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TMI Blog2001 (11) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... had been regularly importing heptene/nonene at Kandla. They were using these chemicals for manufacture of oxo chemicals at their factory. There was a dispute with regard to the classification as to wheth er heptene/nonene could be classified as ATF/Motor Spirit or otherwise . According to the opinion of the Chief Chemist, C.R.C.L., New Delhi, if end use and flash point criteria are taken into consideration, then heptene/nonene should be classified as Raw Naphtha . However, on the basis of smoke point and final boiling point criteria laid down under Heading 2710.21 heptene/nonene may be considered as ATF. On the basis of the Chief Chemist s opinion, it was decided by the Central Board of Excise and Customs that heptene/nonene could be classified and as sessed as Raw Naphtha under Customs Tariff Heading 2710.00 and A.T.F. under Central Excise Tariff Heading 2710.21. The respondent from 18-5-1992 to 28-12-1992 filed bills of entry Nos. 3101, 2679, 6574, 2206, 4212, 4395, 6771 and 5566 claiming classification as A.T.F. for both basic Customs duty and CVD but they were assessed as Motor Spirit for purposes of Customs duty with benefit of Notification 35/90-Cus. For the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods i.e. heptene and nonene as raw naphtha under Heading 2710.00 of the Customs Tariff Act and as Aviation Turbine Fuel under Heading 2710.21 of the Central Excise Tariff and order finalisation of the provisional assessment accordingly. He further allowed the respondents : - benefit of Customs Notification 35/90 under Sr. No. 14 for the period 1990-91 and 1991-92. - benefits of Notification 46/92 under Sr. No. 9 for the period 1992-93 - for the period 1993-94 tariff rate was applicable since no notification was available - for the period 1994 till date benefits of Notification 19/94 was extended. For the CVD purpose, the respondents were allowed to avail the relevant notifications as applicable to ATF. The Assistant Commissioner confirmed the demand of Rs. 22,57,65,172/-. Against the finalisation of the provisional assessment by the Assistant Commissioner the respondents filed an appeal before the Commis sioner of Central Excise and Customs (Appeals) who by the impugned order set aside the above order of the Assistant Commissioner inter alia holding that basic conditions of Notification 158/76 were fulfilled and that benefit could not be denied and that condition rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, shows that raw naphtha was used in the manufacture of fertilisers and ammonia. It would earn the concessional rate of duty. He specifically argued that it is not uncommon for the courts to hold that the word and used in the statute are sometimes used to be read as or . He cited the decision of Jay Kay Company v. CC [1988 (38) E.L.T. 709] and ITC Ltd. v. CC,. Madras [1997 (89) E.L.T. 90]. He also cited the decisions in Consolidated Petrotech Industries Ltd. v. CC [1992 (57) E.L.T. 81] and the judgment of Supreme Court in Ishwar Singh Bindra v. State of UP reported in AIR 1968 SC 1450 at para 11 thereof. 7. In reply to the said argument learned SDR stated that Consolidated Petrotech Industries case facts are different with the facts in this case. As far as ITC Ltd. case was concerned he stated that again that was the case of interpretation of tariff heading in respect of the Customs matter. As far as the third case viz. Jay Kay Co. s case is concerned, especially in para 4 thereof, he stated that was the case of interpretation of the ITC Policy which is not strictly a stat ute. 8. We have considered the rival submissions. The respondent imports heptene/nonene and they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manufacturer evidencing receipt of the imported goods in the premises or the place of manufacturer within a period of three months or such extended period as the Assistant Commissioner may allow. (d) He shall pay on demand in the event of his failure to comply with (a), (b) or (c) above an amount equal to the difference between the duty leviable on such quantity of the said imported goods but for the exemption contained therein and that already paid at the time of importation. Provided further that where raw naphtha is to be processed before being supplied for use in the manufacture of fertiliser and petrochemicals such quantity of raw naphtha as is proved to the satisfaction of the Assistant Com missioner to have been lost or used during such process or returned to any other refinery for further processing of petroleum products shall be deemed to have been used for the aforesaid pur pose. Further importer has never furnished an undertaking to the effect that condi tions laid down in the above notifica tion would be fulfilled. Hence benefit of this notification cannot be extended it is not admissible. After considering the reply of the appellant