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TMI Blog1987 (5) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... 44, on the ground that the LSHS was not used in the manufacture of fertilizers and they had not maintained the Central Excise records in spite of being specifically told to do so by the Inspector in-Charge of the factor. It was also alleged that they had wilfully suppressed the quantity of Ammonia used in the manufacture of Ammonium Nitrate (Prilled) by not showing it properly in the records, which led to the evasion of duty. By the impugned order, the Collector held the charges as established and asked the appellants to pay Central Excise duty amounting to Rs. 37,12,565.41 under Rule 196 read with Rule 9(2) of the Central Excise Rules, 1944 and Section 11A of the Central Excises and Salt Act, 1944, and also imposed on them a penalty of Rs. 5,00,000/- under Rule 173Q of the Central Excise Rules, 1944 for deliberate evasion of duty and for making deliberate misleading statements with intent to evade duty. 2. In upholding the charges, the Collector observed that : (i) The claim of the assessee (the appellants herein) that the Ammonium Nitrate (melt) manufactured by them out of Ammonia produced from LSHS was a fertilizer, was based on a very long-winding argument that once upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther, the Department, through the Inspector in-charge of the factory, had insisted upon the assessee to maintain records in a way so that the Department would get a correct idea of the going on in the assessee's factory, but they deliberately ignored the Department's instruction with intent to evade duty. Under Rule 173-F of the Central Excise Rules, 1944, the assessee was required to determine his liability for duty and not to remove excisable goods from the factory without payment of duty so determined. In the light of this express legal obligation and the deliberate evasion of duty, the longer time limit of 5 years would apply in this case. 3. During the hearing before us, learned representative of the appellants has stated that Ammonium Nitrate (melt) manufactured by them from duty-free Low Sulphur Heavy Petroleum Stock (LSHS) and ammonia is a fertilizer falling under Tariff Item 14HH of the Central Excise Tariff. In Government of India, Ministry of Finance (Department of Revenue and Insurance) Notification No. 164/69-C.E., dated 11-6-1969, ammonium nitrate was mentioned as a fertilizer vide Serial No.1 of the table appended to the Notification. The department classified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ammonium Nitrate (melt) was fertilizer and as such, no duty was payable on LSHS and Ammonia used by them in the manufacture of the said product. He has, therefore, contended that according to the ratio of the aforesaid judgment of Patna High Court, imposition of penalty on the appellants was not justified. Drawing our attention to the judgment of the Supreme Court in the case of Dunlop India Ltd. & Madras Rubber Factory Ltd. v. Union of India and Others, reported in 1983 E.L.T. 1566 (S.C.) = A.I.R. 1977 S.C. 597, learned representative has stated that Ammonium Nitrate (melt) was once classified by the Government in Notification No. 164/69-C.E. as fertilizer. This is a specified item in the Tariff Schedule. It will be against the very principle of classification to deny classification under Tariff Item 14HH and consign it to the Residuary Item 68 of the Central Excise Tariff. He has also stated that in the aforesaid judgment the Hon'ble Supreme Court held that when there was no reference to the use or adaptation of the article, the basis of the end use for classification under a Tariff entry is absolutely irrelevant. According to him, after having classified the product as fertili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trate (melt). The learned SDR has further argued that Tariff Item 14-HH mentions fertilizers, all sorts. This Tariff Heading implies functional use. In the case of Hico Products Ltd., Bombay v. Collector of Central Excise, Bombay reported in 1983 E.L.T. 2483 (Cegat), this Tribunal has held that end-use of certain goods cannot determine their classification in general, but predominant use is relevant and significant where classification is related to function of the goods as in Tariff Item 65. Tariff Item "14-HH-Fertilizers, all sorts" is a functional tariff Item. End use is relevant for classification under this Tariff Item. Learned SDR, in support of his arguments for classification of Ammonium Nitrate (melt) under Item 68, has relied on the grades and uses of Ammonium Nitrate as per the Condensed Chemical Dictionary (Tenth Edition) by Gessner G. Hawley. 5. Regarding the question of limitation under Rule 10 of the Central Excises Rules and Section 11-A of the Central Excises and Salt Act, 1944, learned SDR has stated that in the present case the Department asked the appellants to maintain records of the Ammonia, but they deliverately omitted to maintain the requisite record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argued that the amount of duty deliberately evaded is more than Rs. 37 lakhs and when compared with this amount, the penalty of Rs. 5 lakhs is fully justified and it is not excessive. He has, therefore, prayed that the appeal filed by the appellants may be dismissed in its entirety. 