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1997(5) Supreme 240
SUPREME COURT OF INDIA
(From Customs and Gold (Control) Appellate Tribunal, New Delhi)
S.P. Bharucha and S.B. Majmudar, J.
M/s. Gujarat State Fertilizers Co. -Appellant
versus
Collector of Central Excise -Respondent
Civil Appeal Nos. 3041-46 of 1991
Decided on 28-2-1997
Counsel for the Parties :
For the Appellant : D.A. Dave, Sr. Advocate and Ms. Meenakshi Arora, Advocate.
For the Respondent : K.N. Bhat, Additional Solicitor General, N.K. Bajpai, S.D. Sharma and P. Parmeswaran, Advocates.
Held : Notification No. 75 of 1984 dated 1.3.1984, as amended from time to time, sought to grant a concession in the rates of central excise duty as specified in the Schedule to the said notification on goods of the description specified in column (2) of the Table subject to intended use or condition as laid down in column (4) thereof. The Table to the said notification mentioned at Sl. No.2 raw naphtha as the commodity on which concessional rate of duty was permitted subject to the condition mentioned in column (4) which provided that raw naphtha must be intended for use in the manufacture of fertilisers and ammonia. We are not concerned with the proviso to the said condition mentioned in column (4). Now a mere look at the said notification shows that when raw naphtha was utilised for manufacture of fertilisers and ammonia, it would earn the concessional 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 utilised by it in manufacture of ammonia even leaving aside the further question as to whether it was utilised for manufacture 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. Raw naphtha can also be said to have been utilised in manufacturing molten urea which is a chemical fertiliser covered by the term fertiliser as employed by this very condition in column (4). Thus this condition can be said to have been fully complied with by the appellant. (Para 9)
Further held : Consequently, on a conjoint reading of the express terms of Notification No. 40 of 1985 and the relevant headings and sub-headings of Chapter 31 of the Tariff Act, it must be held that the appellant by captively consuming ammonia had manufactured molten urea, a chemical fertiliser. It is difficult to appreciate the contention of Shri Bhat, learned Additional Solicitor General that the spirit of the notification was to give the benefit only to soil fertilisers as final product which could be utilised by the cultivator in agriculture and with that end in view the notification was promulgated. On the express language of the notifications, it is not possible for us to agree with this contention. If that was the view of the Central Government while promulgating the said notification, nothing prevented the Central Government from indicating that it was not seeking to cover the goods mentioned in Chapter Heading No.31 or in not confining the said exemption notification only to soil fertilisers. In the absence of any such restrictive words in the said notification, the express and wide terminology fertiliser employed in the notification cannot be curtailed by any process of reasoning about the supposed intention of the Central Government underlying the issuance of the said notification. (Para 12)
If molten urea is treated to be an excisable item under Heading 31.02 as a chemical fertiliser, it has to be treated on the same lines while construing the sweep of exemption Notification No. 40 of 1985 which expressly refers to Chapter 31 amongst others. In short, molten urea must be treated to be a fertiliser for the purpose of its exigibility to duty under Heading 31.02 of the Tariff Act and simultaneously also for the purpose of exemption Notification No. 40 of 1985. It is also easy to visualise that if molten urea would have been sold by the appellant in outside market instead of being captively consumed further for the manufacture of melamine, it would have borne full duty subject to exemption notification, if any, under Tariff Item 31.02. Only because it was captively consumed in the onward process of manufacture which had resulted into melamine, it could not be said that the final product for the purpose of Excise Act had not emerged in the shape of molten urea by the captive consumption of ammonia. (Para 13)
On the express language of the notifications, in question, it is not possible to agree with the contention of Shri Bhat, learned Additional Solicitor General that the term fertiliser employed by the said notification must be understood by adopting the common parlance test to be referred to soil fertiliser only. (Para 14)
(ii) Rules of Interpretation -Excise duty-Exemption notification-For deciding whether an exemption notification gets attracted on facts of a given case-Express language of exemption notification has to be given its due effect-Object and purpose of exemption has to be culled out from express language of notification-If express language of notification does not indicate a contrary intention conveyed by wide words employed by notification-Full effect has to be given to wide terminology employed by notification. (Paras 10 & 12)
JUDGMENT
S.B. Majmudar, J.-These six appeals are preferred by the common appellant, M/s Gujarat State Fertilisers Company, against the central excise authorities, being aggrieved by common judgment and order dated 19.4.1991 rendered by the Customs and Gold (Control) Appellate Tribunal ( CEGAT for short). The appellant contends that it is entitled to concessional rate of excise duty on raw naphtha consumed by it at its factory at Vadodara for manufacturing ammonia which was captively consumed for manufacturing molten urea. That claim for concessional rate of duty is based on Notification No. 75 of 1984 dated 1.3.1984, as amended from time to time, issued by the Central Government in exercise of its powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 promulgated under the Central Excises and Salt Act, 1944. The appellant also claimed total exemption from excise duty on the manufactured ammonia utilised by it for production of molten urea by captively consuming the aforesaid ammonia manufactured out of raw naphtha. The said claim is based on a similar exemption notification issued by the Central Government being Notification No. 40 of 1985 dated 17.3.1985, as amended from time to time. The aforesaid manufactured molten urea was further captively consumed for manufacturing melamine. This claim based on the aforesaid exemption notifications was sought to be negatived by issuance of six show cause notices by the excise authorities on the ground that the aforesaid exemption notifications were not applicable to raw naphtha utilised for manufacturing ammonia as well as to ammonia captively consumed for manufacturing molten urea on the ground that the ultimate product manufactured out of it was melamine which was not a fertiliser. It was also contended by the excise authorities that molten urea which was manufactured out of ammonia was not by itself a soil fertiliser and, therefore, on the express terms of the exemption notifications, the appellant was not entitled to get the benefit of concessional rate of excise duty on raw naphtha utilised by it for manufacture of ammonia as well as of total exemption from excise duty on ammonia which was utilised in the manufacture of molten urea. The aforesaid show cause notices were issued by the Superintendent of Central Excise, Vadodara, to the appellant on various dates between 12.5.1986 and 28.5.1987. The appellant was called upon to show cause as to why duty should not be recovered at full rate on the quantity of raw naphtha and ammonia utilised by the appellant for production of molten urea during the period in question and as to why concessional rate of duty on raw naphtha under Notification No. 75 of 1984 and exemption to ammonia under Notification No. 40 of 1985 should not be disallowed.
2. The appellant by its replies to these show cause notices contended that as a public limited company, it was engaged in the manufacture of fertilisers, ammonia and chemicals. That one of the raw materials used for the manufacture of ammonia was raw naphtha which was purchased by the appellant. That ammonia manufactured by it which falls under Chapter 28 of the Schedule to the Central Excise Tariff Act, 1985 ( Tariff Act for short) was captively consumed by it in its Urea Plant for manufacture of molten urea. It was submitted by the appellant that molten urea was classified by the excise authorities under Chapter 31, which refers to fertilisers and duty was paid on molten urea as a chemical fertiliser under Heading 31.02 which covers nitrogenous mineral and chemical fertiliser. The molten urea was then captively consumed in its Melamine Plant for the manufacture of melamine which was not a fertiliser. The case of the appellant was that though molten urea was not used for manufacture of fertiliser, it still remained classifiable as a fertiliser, regardless of its use. Relevant chapter notes were relied upon by the appellant in this connection.
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