- (1.) 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 - fertilizerson 1/03/1970, the government of India issued a Notification bearing No. 25/70 under Rule 8 (1 of the central Excise Rules exempting "mixed fertilizers, falling 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 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 a 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 18/02/1976: "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 thesubject-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.;