P.C. Jain, Member (T)

1. Facts of the case are that the appellants herein filed two classification lists - one for the period 1-4-1984 to 1-4-1986 and another with effect from 2-4-1986 - on 8-5-1987 for sulphuric acid used in silver Recovery Plant. It has been stated in the order-in-original, styled as Memorandum of Approval by the Proper Officer, dated 14-7-1987 that there is no meaning in approving the first classification list for the period 1-4-1984 to 1-4-1986 inasmuch as the appellant has sub motu paid the duty of Rs. 8,33,287.95 p. The second classification list effective from 2-4-1986 claiming the benefit of exemption notification 217/86 dated 2-4-1986 was modified by not accepting the claim of the appellant for benefit of the said notification on the ground that the input sulphuric acid is not liable to exemption because the final product silver is chargeable to nil rate of duty.

2. Learned advocate Shri Lakshmikumaran for the appellants has urged that the lower authorities have not appreciated the manufacturing process undertaken by the appellants. Their main product is zinc and other products are merely by-products of the processing of zinc ore concentrate. Silver Recovery Plant, though no doubt essential for separating silver, is equally essential for maximising the production of zinc the basic aim of the appellants as the name Hindustan Zinc Limited implies.

3. After the roasting of zinc ore concentrate in the form zinc sulphide and leaching thereof, neutral leach residue is obtained. Unreacted zinc and silver sulphides in this neutral leach residue would have been lost but for the process undertaken by the appellants, thereby causing loss of both zinc and silver. The appellants have enclosed a flow chart of their manufacturing process. It is reproduced in the Annexure.

4. An argument has been advanced that recovery of zinc from neutral leach residue at the 1st stage contains zinc ferrite, zinc sulphide (unreacted), silver sulphide etc. For maximum recovery of zinc, this residue is taken to the Residue Treatment Plant. Here process of floatation is adopted to separate zinc ferrite from zinc sulphide and silver sulphide. As part of Residue Treatment Plant, silver Recovery Plant has also been installed to separate zinc and silver from their sulphides through the processes of roasting and treatment with sulphuric acid and sodium chloride. Sulphates of zinc and of other metals (such as cadmium) obtained from silver Recovery Plant are taken to the conversion in the Jarosite Process meant for separating zinc and other metals from iron by treating zinc ferrite with ammonium sulphate and acid. Solution of sulphates of zinc and of other metals are again sent into Neutral Leaching. From this, through the processes in Thickener and by treatment with zinc dust and process of filteration , pure zinc sulphate solution is obtained. By process of electrolysis of pure zinc sulphate solution, zinc is obtained.

5. The department argues, on the authority of letter dated 28-2-1989, addressed to the Departmental Representative - copy of which has been taken on record - that floatation process undertaken by the appellants is a deviation from the normal process. Learned Chief Chemist's observation in this connection are reproduced below:-

"The need for subjecting the neutral leach residue to floatation thereby separating the sulphides of silver and zinc from zinc ferrites, then subjecting the separated sulphides to roasting, leaching, and precipitating the silver from the leach is neither mentioned in the literature on recovery of zinc, nor is explained in the technical literature of the party. The separation of the sulphides, which is an obvious deviation, from the conventional process of recovery of zinc, is apparently to avoid the loss of silver in jarosite waste solids. Moreover, silver does not find mention in the list of impurities which effect in zinc electro winning .

Therefore, I am of the opinion that the operations carried on th