Madras
Fertilizers Ltd. Vs. Assistant C.C.E [1994] INSC 45 (20 January 1994)
Jeevan
Reddy, B.P. (J) Jeevan Reddy, B.P. (J) Hansaria B.L. (J)
CITATION:
1994 SCR (1) 189 1994 SCC (2) 295 JT 1994 (1) 150 1994 SCALE (1)173
ACT:
HEAD NOTE:
The
Judgment of the Court was delivered by B.P. JEEVAN REDDY, J.- Tariff Item 14-HH
of the First Schedule to the Central Excises and Salt Act, 1944 levied duty on
fertilizers at the rate of 15 per cent ad valorem.
The
tariff item read as follows:
ITEM
No. 14-HH FERTILIZERS Item No. Description Rate of Duty 14-HH. Fertilizers, all
sorts, but 15% ad valorem excluding natural, animal or vegetable fertilizers
when not chemically treated On March 1, 1970, the Government of India issued a
Notification bearing No. 25/70 under Rule 8(1) of the Central Excise Rules
exempting " mixed fertilizers, failing under Item No. 14-HH of the First
Schedule to the Central Excises and Salt Act, 1944 manufactured with the aid of
power, from two or more fertilizers on all of which the appropriate amount of
the duty of excise or, as the case may be, the additional duty under Section
2-A of the Indian Tariff Act, 1943 has already been paid, from the whole of the
duty of excise leviable thereon." There was an Explanation appended to the
said Notification but since it is not relevant for the present purposes, it
need not 298 be quoted or referred to. A reading of the Notification shows that
excise duty was waived in full in respect of "mixed fertilizers falling
under Item 14-HH" which is manufactured "from two or more fertilizers
on all of which the appropriate amount of duty of excise or as the case may be
additional duty" has already been paid. The question in these appeals is
whether the mixed fertilizers manufactured and sold by the appellant under the
trade name, Vijay (N.P.K. 17-17-17) is entitled to the benefit of the said
Notification.
2. The
Assistant Collector refused the benefit of the said Notification to the
appellant on the ground that the mixed fertilizers (N.P.K.) manufactured by the
appellant is not a mixture of two or more fertilizers as required by the
Notification but a mixture of fertilizers and other ingredients. He found that
(N.P.K.) is a combination of urea, muriate of potash, phosphoric acid, ammonia
fillers and coating agents. Moreover, he held, the ammonium phosphate which
goes into the composition of N.P.K. is also a well-known fertilizer, though it
is not subjected to levy for practical reasons. On appeal, the Appellate
Collector affirmed the Assistant Collector's order observing, " according
to the Notification it was only such mixed fertilizers are exempted which are
produced by blending, mixing or granulating duty-paid fertilizers (two or more)
with any substance wherein such mixtures are produced by physical actions and without
chemical reactions. The fertilizers manufactured by the appellants are
definitely complex fertilizers which are obtained by chemical reaction.
Such
complex fertilizers cannot therefore be considered as simple mixtures for
exemption provided in the notification." The appellant challenged the
correctness of the appellate order by way of revision before the Government of
India which allowed the same and remitted the matter for further verification
under the following order (dated February 18, 1976): "The order in appeal
is based on the contention that the mixture of two or more fertilizers
envisaged in the relevant Notification should be by physical action and without
chemical reaction and the fertilizers, manufactured by the petitioners are
definitely complex fertilizers obtained by chemical reaction and hence they
cannot be considered as simple mixtures to attract the exemption in the
Notification. The said Notification does not lay down any such conditions and
only requires that the mixture can be obtained with the aid of power and the
mixed fertilizers should contain not more than one nutrient. Thus the order in
appeal is not a proper speaking order on the issue involved and is set aside.
The exemption under the said notification is allowed if the conditions thereof
are fulfilled".
3.
