2016 (8) TMI 935 - AT - Central Excise

Demand of differential duty - fertilizers cleared by them by availing the notification no. 6/02-CE dated 01/03/2002 and Notification No. 4/06-CE dated 1/3/2006 during the period 2001-2002 to 2005-2006 but some part of the fertilizers were lost in transit and were not used as fertilizers - Held that - the notification grants exemption to all goods other than those which are not to be used as fertilizer, i.e., exemption is provided in the negative way. The literal meaning of the notification would indicate that if there is unambiguous intention at the time of clearance of the goods not to use them as fertilizer, the exemption shall not be available to such goods. In other words, if goods are clearly intended to be used as fertilizers at the time of clearance the exemption would be available. Since, in this case, there was no such intention of not using the goods as fertilizerand goods were cleared with clear intention to be used a fertilizer then mere fact that certain quantity of urea was not used as fertilizer due to loss in transportation, re-bagging and standardization, it would not mean that such urea was not intended to be used as fertilizer. Further, I find that there is no indication in the notification that urea should be actually used as fertilizer for benefit of said notification. The department contention that impugned goods must be actually used as fertilizer is not correct. The benefit of notification to urea for use in fertilizer has to be decided at the time of clearance of the goods itself from the factory. In my view actual use of urea as fertilizer is not envisaged in the impugned notification. Since there is all the intention at the time of clearance that urea to be used as fertilizer and there is no intention that urea will not be used as fertilizers, hence the benefit of exemption to urea will apply to all quantity of urea even if some quantity of urea is subsequently destroyed or lost due to transportation, re-bagging and standardization. - Decided against the Revenue

Summary

Issues Involved:
Demand of differential duty on fertilizers cleared under exemption notifications due to loss in transit.

Analysis:
The appeal was filed by the Revenue against the Order-in-Appeal regarding the demand of differential duty from the respondent on the grounds that fertilizers cleared under specific notifications were not used as intended. The Revenue claimed that some fertilizers were lost in transit, and thus, not eligible for the exemption. However, the Tribunal disagreed with the Revenue's contentions, stating that the notifications did not impose any conditions, and the exemption was unconditional.

The First Appellate Authority's findings were crucial in this case. It was noted that the notifications did not require actual use of the fertilizers, but rather that they were intended for use as fertilizers. Citing previous judicial interpretations, it was established that "for use" should be construed as "intended for use" and not actual use. The Tribunal highlighted cases where exemption was granted even if goods were lost or destroyed, as long as the intention at the time of clearance was for the specified purpose.

In the present case, urea cleared for use as fertilizer was lost during transit, re-bagging, and standardization. The First Appellate Authority emphasized that the exemption applied as long as the goods were intended for use as fertilizers at the time of clearance, regardless of subsequent loss. The literal meaning of the notification indicated that if there was a clear intention at the time of clearance to use the goods as fertilizers, the exemption would be applicable. Actual use of the goods as fertilizers was not a requirement for the exemption.

Ultimately, the Tribunal upheld the findings of the First Appellate Authority, stating that the benefit of exemption applied to the urea that was subsequently destroyed due to transportation, re-bagging, and standardization. The appeal filed by the Revenue was rejected based on the established interpretation of the notifications and previous legal precedents.

In conclusion, the judgment clarified that the intention at the time of clearance for specified use was crucial for determining eligibility for exemption, rather than actual use of the goods. The decision emphasized the importance of interpreting exemption notifications in a manner that aligns with the legislative intent and previous judicial interpretations.