2014 (12) TMI 1030 - AT - Central Excise

Exemption in respect of zinc sulphate (agricultural grade) that is used in manufacture of Fertilizer - scope of the term Fertilizer - Notification No. 4/2006-C.E., dated 1-3-2006 - Held that - Dispute was the subject matter of the earlier decision of the Tribunal, though in the context of the different Notification No. 81/75. In the case of Punjab Micronutrient Ltd. v. C.C.E. - 1990 (4) TMI 122 - CEGAT, NEW DELHI as also in the case of C.C.E. v. India Phosphate and Carbonate - 1997 (12) TMI 208 - CEGAT, NEW DELHI , it stand held that classification of fertilizer under a particular tariff heading is not a pre-requisite condition for extending the benefit of exemption Notification. Inasmuch as the zinc is essential for growth and development, the same has to be considered as fertilizer. It is seen that at the time of the decision of the Tribunal in referred case, there was no Explanation attached to the Notification No. 81/75 which was under consideration. However, the Explanation was subsequently included in the said Notification, which is identical to the Explanation as available in the present Notification No. 4/2006. It is further seen that neither in the earlier Notification No. 81/75 nor in the present Notification No. 4/2006, there is any requirement of the fertilizer to be classified under Chapter 31 also. The only requirement in the present Notification which was also introduced in the previous Notification by way of including Explanation is to explain the meaning of fertilizer. It stands mentioned in the Explanation that fertilizer shall have the meaning assigned to it under Fertilizer (Control) Order, 1985. Both the decisions referred to by the ld. Advocate have taken note of the fact that zinc sulphate is included in the Fertilizer (Control) Order, 1985. As such, the said condition of Notification also stands fulfilled by the assessee. - Decided in favour of assesse.

Summary

Issues: Classification of zinc sulphate as fertilizer for the purpose of Notification No. 4/2006-C.E. exemption.

Analysis:
The appeals involved in this judgment concern the classification of zinc sulphate as fertilizer for the purpose of availing exemption under Notification No. 4/2006-C.E. The appellant/assessees, engaged in manufacturing zinc sulphate, procured sulphuric acid duty-free under the said Notification. The crux of the matter was whether zinc sulphate, classified under Chapter Heading 28, could be considered a fertilizer, typically classified under Chapter Heading 31. Revenue contended that zinc sulphate did not qualify as a fertilizer, leading to proceedings against the assessee and imposition of penalties. The central issue revolved around the interpretation of the Notification and the definition of "fertilizers" under the Fertilizer (Control) Order, 1985.

The Tribunal referred to previous decisions, including Punjab Micronutrient Ltd. v. C.C.E. and C.C.E. v. India Phosphate and Carbonate, where it was established that classification under a specific tariff heading was not a prerequisite for exemption eligibility. These precedents emphasized that substances essential for growth and development, like zinc, could be considered fertilizers. Notably, zinc sulphate's inclusion in the Fertilizer (Control) Order, 1985, further supported its classification as a fertilizer. The Tribunal highlighted that neither the previous Notification No. 81/75 nor the current Notification No. 4/2006 mandated classification under Chapter 31; the key requirement was compliance with the Fertilizer (Control) Order, 1985. The Explanation in the current Notification clarified the definition of fertilizer based on the Control Order, aligning with the earlier precedents and the Supreme Court's affirmation of such interpretations.

Ultimately, the Tribunal, guided by the established precedents upheld by the Supreme Court, rejected Revenue's stance. It concluded that zinc sulphate met the criteria to be considered a fertilizer under the Notification, allowing the appeals by the assessee and dismissing Revenue's appeal. The judgment underlined the importance of substance over technical classification, emphasizing the fulfillment of statutory conditions for exemption eligibility.