M/S. GUJARAT STATE FERTILIZERS CO. versus COLLECTOR OF CENTRAL EXCISE

Citation: [1997] 2 S.C.R. 561 · Decided: 28-02-1997 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

M/S. GUJARAT STATE FERTILIZERS CO. 
v. 
COLLECTOR OF CENTRAL EXCISE 
FEBRUARY 28, 1997 
[S.P. BHARUCHA AND S.B. MAJMUDAR, JJ.) 
Central Excises and Salt Act, 1944/Central Excise Rules, 1944/Tariff 
Act, 1985: 
A 
B 
S. 3/Rule 8(1)/Chapters 28 and 32 of the Schedule-Notification No. C 
75 of 1984 pennitting concessional rate of central excise duty 011 raw naptha 
and Notification No. 40 of 1985 totally exempting ammonia from central 
excise duty-Held the appellant-manufacturer is entitled to the benefits avail-
able under the two notifications, as they have fully satisfied the conditions 
therein inasmuch as raw naptha was utilised by the appellant- manufacturer 
in manufacture of ammonia; and ammonia was captively consumed in D 
manufacture of molten urea, a chemical fertilizer covered under the term 
'fertilizer' in Chapter 31 of the Schedule to the Tariff Act. 
Rules of Interpretation : 
Exemption Notification under Central Excise Rules, 1944-0bject E 
of-Held if express language does not indicate a contrary intention, full effect 
has to be given .to wide terminology employed by Notification. 
Words and Phrases : 
'Fertilizer' in the context of Tariff Act, 1985-Held includes chemical F 
fertilizer. 
The ·Central Government, by Notification No. 75 dated 1.3.1984, 
granted concession in the rate of central excise duty on raw naptha used 
in the manufacture of fertilizers and ammonia; and by Notification No. 40 G 
dated 17.3.1985, it exempted from excise duty, the ammonia utilised for 
production of fertilizers. 
The appellant, a public limited company engaged in manufacture of 
fertilizers, ammonia and chemicals, claimed concessional rate of excise 
duty, as per Notification No. 75 dated 1.3.1984, on raw naptha consumed H 
561 
562 
SUPREME COURT REPORTS 
[1997] 2 S.C.R. 
A by it for manufacturing ammonia. It also claimed total exemption from 
excise duty, as per Notification No. 40 dated 17.3.1985, on the manufac-
tured ammonia captively utilised by it for production of molten urea. The 
claim of the appellant was negatived on the ground that the benefit of the 
B 
· two exemption notifications could not be made available to the appellant 
since the ultimate product manufactured by it by captively consuming 
naptha, ammonia and molten urea was melamine which was not a fer-
tilizer. Notices were issued to the appellant to show cause as to why duty 
should not be recovered at full rate on the two items. The appellant filed 
its reply. The Assistant Collector of Central Excise accepted the case of 
the appellant and discharged the show cause notices. The Revenue filed 
C appeals on the ground that molten urea was used by the appellant in 
manufacture of melamine. and therefore, it would not be entitled to the 
benefit of the exemption notifications as the spirit of the exemption 
notification was that ammonia should be used in manufacture of soil 
fertilizer and not of any other commodity. The Collector of Central Excise 
D accepted the contention of the Revenue and allowed the appeals. In the 
appeals filed by the manufacturer, the Customs and Gold (Control) Ap-
pellate Tribunal also accepted the case of the Revenue and dismissed the 
appeals. Aggrieved, the manufacturer filed these appeals. 
It was contended for the appellant that raw naptha was utilised by 
E it in manufacturing ammonia, and ammonia was captively consumed in · 
manufacture of molten urea, which was a chemical fertilizer; and the 
notifications did not lay down that raw naptha and ammonia should be 
used in manufacture of soil fertilizer and not chemical fertilizer; that even 
though molten urea might have ultimately resulted in the manufacture of 
p 
melamine which was not a fertilizer, on the express language of the two 
exemption notifications the appellant was entitled to the relief claimed by 
it and the CEGAT wrongly assumed that the notifications necessarily 
required the ultimate product to be only soil fertilizer and not fertilizer. 
For the Revenue it was contended that a conjoint reading of the two 
notifications indicated that the Central Government wanted to exempt 
G either partially or wholly excise duty for only those products which were 
consumed in a continuous process for ultimately manufacturing soil fer-
tilizers to be made available to agriculturists for improving the yield of 
crops, and this real object underlying the issuance of the two notifications 
had to be kept in view and the express terminology employed by these 
H no

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