ORDER
Gowri Shankar, Member (T)
1. The issue for decision in this appeal is whether the ammonium chloride manufactured by the respondent in this appeal is entitled for exemption under Notification 66/71, dated 29-5-1971. The respondent had filed a classification list dated 24-9-1980. There were three items in this list. The first described as muriate of ammonia commercial grade and the second ammonium chloride (technical) were classified by the respondent tinder item 68 of the prevailing Central Excise Tariff. In the remarks column, the respondent stated “these goods are neither cleared by us as fertilizer nor manufactured and sold as fertilizer.” There was another entry in the classification list for ammonium chloride fertilizer which the respondent classified under item 14HH. Subsequently the respondent claimed refund of the duty paid on ammonia used for the manufacture of the first two products under Notification 66/71. This exempts the ammonia entirely from duty if used in the manufacture of fertilizer falling under item 14HH. While the Assistant Collector of Central Excise rejected the claim on the ground that what was manufactured is not the fertilizer, the Collector (Appeals), relying upon the decision in a similar case of this Tribunal, allowed the appeal. This appeal is against that order.
2. We have heard Shri Sharad Bhansali, SDR and Shri Gopal Prasad, Consultant for the respondent.
3. The Order No. 295/88-C of this Tribunal relied upon by the Collector (Appeals) (and cited by the Consultant) in coming to its conclusion that ammonium chloride not sold by its manufacturer to the fertilizer dealers would be classifiable under item 14HH, only adopted the reasonings of this Tribunal in its decision in Collector of the Central Excise, Cochin v. FACT -1986 (24) E.L.T. 388. Shri Gopal Prasad, Consultant relied upon this decision as well as the decision of the Tribunal in the order in Collector of Central Excise v. National Fertilizers Ltd. – 1992 (60) E.L.T. 285. In this decision, this Tribunal held that the benefit of exemption available under Notifications 145/71 and 147/74 to ammonia furnace oil and low sulphur heavy stock used in the manufacture of fertilizer was available to such of these goods as had been vised in the manufacture of urea technical grade. The Tribunal held that urea technical grade satisfied the specification for urea of fertilizer and therefore could be used as fertilizer. This is in essence Consultant’s argument in the present case.
4. There is much to be said for the argument of the SDR that the decision in Collector of Central Excise, Cochin v. FACT has been incorrectly adopted by the Collector (Appeals). In that decision, the Department had contended before the Tribunal that ammonium chloride fertilizer grade which is lower than chemical grade would not be ineligible for the exemption under Notification 164/69-C.E. when vised in the manufacture of dry cell batteries. The Tribunal observed rightly that ammonium chloride figured in that notification without reference to the purity of grade and any ammonium chloride which is used in the manufacture of dry cell batteries has been specifically exempted. The issue before us is different in fact this covers as whether ammonium chloride technical grade which is not vised as fertilizer should be classified as fertilizer. Hawley’s Condensed Chemical Dictionary indicates various uses for ammonium chloride including fertilizer. It is clear that ammonium chloride used for different application would have different standards of purity. Thus ammonium chloride of pharmacopoeial standard would be much purer and therefore costlier for manufacturer than ammonium chloride vised for fertilizer. In theory, no doubt the pharmacopoeial grade can be vised as fertilizer since it satisfies the specifications for the fertilizer. However, a distinction has to be made between a theoretical use of the product and the vises for which, having regard to commercial reality, it can be reasonably expected to be put. It is settled law that inter alia commercial understanding determines the excisability and the classification of a product. When a farmer goes to a fertilizer merchant and asks for ammonium chloride he expects to pay for and receive fertilizer grade ammonium chloride and not, for example the pharmacopoeial grade. A reference to ammonium chloride as fertilizer therefore has to be understood by applying the test of commercial parlance as that grade of ammonium chloride which is vised generally as fertilizer. It is to be noted that item 14HH was for fertilizers and not for ammonium chloride. Higher grades of ammonium chloride were in fact being classified under Item 68. This distinction between different grades of purity is maintained in the present tariff also. Thus pure ammonium chloride is not classifiable under Chapter 31 as fertilizer but is classifiable under Chapter 28 as a chemical. We note that in coming to the decision reported in 1992 (60) E.L.T. 285, the point as to whether urea technical grade could be considered in commercial parlance as fertilizer or not was not urged by the Departmental Representative as therefore passed sub silentio. A different conclusion might well leave emerged if this point had been urged. We … therefore distinguish this decision in the case before us. The respondent does not suggest that the ammonium chloride in question was sold or used as fertilizer. On the contrary, the classification list firmly says that the respondent did not consider it as fertilizer either for the purpose of manufacture or sale. The Circular No. 164/69, dated 11-6-1969 of the Central Board of Excise & Customs by which the respondent placed reliance, limits itself to “fertilizer” and in fact supports the Department’s case by saying that “fertilizer” falling under 14HH when used for industrial purpose is liable to duty.
5. In the result, we hold that ammonium chloride manufactured by the respondent had not been shown to be used in the manufacture of fertilizer and therefore will not be entitled to the benefit of the notification. The order of Collector (Appeals) is accordingly set aside and that of the Assistant Collector is restored.