Assistant Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the place of the manufacturer for the manufacture of petrochemicals. It has to be done as specified by Assistant Commissioner of Customs. The party has not produced any such account. Secondly, they have never asked Assistant Commissioner of Customs about the manner on which such account should be maintained. Therefore, this portion of notification is not followed by the party. According to third condition of aforesaid notification, they shall produce the extract of such account duly certified by the manufacturer evidencing receipt of the imported goods in the premises of the place of manufacturer within a period of 3 months or such extended period as Assistant Commission er may allow. The party has not fulfilled this condition also. The fourth clause of this notification clearly states that the party shall pay on demand in event of his failure to comply with above mentioned conditions. The amount will be equal to the difference between the duty leviable on such quantity of the said imported goods but for the exemption contained herein and that already paid at the time of importation. Therefore, the Dept. has right to recover differential duties. It is further provided in notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indicates that several products can be extracted of each product, what is left over is considered as residue. The residue in this case after extraction of each item, however, continues to be raw naphtha of different grade. The learned bench has also taken the stand that a product which is not radily usable at the stage of extraction but is still in the nature of raw material capable of being a source of extraction of several products is to be considered as raw naphtha. Considering their letter and the judgment quoted by them, I accept their plea that the left over material (Return Stream) is nothing but Raw Naphtha. Therefore, to avail the benefit of notification they should send this material to another refinery which they are unable to do. Thus the benefit of this notification cannot be extended to the party. In the above referred judgment, the benefit of notification was denied because the party is not using return stream as per conditions of notification. In the present case, the party has not followed this condition but other conditions are also not fol lowed as discussed above. Therefore, the benefit of Notification No. 158/76 as amended cannot be extended to the party. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hemicals Ind. Ltd. in SCA No. 6540/96, dated 1-10-1996, I decide the issue without giving another opportunity for PH. It is contended by the learned SDR that if any conditions of notifications are very impracticable, on that score party claiming benefit of notifications cannot be held to say that they are difficult to comply. He relies on the judgment of Bombay Oil Industries Pvt. Ltd. s case [1995 (77) E.L.T 32]. In the said case, there was the colour specification from the table was removed from the specification. The original exemption notification was issued on 2nd August, 1976 colour specification was deleted by notification dated 2-9-1978. It was argued that subsequent notification issued in 1978 was a clarificatory in nature. Even then the Tribunal did not agree with him. The judgment of the Tribunal has been referred to by the Supreme Court in its judgment at page 40 of the reports as follows :- 10. Before parting we may note one submission of the learned counsel. They submitted that laying down of condition No. 2 in Notification dated 2-8-1976 was a clear error on the part of the Central Government which was corrected by them by the latter Notification, dated 2-9-1978 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earn the exemption. It is trite to say that in order to earn the exemption the person claiming the exemption must satisfy that his imported item has fulfilled all the conditions of the exemption Notification as such exemptions are granted in public interest. In connection with such exemption Notification issued under Section 25 of the Customs Act, a Bench of this Court in case of Union of India Ors. v. Jalyan Udyog Anr. [AIR 1994 SC 88], speaking through B.P. Jeevan Reddy, J., has made the following observations : An exemption granted may be an absolute and/or subject to such conditions, as may be specified in the notification and further that the condi tions specified may relate to a stage before the clearance of goods or to a stage subsequent to the clearance of goods. Section 25(1) is a part of the enactment and must be construed harmoniously with the other provisions of the Act. The power of species of delegated legislation. Whether it is one or the other, it is a power given to the Central Government to be exercised in public interest. Such a provision has become a standard feature in several enactments and in particular, taxing enactments. It is equally well settled by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation are technical in nature and the appellants cannot be denied the benefit of notification particularly when the CE authorities have confirmed the entry of the imported goods into the factory premises of the appellants situated in Baroda and have been used only for the manufacture of petrochemicals. The proviso to the Notification has no application to the facts of the case as raw naphtha i.e. to say Heptene and Nonene is not required to be processed before being used for the manufacture of these petrochemicals. 