According to the Government of India's order, the fact that chemical reaction
takes place during the mixing of fertilizers is no ground for denying the
benefit of the said Notification. It was of the opinion that the benefit of the
Notification cannot be confined to simple mixtures alone, inasmuch as the
Notification did not contain any such condition. Having so held, it remitted
the matter to the lower authorities to grant the exemption if the conditions of
the Notification are fulfilled. Be it noted that the Government of India did
not deal with other objections contained in the Assistant Collector's order
presumably because, the appellate order (which was the 299 subject-matter of
challenge before the Government of India) dealt only with one ground, viz.,
occurring of chemical reaction/transformation during the course of mixing of
fertilizers by the appellant, yielding a new product ammonium phosphate.
4.
Pursuant to the orders of the Government of India, the Assistant Collector, by
his order dated March 5, 1976, extended the benefit of the Notification to the
appellant's product Vijay N.P.K. 17-17-17 subject to the condition that the
appellant pays the duty on the components. Within a few months, however, the
Assistant Collector appears to have realised that he committed a mistake in
extending the benefit of the Notification to the appellant's fertilizer mixture
and accordingly issued a show-cause notice on June 7, 1976 calling upon the
appellant to show-cause why the benefit of the Notification be not denied to
him for the reasons stated therein. The show cause notice set out these grounds
for the action proposed therein : urea is not used as an independent base
fertilizer in the manufacture of the fertilizer mixture (Vijay N.P.K. 17-17-17)
by the petitioner. Duty on urea is paid at the intermediary stage only to
satisfy the condition of the Notification. Further a mixed fertilizer
contemplated by the Notification is a mixture of two or more fertilizers. It
does not contemplate formation of a third fertilizer, viz., ammonium phosphate
in the process of mixing or admixture of such raw materials as ammonia and
phosphoric acid. No duty is paid on the ammonium phosphate. Further, ammonia is
cleared free of duty under Notification No. 145 of 1971 CE dated January 26,
197 1.
5. In
response to the notice the appellant showed cause, whereafter the Assistant
Collector, by his order dated January 7, 1977 denied the benefit of the
Notification to the said product of the appellant on the ground that a review
of the process of manufacture establishes that it does not satisfy the
conditions prescribed in this Notification. He found specifically that the said
mixture is not a mixture of two or more fertilizers alone and that more than one
non-fertilizer agent goes into the manufacture of the said mixture. He also
found that the ammonium phosphate which is obtained by mixing of certain
fertilizers and certain non-fertilizer agents is itself a fertilizer on which
no duty is paid. Accordingly he concluded that the said product is not a
mixture of fertilizers as contemplated by the Notification. He further held
that the Notification contemplates a mixture of two or more fertilizers wherein
chemical transformation does not take place whereas in the case of the
appellants' product, such a chemical transformation does take place as a result
of which the original substances lose their identity and get transformed into a
new product.
6. The
appellant approached the Madras High Court by way of writ petition against the
aforesaid order of the Assistant Collector dated January 7, 1977. The main contention urged by the petitioner was that
inasmuch as the impugned order of the Assistant Collector denies the benefit of
the Notification on a ground which has been specifically negatived by the
Government of India in its revisional order dated February 18, 1976, it is unsustainable in law. A learned Single Judge agreed with
the appellant's 300 contention and allowed the writ petition against which the
State preferred a writ appeal. The Division Bench allowed the writ appeal and
dismissed the writ petition. The Division Bench held that the appellant was not
right in contending that the Assistant Collector's order dated January 7, 1977 is based on the only ground which
had been negatived by the Government of India in its order dated February 18, 1976. So far as merits are concerned,
the Division Bench held that the decision of this Court in Coromandel
Fertilizers Ltd. v. Union of India' concludes the issue against the appellant.
The Division Bench further observed that it was open to the Assistant Collector
to rectify the mistake committed by him in his order dated March 5, 1976 and
that the contention that he has no jurisdiction to do so is unacceptable. The
correctness of the order of the Division Bench is assailed in these appeals.
