1991 (4) TMI 250 - AT - Central Excise

Summary

Issues Involved:
1. Applicability of Notification No. 40/85-C.E. and Notification No. 75/84-C.E. for exemption and concessional rate of duty.
2. Classification of Molten Urea under Chapter 31.
3. Eligibility of Ammonia derived from raw naptha for concessional rate of duty.
4. Relevance of the final product (Melamine) being a fertilizer for the applicability of the notifications.

Summary:

1. Applicability of Notification No. 40/85-C.E. and Notification No. 75/84-C.E.:
The appellants, a Public Limited Company engaged in the manufacture of fertilizers and chemicals, claimed exemption u/s Notification No. 40/85-C.E. and concessional rate of duty u/s Notification No. 75/84-C.E. for Ammonia used in the manufacture of Molten Urea, an intermediate product in the production of Melamine. The Department issued show cause notices demanding full duty, arguing that Molten Urea is not used as a soil fertilizer, thus not eligible for the exemptions. The Assistant Collector initially vacated the demands, but the Collector of Central Excise (Appeals) set aside these orders, agreeing with the Department's view that the notifications apply only to soil fertilizers.

2. Classification of Molten Urea under Chapter 31:
The appellants argued that Molten Urea, classified under Chapter 31 as a fertilizer, should automatically receive the benefit of the notifications. However, the Collector (Appeals) held that Molten Urea does not meet the specifications of the Fertilizer (Control) Order and should be classified under TI 68. The Tribunal upheld that Molten Urea, used in the manufacture of Melamine (not a fertilizer), does not qualify for the exemption intended for fertilizers.

3. Eligibility of Ammonia derived from raw naptha for concessional rate of duty:
The appellants sought concessional duty for Ammonia derived from raw naptha used in the manufacture of Molten Urea. The Collector (Appeals) rejected this, stating that the final product, Melamine, is not a fertilizer. The Tribunal agreed, noting that the benefit of the notification is intended for products ultimately used as fertilizers.

4. Relevance of the final product (Melamine) being a fertilizer:
The Tribunal emphasized that the benefit of the notifications is contingent on the final product being a fertilizer. Since Melamine is not a fertilizer, the intermediate product Molten Urea does not qualify for the exemptions. The Tribunal referenced previous rulings, including Hemraj Gordhandas v. H. H. Dave and others, to support the strict interpretation of notifications.

Conclusion:
The Tribunal upheld the Department's view that the benefit of the notifications is not applicable to Molten Urea used in the manufacture of Melamine, as the final product is not a fertilizer. The appeals were dismissed, affirming the orders of the Collector (Appeals).