit made by the Respondent, not from an earlier date. The Court noted the refund of the principal amount and considered the date from which interest should be calculated.

Issue 2: Controversy over the use of Oleum for manufacturing fertilizers:
The substantive dispute revolved around the use of Oleum for manufacturing Ammonium Sulphate and Caprolactum. Oleum, known as fuming sulphuric acid, falls under Tariff Item 14G of the Central Excise and Salt Act. The Appellant contended that Oleum was not used in manufacturing fertilizers as Ammonium Sulphate was a by-product. However, the Court emphasized that the use of Oleum resulted in the production of Ammonium Sulphate, which qualifies as a chemical fertilizer. The Court analyzed the exemption notifications and concluded that the use of fuming sulphuric acid in manufacturing fertilizers met the criteria for excise duty exemption.

Issue 3: Exemption notifications regarding excise duty on Oleum:
The Court examined two exemption notifications issued by the Central Government regarding the use of sulphuric acid in fertilizer manufacturing. The notifications exempted sulphuric acid, including Oleum, from excise duty if used in the production of fertilizers. The Court highlighted that the notifications did not differentiate between primary products and by-products, focusing instead on whether the use of fuming sulphuric acid contributed to fertilizer production. As the Respondent used Oleum to manufacture Ammonium Sulphate, a recognized fertilizer, the Court upheld the exemption from excise duty.

In conclusion, the High Court dismissed the appeal, affirming the order for excise duty refund with interest. The judgment clarified the application of exemption notifications to Oleum used in fertilizer manufacturing, emphasizing the production of fertilizers as the key factor for excise duty exemption.