GUJARAT NARMADA VALLEY FERTILIZERS CO. versus COLLECTOR OF CENTRAL EXCISE, VADODARA

Citation: [2001] 1 S.C.R. 447 · Decided: 18-01-2001 · Supreme Court of India · Bench: B.N. KIRPAL · Disposal: Case Partly allowed

Judgment (excerpt)

...._ 
--= 
~ 
... 
·au JARA T NARMADA VALLEY FERTILIZERS co . 
v. 
COLLECTOR OF CENTRAL EXCISE, VADODARA 
JANUARY 18, 2001 
[B.N. KIRPAL, RUMA PAL AND BRIJESH KUMAR, JJ.] 
Excise Law: 
Central Excises and Salt Act, 1944: Tariff Item Nos. IO, II-A and 27.13. 
Exemption Notifications-Low Sulphur Heavy Stock (LSHS)-Exempted 
from excise duty-Assessee manufactured fertilizers by using LSHS-First two 
notifications exempted furnace oil and petroleum stock if used as feed stock 
in the manufacture of fertilizers-Third notification exempted LSHS if used 
A 
B 
c 
as feed stock but subjected it to a lower rate of excise duty if used otherwise D 
than as feed stock-Assessee used LSHS directly in manufacture of fertilizers 
and for manufacture of steam which in turn was used in manufacture of 
fertilizers-Entitlement of assessee to benefit of notifications in respect of that 
part of LSHS used in the production of steam-Held: Assessee entitled to 
benefit of notification Nos. 14711974 and 7511984 in respect of that part of 
LSHS used as feed stock for manufacture of fertilizers and not for generation E 
of steam-However, assessee entitled to benefit of notification No. 12711988 
in respect of LSHS used for generation of steam w.ej. 1-3-1988-Exemption 
Notifications Nos. 14711974, 7511984 and 12711988. 
Words and Phrases: 
"Feed stock"-Meaning of-In the context of Exemption Notifications 
Nos. 14711974, 7511984 and 12711988. 
F 
The appellants manufactured fertilizers for which it used Low Sulphur 
Heavy Stock (LSHS). There were three notifications of exemption from G 
excise duty namely, Notifications Nos. 147/1974, 75/1984 and 127/1988. 
The first two notifications exempted furnace oil and petroleum stock if they 
were used as feed stock in the manufacture of fertilisers. The third notification· 
exempted LSHS from excise duty if it was used as feed stock in the 
manufacture of fertilizers but subjected it to a lower rate of excise duty if 
it were not so used. 
447 
H 
). 
448 
SUPREME COURT REPORTS 
[2001] 1 S.C.R. 
A 
The appellant used LSHS directly in the manufacture of fertilizers and 
---
for manufacture of steam, which in turn was used in the manufacture of 
-JI. 
fertilizers. 
The appellant claimed exemption from excise duty in respect of the 
entire quantity of LSHS used for manufacture of fertilisers as well as steam. 
B But the Central Excise, Customs and Gold (Control) Appellate Tribunal held 
that the appellant was not entitled to the benefit of the first two notifications .. 
inasmuch as that part of LSHS, which had been used for producing steam 
wculd not be regarded as having been used as feed stock. Hence this appeal. 
c 
Allowing the appeal in part, the Court 
HELD: 1.1. The notifications clearly show that in the manufacture of 
fertilizers there may be more than one way in which Low Sulphur Heavy 
... 
,..
Stock.(LSHS) may be used. It is only of LSHS is used as 'feed stock' that 
there is a complete exemption from duty. [452-El 
D 
1.2. LSHS has been used in two ways. Firstly, it had been used as feed 
stock in the oxidation process when along with furnace oil it came in contact 
with oxygen and steam which resulted in gas with soot which was ultimately 
subjected to further process before leading to liquid ammonia. Secondly, it 
...,.. 
was used for adding to the coal which was burnt for boiling water which 
E resulted in the production of steam which was also an essential part of the 
process of manufacture of fertilizers but that by itself would not entitle the 
appellant to the benefit of complete exemption from excise duty unless it can 
be shown that LSHS has been used as feed stock in the manufacture. The 
notifications clearly indicate that it is only in respect of the limited use of 
LSHS as feed stock that complete exemption has been granted. LSHS used "' 
F in the manufacture of fertilizers, but not as feed stock, was, however, subject 
to excise duty though at a lower rate. [453-A-CI 
2. The very process of manufacture shows that LSHS, as a result of 
chemical reaction, becomes gas which is subsequently purified resulting in 
G liquid ammonia which can be regarded as feed stock in contra-distinction to 
LSHS which is burnt and as a result whereof steam is generated which in 
..; 
turn is used in the process. In the above-mentioned second case, LSHS is 
used in the manufacture of ammonia but not as a feed stock. As such, benefit 
of notification No. 127/1988 would be available to the appellant 

Excerpt shown. Read the full judgment & AI analysis in Lexace.