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IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR
J U D G M E N T
CENTR.EXCISE APPEAL No. 83 of 2006
UNION OF INDIA
V/S
M/S HINDUSTAN ZINC LIMITED & ANR
Date of Judgment : 27.8.2008
PRESENT
HON'BLE SHRI N P GUPTA,J.
HON'BLE SHRI KISHAN SWAROOP CHAUDHARI,J.
Mr.Rishabh Sancheti for Mr.V.K.Mathur, for the appellant
Mr.Dinesh Mehta, for the respondent
BY THE COURT : (PER HON'BLE GUPTA,J.)
This appeal is by the Revenue against the
judgment of the Tribunal dated 28.10.2004, accepting the
appeal of the assessee, and holding, that the assessee is
entitled to the exemption under notification No.81 of
1975 dated 22.3.1975, as clarified vide clarification
dated 12.12.1986. The appeal was admitted by framing the
following substantial question of law, vide order dated
9.1.2007:-
“Whether the benefit of Notification
No.81/75 dated 22.03.1975 was available to
the assessee who had used Sulpheric acid
captively in the manufacture of phosphoric
acid which was later on cleared on payment
of duty to M/s IFFCO. Keeping in view the
Clarification Circular dated 12.12.1986
issued by the Board, for the period in
question.”
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The factual aspect of the matter, which is not
in dispute is, that the assessee is a manufacturer of
sulphuric acid, and it was used subsequently in
manufacture of phosphoric acid, which phosphoric acid was
cleared on payment of duty to M/s. IFFCO. On these facts
different show cause notices were issued to the assessee,
for different periods, alleging inter-alia, that during
course of examination of records, it was observed, that
the assessee is using sulphuric acid manufactured by it
in the manufacture of phosphoric acid without payment of
central excise duty leviable thereon, since February
1979. Sulphuric acid was alleged to be assessable to
central excise duty @ 10% adval under Central Excise
Tariff Item No.14G, which rate was subsequently enhanced,
and subsequently special excise duty was also levied,
which was withdrawn later on. Since no specific
notification exempting leviability of excise duty on
sulphuric acid used in manufacture of phosphoric acid was
available, the assessee was called upon to show cause and
explain, as to why central excise duty leviable on
sulphuric acid, used in manufacture of phosphoric acid,
may not be recovered from the assessee from February 1979
onwards.
The notice was contested, and it was contended,
that under a contract, they were supplying the total
quantity of phosphoric acid to IFFCO, who in turn was
using it in the manufacture of fertilizers, and as such,
they are entitled to exemption of duty on sulphuric acid,
used in the manufacture of phosphoric acid, which was
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ultimately used by IFFCO, under Notification No.81/75,
which exempts “Sulphuric Acid intended for use into
manufacture of fertilizers”. It was also contended, that
the notification does not specifically provide, that the
factory which produces sulphuric acid, and intends to use
it in the manufacture of fertilizers, should himself
produce the fertilizers also, rather the 2nd proviso to
the said Notification provides, that the factory of
production of sulphuric acid and that of fertilizers can
be different, and that they may not be denied the benefit
of the above said Notification, merely on the ground,
that they do not use sulphuric acid in the manufacture of
fertilizers themselves, but sell phosphoric acid in which
they have used sulphuric acid. Various other grounds were
also taken.
The learned Assistant Collector, vide order in
original dated 31.12.1980, confirmed the demands of all
the 16 notices, and also confirmed the special excise
duty, leviable on the sulphuric acid, manufactured and
used in manufacture of phosphoric acid, during the period
February 1979 to November 1980, and also directed the
assessee to file revised classification list in respect
of sulphuric acid, and to start paying central excise
duty thereon at the appropriate rate forthwith, before it
is cleared for the use in the manufacture of phosphoric
acid.
The assessee filed appeal against this order,
which was dismissed. The appellate authority also
examined the clarification dated 12.12.1986, and
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observed, that what has been clarified therein is, that
even if the sulphuric acid is not used in manufacture of
fertilizers, the benefit of the said notification cannot
be denied, so long as it can be established that
sulphuric acid is ultimately used in the manufacture of
fertilizers, and held, that the Board’s instructions
dated 12.12.1986 are entirely on different issue i.e.
that even in case of phosphoric acid coming into
existence as an intermediate product, sulphuric acid
would be entitled to the benefit of notification No.81/75
so long as it is established, that the sulphuric acid has
been used in the manufacture of fertilizers, but these
clarifications do not cover the issue of the case in
hand, being as to whether the sulphuric acid which is
used in the manufacture of phosphoric acid is entitled to
exemption under Notification No.81/75, when the
phosphoric acid has been cleared as final product on
payment of duty, and then sold out to 3rd party, claiming,
or even proving, that the 3rd party has used the
phosphoric acid, for the manufacture of fertilizers, and
it was held that the answer to this is clearly in
negative, as what has been cleared is phosphoric acid, to
which Notification No.81/75 is not applicable, and
secondly at the stage when sulphuric acid was used by the
assessee for manufacturing of phosphoric acid, no
exemption was available to sulphuric acid, since at that
stage, it could not be established, that the phosphoric
acid, which would be cleared on the payment of duty, and
sold to 3rd party, would ultimately be used in the
manufacture of fertilizers. With these findings, the
appeal was dismissed.
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The learned Tribunal in appeal found, that the
Notification No.81/75 provides exemption to Sulphuric
Acid, which is intended for use in the manufacture of
fertilizer, and since the assessee is manufacturing
sulphuric acid, which was later on converted into
phosphoric acid, and same was cleared for manufacture of
fertilizer, the entire quantity of sulphuric acid,
received from the assessee, is used in manufacture of
fertilizer, which factual aspect is not in dispute, the
clarification, read with the Notification, clearly
entitles the assessee to exemption.
We have again gone through the Notification
No.81/75, and the clarification dated 12.12.1986, and
considering the fact, that the factual aspect about the
sulphuric acid, being manufactured by the assessee, being
intended to be used in manufacture of fertilizer, rather
it having actually been so used, by intermediary
conversion into phosphoric acid, and then being sold to
IFFCO, which ultimately used it in manufacture of
fertilizer, is not a disputed fact, the assessee in our
view, has already been found to be entitled to exemption.
Thus, the question as framed is answered in
favour of the assessee, and against the Revenue. The
appeal thus, has no force and is dismissed.
(KISHAN SWAROOP CHAUDHARI),J. (N P GUPTA),J.
/tarun/