Case Law Details
Rastriya Chemicals & Fertilisers Ltd. Vs Union of India (Delhi High Court)
The Appellant is a Public Sector Undertaking and is a Government Company within the meaning of Section 617 of the Companies’ Act, 1956. The Appellant engages in the manufacture of fertilizers and other chemicals, falling under Chapter Heading 29 and 31 of the Central Excise Tariff Act, 1985. The Appellant has a factory at Thal, in the District of Raigad. and has set up a Steam Generation Plant, which is operated by the use of fuels such as Naphtha and natural gas. he Steam Generation Plant is fired and heated by the use of Naphtha, which is procured by availing of an exemption under Notification 4/97 dated 1 March 1997 and natural gas procured from the Gas Authority of India Ltd. Under the exemption notification dated 1 March 1997, a nil rate of duty has been prescribed inter alia for Naphtha and Natural Gasoline Liquid for use in the manufacture of fertilizer or ammonia, falling under Chapter Heading 27. The annexure to the notification contains conditions 3 and 4 subject to which the exemption has been provided. Condition 3 prescribes that the exemption shall be subject to proving to the satisfaction of an officer not below the rank of the Assistant Commissioner of Central Excise that “such goods are cleared for the intended use specified in column (3) of the table.” Use in this case is the manufacture of fertilizer or ammonia. Condition 4 is that where such use is elsewhere than in the factory of production, the procedure set out in Chapter X of the Central Excise Rules, 1944 must be followed.
In the present case, a notice to show cause was issued to the Appellant on 29 August 2001. Evidently, several rounds of proceedings took place in pursuance of the notice to show cause and the Tribunal was called upon to remand the proceedings back to the adjudicating authority on more than two occasions. Eventually, on 27 January 2010, the adjudicating authority passed an order, adjudicating the claim of the Appellant and holding that the Appellant was not entitled to the benefit of the exemption. The Appellant filed an appeal before the Tribunal together with an application for waiver of predeposit. The Tribunal by its order, which is impugned in these proceedings, directed the Appellant to deposit an amount of Rs.2 crores and report compliance by 19 August 2011.
In the present case, the Appellant has contended that it is entitled to the benefit of the exemption notification on the ground that the Naphtha that is acquired is for the intended use of manufacture of fertilizers. In this regard, in order to support its case, the Appellant placed reliance on a judgment of the Supreme Court in State of Haryana vs. Dalmia Dadri Cement Ltd.5 and more particularly on the following observations contained in paragraph 13 of the judgment :
“We are, therefore, of the view that the real question which we are called upon to determine is whether, in the present case, the cement supplied was intended for use directly in the generation or distribution of electrical energy. If it was so intended, the exemption was attracted but not otherwise. The certificates which we have referred to earlier issued by the Board clearly show that the intention of the Board was that the cement should be used for a purpose directly connected with the generation or distribution of electrical energy. There is no material to show that the certificates were false certificates given by the Board, having another use in mind, or that they were fraudulently obtained by the assessee in collusion with the Board. The mere fact that some of the cement supplied was, in fact, used by the Board for activities not directly connected with the generation or distribution of electrical energy cannot make any difference regarding the availability of the exemption.” (emphasis supplied).
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