7. From the foregoing facts and arguments of the learned representative of the appellants, and the learned SDR, the questions which emerge for our consideration and decision are :- (i) Whether Ammonium Nitrate (melt) produced by the appellants for captive consumption was a fertilizer; (ii) If the reply to Question No. (i) is in the affirmative, whether LSHS and Ammonia used in the production of the said Ammonium Nitrate (melt) which was subsequently used in the manufacture of Ammonium Nitrate (Frilled), was entitled to the benefit of Notification No. 145/71-C.E., dated 26-6-1971 and 147/74-C.E., dated 30-10-1974; and (iii) Whether in the facts and circumstances of the case, the demand for duty was barred by limitation under Rule 10(1) of the Central Excise Rules and Section 11-A of the Central Excises and Salt Act, 1944. 8. Under Notification No. 145/71-C.E., dated 26-6-1971, ammonia u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Revenue that Ammonium Nitrate is not included as an item of fertilizers in the Fertilizer (Control) Order, 1957. This fact is not disputed by the appellants. Their contention, however, is that under Notification No. 164/69-C.E., dated 11-6-1969 Ammonium Nitrate was shown as fertilizer. Clause 2(d) of the Fertilizer (Control) Order, 1957 defines fertilizer as meaning any substance used or intended to be used as a fertilizer of the soil and specified in Column-1 of the Schedule-1". In paragraph 23 of Order No. 112/83-C, dated 21-5-1983 in Appeal No. ED(SB)(T) A. No. 59/76-C (M/s. Gujarat State Fertilizers Co. Ltd., Baroda v. Collector of Central Excise, Baroda) this Tribunal held that even if any material is specified in the Schedule to the Fertilizer (Control) Order, it would not be fertilizer if it was not used or intended to be used as such. In the said case, the interpretation of Notification No. 187/61-C.E., dated 23-12-1961 was involved. Notification provided as follows :- "(I) Raw Naphtha is exempt from so much of duty of excise leviable thereon as is in excess of four rupees and forty paise per kilolitre at 15° centigrade provided that - (i) it is proved to the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Dunlop India Limited. In that case, the Hon'ble Supreme Court held that end use was irrelevant in the context of an entry where there is no reference to the use or adaptation of the article. There cannot be any dispute about the ratio laid down by the Hon'ble Supreme Court in the case of Dunlop India Limited [A.I.R. 1977 S.C. 597 = 1983 E.L.T. 1566 (S.C.)]. It was held by this Tribunal in its Order No. C-154/85-C in Appeal No. ED(SB) A. No. 113/84-C (M/s. Citric India Limited, Nasik v. The Collector of Central Excise, Pune) that the above ratio is applicable in situations where the goods are described by name. In the said case before the Tribunal, no description was given of the goods, but a general categorisation by use and function was given. Tribunal observed that there was no such thing as a drug or pharmaceutical and it was only a chemical and other substance which was put to such use. The term "drug/drug-intermediate and Pharmaceutical" was not description of a product identifiable as such, but only a class or category within which many chemicals and substances can be grouped. At the same time, those same chemicals are not always used as drugs or pharmaceuticals. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n No. 164/69-C.E. because it was not a fertilizer and it did not appear as fertilizer in the Fertilizer (Control) Order, 1957. We are unable to accept the contention of the appellants that Government cannot change the classification. If the Ammonium Nitrate was not used as fertilizer and it did not appear as fertilizer in the Fertilizer (Control) Order, 1957 it was within the competence of the Government to delete the item from the Exemption Notification No. 164/69-C.E., dated 11-6-1969 and the Government did so by another Notification No. 225/79-C.E., dated 21-7-1979. Not only that, the Department informed the Trade about the change in the Notification by issue of Trade Notice No. 53/l-Fertilizer/79, dated 5-6-1979. The Trade Notice made it very clear that Ammonium Nitrate (melt) was dutiable under Item 68 of the Central Excise Tariff and Ammonia Gas falling under Tariff Item 14-H used in the manufacture of Ammonium Nitrate (melt) was not dutiable. Nothing further remained to be done by the Department to guide the Trade properly. 12. n view of the foregoing discussions, we hold that Ammonium Nitrate (melt) produced by the appellants was-not fertilizer and hence, it did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record deliberately on the plea that Ammonium Nitrate was a fertilizer. Their plea does not stand in view of the discussions already made by us earlier in this order. The appellants were working under Self-Removal Procedure. Under this procedure, they were supposed to make correct assessment of the goods and pay duty. By issue of a Trade Notice as early as on 5-6-1979, the Department informed the Trade that Ammonium Nitrate (melt) would be dutiable under Item 68 of the Central Excise Tariff and ammonia used in the manufacture of Ammonium Nitrate (melt) was also dutiable. We find no justification on the part of the appellants to act in the manner they have done in this case. Learned SDR has also, relied on the decision of this Tribunal, reported in 1984 (17) E.L.T. 204, in the case of Bajaj Tempo Limited v. Collector of Central Excise, Pune, in which the Tribunal held that demand under Rule 196 of the Central Excise Rules, 1944 could be made without any period of limitation and since the concession was wrongly used, the demand for duty was in order in that case. The present case is fully covered by the aforesaid decision of this Tribunal. In the present case, Rule 196 of the Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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