7. Shri
Uttam Reddy, the learned counsel for the appellant urged the following
contentions:
(1)
The order of the Assistant Collector dated March 5, 1976 is in implementation of the order
of the Government of India dated February 18, 1976. Once the Assistant Collector passed the said order he
became functus officio. He had no jurisdiction to revise or revoke the said
order thereafter.
Even
otherwise, it is clear that the order of the Assistant Collector dated January 7, 1977 reiterates the very ground negatived
by the Government of India, viz., chemical transformation in the process of
mixing of fertilizers. The said ground, having been expressly negatived by the
Government of India in its revisional order dated February 18, 1976 is not available to the authorities. The order of the
Government of India having become final, and also being inter partes, is
binding upon the' department and they cannot question its correctness relying
upon the decision of this Court in Coromandel Fertilizers' assuming that it
applies to the facts of this case. Even otherwise, the fact that this Court may
have taken a different view on merits in Coromandel Fertilizers' is of no
relevance so far as the appellant is concerned. As a matter of fact, the
decision of this Court in Coromandel' deals with a different product which was
a mixture of components different than the components concerned in the
appellant's product.
(2)
The Division Bench of the High Court was in error in holding that the order of
the Government of India in revision did not foreclose the controversy. All the
grounds now urged by the Assistant Collector were before the Government. It
allowed the appellant's claim. The last sentence in its order "The
exemption under the said Notification is allowed if the conditions thereof are
fulfilled", meant only that the authorities ensure that duty is paid on
the components. The said sentence did not mean that authorities could raise the
very same objections again which were raised by them on the earlier occasion.
All those objections must be deemed to have been rejected by the order of the
Government of India. The said order in revision has to be read as a whole and
understood reasonably. If so read and 1 1984 Supp SCC 457 : 1984 SCC (Tax) 225
(1985) 1 SCR 523 301 understood, it must be held to have left no room to reagitate
the very same objections over again. All that the authorities were required to
be satisfied was regarding the payment of duty on components and nothing more.
8. We
may first deal with the submission of the learned counsel for the appellant
with respect to the meaning and effect of the order of the Government of India
dated February 18, 1976. The order deals only with one
aspect, viz., that chemical reaction or transformation, if any, taking place on
the mixing of fertilizers is no ground to deny the benefit of the
aforementioned Notification to mixture of fertilizers. The order does not deal
with any other condition specified in the exemption Notification. It would,
therefore, not be reasonable to read the said order as holding finally that the
fertilizer mixture manufactured by the petitioner satisfies all the conditions
of the said Notification. Nor are we prepared to accede to the learned
counsel's contention that the remitting of the matter to the lower authorities
was confined only to verification of payment of duty on fertilizers going into
the manufacture of said mixture. The contention of the learned counsel does not
even stand to logic. The payment of duty on components is also a condition of
the Notification just as the other condition that the mixture to become
entitled to benefit of exemption should be a mixture of fertilizers alone.
There is nothing in the order of the Government of India to indicate that it
contemplated verification of only one condition or one condition of a
particular nature. On the contrary, it spoke of "conditions" of the
Notification being satisfied. When the Government of India remitted the matter
to the lower authorities to grant exemption if the conditions of the
Notification are satisfied, it necessarily meant the conditions other than the
one specifically dealt with by the Government of India in its order. We are,
therefore, of the opinion that after the remand it was open to, indeed it was
the duty of, the excise authorities to satisfy themselves that all the other
conditions of Notification are satisfied.
9. It
is equally difficult to agree with the learned counsel for the appellant that
once the Assistant Collector passed his order dated March 5, 1976 pursuant to
the Government of India's order dated February 18, 1976, he became functus
officio and that he had no power to reopen the matter. The Government of India
remitted the matter to the Assistant Collector to grant exemption if the
conditions of the Notification are satisfied. If the Assistant Collector
granted an exemption contrary to law it was always open to him to rectify the
said error. Sub-rule (5) to Rule 173-B of Central Excise Rules empowers the
excise authorities to do so. Rule 173-B provides for approval of the list of
goods by the proper officer. The approval inter alia includes rate of duty leviable
on each such goods.
