1998 (1) TMI 123 - AT - Central Excise

Summary

Issues:
Classification of phosphorus for exemption under Notification No. 43/88, dated 1-3-1988.

Detailed Analysis:
The Department appealed against the order of the Collector of Central Excise (Appeals), Bombay regarding the classification of phosphorus for exemption under Notification No. 43/88, dated 1-3-1988. The respondents claimed exemption for phosphorus used in the manufacture of pesticide intermediates, namely Tri-methyl phosphite, Phosphorus Tri-chloride, and Phosphorus Pentasulphide. The Departmental Representative argued that since phosphorus was not directly used in the manufacture of pesticides, the company was not entitled to the exemption as per the notification. The Assistant Collector approved the classification list based on this argument.

The respondents contended that they consumed phosphorus within their factory for the manufacture of Phosphorus Trichloride and Trimethyl Phosphite, which were further used in the production of pesticides by their customers. They followed Chapter X procedure for the clearance of these products. The white phosphorus, PTC, and TMP manufactured by the respondents were covered in the Annexure of Notification No. 43/88 and were intermediate products for manufacturing pesticides. The respondents argued that since they cleared these intermediate products for pesticide manufacture as per the notification, they were eligible for the exemption. They also used white phosphorus in their Vapi factory for producing Phosphorus Pentasulphide and Phosphorus Trichloride, as well as pesticides.

The Department raised concerns about yellow phosphorus not being mentioned in the notification and argued that the exemption did not apply to it. However, the Tribunal clarified that white and yellow phosphorus were essentially the same for practical purposes, and if white phosphorus was covered by the notification, yellow phosphorus should also be considered eligible for the exemption. The Tribunal highlighted the conditions for exemption, including the specification in the Annexure, falling under Chapter 28 or 29, being used for goods falling under sub-heading 3808.10, and following Chapter X procedure when necessary.

The Tribunal observed that phosphorus was specified in the notification and used in the manufacture of pesticides, which was not disputed. The technical process involving the conversion of white/yellow phosphorus into intermediates before the final pesticide product emerged did not negate the claim for exemption, especially since all relevant products were listed in the Annexure. The Tribunal also addressed the Department's argument about the location of phosphorus use, stating that the notification allowed for use in a different factory if Chapter X procedure was followed, which the respondents had complied with. Additionally, another notification allowed for exemption when inputs were used in a different factory for the same manufacturer, further supporting the respondents' claim for exemption.

In conclusion, the Tribunal upheld the findings of the Collector (Appeals) and rejected the Department's appeal, affirming that the respondents had satisfied the conditions for exemption under the notifications.