10. As far as the exemption Notification is concerned, it cannot be treated in a liberal way as mentioned in Para 24 of the order where the Collector has held as follows : Liberal and strict instruction of an exemption provi sion are to be invoked at different stages of interpreting it. However, the Supreme Court in interpreting the exemption notification has held in the case of Novopan India Ltd. [1994 (73) E.L.T. 769] the strict interpretation is to be given to such notification in case of doubt or it must go to the state saying the said at Para 18 thereof. In deciding the said case, however, it must be mentioned that the Court also refers to the judgment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on shows that when raw naphtha was utilised for manufacture of fertilisers and ammonia, it would earn the conces sional rate of duty. It is not in dispute between the parties that raw naphtha which the appellant purchased from the open market was in fact uti lised by it in manufacture of ammonia even leaving aside the further question as to whether it was utilised for manu facture of any fertiliser. It is, therefore, difficult to appreciate as to how the CEGAT could persuade itself to hold that because ammonia manufactured out of raw naphtha had resulted in molten urea which was not a soil fertiliser, the benefit of the aforesaid notification could not be made available to the appellant which had utilised raw naphtha in its Plant. Moment it was shown that raw naphtha was wholly utilised by the appellant for manufacturing ammonia, the condition laid down in Column (4) of the notification got fully satisfied. On this short ground, the reasoning of the CEGAT for not extending the benefit of concessional rate of duty on raw naphtha to the appellant cannot be sustained. However, as discussed hereinafter, raw naphtha can also be said to have been utilised in manufac turing molten urea wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f fertilisers and chemicals. The facts admittedly is that they have not used for manufacture of the items as mentioned in the notification. According to us the conditions mentioned in the Notification 158/76 were never complied viz. utilisation of the imported material in the manufacture of fertiliser and ammonia and keeping of accounts. 14. In this connection it is relevant to mention that the conditions which are very onerous have to be fulfilled if any person claims exemption. This is what the judgment of the Supreme Court in the case of Bombay Oil Industries Ltd. [1995 (77) E.L.T. 32] vide Paragraph 8 thereof which we have extracted earlier. Here it is not a case of type of fertiliser whether it is a soil fertiliser as was the case in the Gujarat State Fertilisers Co. decided by the Supreme Court. In fact in Paragraphs 12 to 15 of the judgment in GSFC case (supra) it is very clear that the Supreme Court discussed about varieties of fertilisers viz. chemical fertiliser etc. That type of questions do not arise here. Therefore, the decision of the Supreme Court in that judgment will not be applicable to facts of the instant case. 15. In this connection, it is useful to refer t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 27 or 29 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), from so much of the duty of excise leviable thereon under the Central Excises and Salt Act, 1944 (1 of 1944), at the rate specified in the said Schedule, as is in excess of the amount calculated at the rate specified in the corresponding entry in Column (3) of the said Table, subject to the intended use, or the conditions, if any, laid down in the corresponding entry in Column (4) thereof : Provided that where any such exemption is subjected to the intended use, the exemption in such case shall be subject to the following conditions namely :- (i) that it is proved to the satis faction of an officer not below the rank of an Asst. Collector of Central Excise that such goods are cleared for the intended use specified in Column (5) (now Column 4) of the said Table; (ii) where such use is elsewhere than in the factory of production, the procedure set out in Chapter X of the Central Excise Rules, 1944, is followed. S. No. Description of goods Rate of duty Intended use/condition 1. Raw Naphtha and Natural Gasoline Liquified Rs. 5.50 per Kl. at 15 C Inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, it will be useful