2010 (2) TMI 353 - AT - Central Excise

Refund- Notification No. 04/2006-C.E., dated 1-3-2006- The appellants are engaged in the manufacture of Zinc Sulphate for which they had procured for the relevant period Sulphuric Acid at nil rate of duty claiming exemption under Notification No. 04/2006-C.E., dated 1-3-2006. While contending that the exemption contained under the said Notification could be claimed in relation to the Sulphuric Acid only if the same is used in the manufacture of fertilizers classifiable under Chapter 31, whereas the appellants having used the same for manufacture of Zinc Sulphate classifiable under Chapter 28, had illegally claimed exemption under the said Notification and that, therefore, they were liable to pay the excise duty on Sulphuric Acid procured by them without payment of duty. Held that- explanation under SI.No. 35 of Notification not placed at the end of notification but at relevant entry only. Placement of explanation and use of words this exemption instead of this notification indicating that explanation relating the word fertilizer to exemption under S.No. 35 alone. Contention that goods classifiable as fertilizer not raised before. Impugned order denying exemption sustainable.

Issues Involved:
1. Applicability of the explanation clause under Notification No. 04/2006-C.E., dated 1-3-2006.
2. Classification of Zinc Sulphate as a fertilizer under Central Excise Law.
3. Historical context and interpretation of exemption notifications.
4. Applicability of common parlance theory for product classification.

Issue-wise Detailed Analysis:

1. Applicability of the explanation clause under Notification No. 04/2006-C.E., dated 1-3-2006:
The core issue was whether the explanation regarding the term 'fertilizers' appended to entry No. 35 of Notification No. 04/2006-C.E., dated 1-3-2006, is applicable to the term 'fertilizer' appearing in entry No. 28. The appellants argued that the explanation clause should apply to all entries in the notification where the term 'fertilizer' is used. However, the Tribunal held that the explanation clause is specifically appended to entry No. 35 and uses the term "this exemption," indicating its exclusive applicability to that entry alone. The Tribunal reasoned that if the explanation were meant for all entries, it would have been placed at the end of the notification, not appended to a specific entry.

2. Classification of Zinc Sulphate as a fertilizer under Central Excise Law:
The appellants manufactured Agricultural Grade Zinc Sulphate, a micro-nutrient, and claimed exemption under Notification No. 04/2006-C.E. The Tribunal noted that Zinc Sulphate is classifiable under Chapter 28 and not Chapter 31, which covers fertilizers. The Tribunal referred to the Central Excise Tariff Act and various Board Circulars, including Circular No. 392/25/98-CX., dated 19th May 1998, which clarified that micronutrients, if chemically defined, are classifiable under Chapter 28/29 and not as fertilizers under Chapter 31. The Tribunal also cited the Supreme Court's decision in Ranadey Micronutrients v. Collector of Central Excise, which distinguished between micronutrients and fertilizers for classification purposes.

3. Historical context and interpretation of exemption notifications:
The appellants argued based on the historical context of similar notifications from 1994 onwards, suggesting that the explanation clause should apply broadly. The Tribunal examined previous notifications and found that earlier explanations were either placed at the end of the notification or used the term "this notification," indicating broader applicability. However, the current notification's use of "this exemption" and specific placement of the explanation clause indicated its limited scope to entry No. 35. The Tribunal concluded that historical changes in the wording and placement of the explanation clause support its limited applicability.

4. Applicability of common parlance theory for product classification:
The appellants contended that Zinc Sulphate should be classified as a fertilizer based on common parlance. The Tribunal rejected this argument for several reasons: it was not raised before the lower authorities, was not included in the Memorandum of Appeal, and required a factual matrix absent in this case. The Tribunal emphasized that the classification should be based on the statutory definition and relevant Board Circulars, not common parlance.

Conclusion:
The Tribunal dismissed the appeals, upholding the Commissioner (Appeals)'s order that the explanation clause under entry No. 35 of Notification No. 04/2006-C.E. applies exclusively to that entry and not to other entries in the notification. The Tribunal affirmed that Zinc Sulphate, being a micro-nutrient and chemically defined, is classifiable under Chapter 28 and not as a fertilizer under Chapter 31. The appeals were dismissed, and the appellants were held liable to pay the excise duty on Sulphuric Acid procured without payment of duty.

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