1989 (11) TMI 158 - AT - Central Excise

Summary

Issues:
Interpretation of Notification No. 145/71-CE dated 26-7-1971 for exemption from duty of excise on certain gases, specifically ammonia used in the manufacture of fertilizers. Eligibility of appellant for exemption under the notification for ammonia used in the manufacture of molten urea and subsequently in the production of melamine.

Analysis:
The appeal before the Appellate Tribunal CEGAT, New Delhi involved the interpretation of Notification No. 145/71-CE dated 26-7-1971, which grants exemption from duty of excise on certain gases, including ammonia, if utilized for specified purposes such as in the manufacture of fertilizers. The appellant, engaged in the manufacture of Anhydrous Ammonia for use in fertilizers, faced show cause notices for duty recovery on ammonia removed without payment of duty during a specific period.

The Assistant Collector initially held that the appellant was not eligible for the exemption under the notification as duty was required to be paid when ammonia was cleared for use in the manufacture of products other than fertilizers. This decision was upheld by the Collector (Appeals) who emphasized that the ammonia used for non-fertilizer products, like melamine, was not eligible for the exemption under Notification No. 145/71.

In the appellant's defense, it was argued that the ammonia returned from the melamine plant was essentially the original ammonia used in the production of urea, thus qualifying for the exemption. The appellant contended that the notification did not specify a direct use requirement for the gases and cited relevant legal precedents to support their claim.

The Tribunal rejected the appellant's argument, stating that the ammonia used in the manufacture of molten urea was entirely consumed in the process and the re-generated ammonia after decomposition of urea was a new product attracting fresh excise duty. However, the Tribunal allowed exemption for the re-generated ammonia used for manufacturing fertilizers falling under the specified tariff item.

In conclusion, the Tribunal dismissed the appeal, except for the modification allowing exemption for the re-generated ammonia used in the production of fertilizers. The decision clarified that the re-generated ammonia, meeting the specified criteria, would be eligible for the benefit of exemption under Notification No. 145/71-CE.