to refer to judgment of Mac Beth v. Chislett [1910 appeal case page 220] where the court has held as follows : It would be new terror in the construction of acts of parliament if we were required to limit the word to an unnatural sense because in some act which is incorporated referred to such an interpretation is given to it for on the basis of that act. Above observation of the Houses of Lords have been approved by the Supreme Court in Ujagar Prints (I) Ltd. v. U.O.I. [1988 (38) E.L.T. 535 (S.C.) = AIR 1989 SC 516 at 530]. Above judgment will also be equally applicable to the judgment referred by Shri Gulam Vahanvati to case of Gujarat Fertiliser s case. Firstly the facts of this case are not identical to the facts in the instant case. The content of both the notifications under consideration are entirely different. The notification specifically requires certain conditions. Those conditions firstly have not been fulfilled by the appellants. Nowhere did they state that they have complied with. In fact no reply to show cause notice was ever filed. Much debate was revolved round the words Fertilisers and Petrochemicals . Naphtha will be petro chemical and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s occurring in the notification redundant. Fertiliser manufactured out of naphtha the same chemical and it is a petrochemical. In that it is manufactured out of naphtha. 25. Hawley s Condensed Chemical Dictionary defines the word petrochemical as follows : an organic compound for which petroleum or natural gas is the ultimate raw material . It says that the term is also applied to substance such as ammonia, because the hydrogen used to form the ammonia is derived from natural gas. Thus synthetic fertilisers are considered to be petrochemicals. 26. Therefore in the manner in which the expression fertilisers and petrochemicals have been interpreted, it would result in the word petrochemical being rendered redundant. The framers of the notification, being aware of the term petrochemicals would necessarily include fertilisers, have considered it necessary to indicate as the end product not only for fertiliser but petrochemicals. As I have said, an interpretation rendering notification redundant is impermissible. Therefore, the word petrochemical occurring in the notification must necessarily be read to me, as a petrochemical other than fertiliser. The goods manufactured by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation. It was however contended before us that account had been maintained and could be produced. I am therefore of the view that the matter should be remanded and the appeal should be allowed on the substantive point of utilisation of the naphtha for the manufacture of the end product and the matter should be remanded to the Commissioner to satisfy himself that account has been maintained to show the utilisation of the imported goods in the manufacture of the finished products. Sd/-(Gowri Shankar)Member (T) 30. Accordingly the matter may be referred to a third member to resolve the following points of difference. (i) Whether the term fertiliser and petrochemical occurring in the notification should be interpreted to mean only so as to include petrochemicals other than fertilisers. (ii) If the answer to question (i) is in the affirmative, whether the appeal is to be allowed by remanding the matter to the Assistant Commissioner to determine whether the conditions in the notification relating to maintenance of accounts and utilisation of the imported product had been complied with or whether the appeal should be dismissed for not complying with these conditions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) says that cups of roller bearings are liable to the duty applicable to the bearings of which they are part and cones of roller bearings are liable to the rate of duty applicable to the bearings of which they are part. There is no justification for reading the entry conjuctively in the sense that the rate of duty applicable to the bearings of which they are part will apply only when the cups and cones of roller bearings are imported together but not if they are imported separately. 34. Oxo chemicals manufactured by the assessee are petrochemicals and admittedly not utilised as fertilisers. If the intention of the Ministry was to exempt fertilisers alone then there was no reason for those two terms to have been used. In fact during the currency of the Notification 158/76 another notification was in force, namely 160/76-Cus. which exempted furnace oil and heavy petroleum stock imported for use as feed stock in the manufacture of fertilisers. It is not that petrochemicals cannot be made from furnace oil. Petrochemicals as per Hawley s Condensed Chemical Dictionary are inorganic compounds for which petroleum is the raw material. But whereas the import of furnace oil was limited fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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