Sub-rule
(5) reads:
"(5)
When the dispute about the rate of duty has been finalised or for any other
reasons affecting rate or rates of duty, a modification of the rate or rates of
duty is necessitated, the proper officer shall make such modification and
inform the assessee accordingly." 302 It may be noted that before revising
his order dated March
5, 1976, the Assistant
Collector gave a notice to the appellant stating the grounds on which he
proposed to revise and modify his earlier order. The decision cited by Shri Uttam
Reddy in support of this submission, viz., Collector of Central Excise v. V.K. Pallappa
Nadar2 has no relevance whatsoever. That was a case where the appellate
authority set aside the order of the original authority levying penalty without
saying more. It was held that in such a situation, the original authority has
no power to initiate de novo proceedings for levy of penalty. We are unable to
see any analogy whatsoever with that case herein. The learned counsel also
cited Union of India v. Kamalakshi Finance Corpn. Ltd.3 to stress the judicial
discipline required of the Excise Officers to obey the order of the superior
tribunals and courts. Again, we see no relevance of the said principle in the
facts of that case.
10. It
has been held by this Court in Coromandel Fertilizers' that ammonia is not a
fertilizer but falls within the purview of "gases" mentioned under
Tariff Item 14-H, whereas fertilizers fall under Tariff Item 14-HH. In view of
the said judgment it can no longer be contended by the appellant that ammonia
(which is one of the chemicals used to manufacture N.P.K.) is a fertilizer. Shri
Uttam Reddy requested that an opportunity may be given to the appellant to
establish that ammonia is also a fertilizer.
We do
not think we can accede to the said request. The show-cause notice issued on
January 7, 1977 did expressly put the appellant on notice specifically that
some of the raw materials like ammonia and phosphoric acid are not fertilizers.
The final orders stated the said fact more clearly. In any event, in view of
the decision of this Court in Coromandel' it is not open either to the
appellant or to any authority to say that ammonia is a fertilizer more so when
the judgment of this Court is based upon the tariff entries themselves.
11.
Lastly, the learned counsel for the appellant relied upon para 11 of the
judgment in Coromandel Fertilizers'. It appears that the counsel for Coromandel
Fertilizers' referred to the fact that a similar manufacturer of mixed
fertilizers, namely the appellant herein, has been given the benefit of the
said exemption Notification under the orders of the Assistant Collector dated
March 5, 1976 and that there was no reason to deny the said benefit to Coromandel
Fertilizers'. The said argument was dealt with by this Court in the following
words: (SCC p. 464, para 13) "Mr Setalvad made a grievance that the
authorities concerned had allowed the benefit of the notification under similar
circumstances to a rival company, If the grievance of the appellant is true,
the appellant may no doubt have reasons to feel sore about it. We have,
however, to point out that the grievance of the appellant, even if it is well
founded, does not entitle the appellant to claim the benefit of the
notification. A wrong decision in favour of any particular party does not
entitle any other party to claim the benefit on the basis of the wrong
decision." 2 AIR 1964 Mad 111:(1963) 2 MLJ 332:76 Mad LW 809 3 1992 Supp
(1) SCC 443 : (1991) 55 ELT 433 303
12. We
do not think that the said observations help the appellant in any manner. It is
not for us to say whether the mixture of fertilizers concerned in Coromandel
Fertilizers' is similar to the mixture manufactured by the appellant. It is
sufficient to say that the mixture manufactured by the appellant does not
satisfy all the conditions prescribed by the relevant Notification and that
unless all the conditions are satisfied, the benefit does not flow. It was also
admitted before us by the learned counsel for the appellant that the
Explanation appended to the exemption Notification is not relevant herein.
13. For
the above reasons, the appeals fail and are accordingly dismissed with costs.
Advocate's fee assessed at Rs5000 consolidated.
Back
