CX - Amendment is vital as it makes a dutiable product non-dutiable after the amendment - it cannot, therefore, be said to be clarificatory in nature: CESTAT
By TIOL News Service
MUMBAI, DEC 19, 2017: THE issue involved in the appeal filed by the assessee is whether the goods namely Acid Slurry (organic surface active agent) falling under Chapter heading 3402.90 of CETA is eligible for exemption notification no. 88/88 dated 01.03.1988 which exempts synthetic detergents vide Sr. No. 26 of the table attached to the notification.
The entry(s) in question are -
THE TABLE
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S.No.
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Chapter No. or Heading No.
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Description of goods
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(1)
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(2)
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(3)
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…
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26
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34.02
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Synthetic detergents
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…
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28
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1 to 96
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All goods consumed within the factory of production of such goods for the manufacture of goods specified at S.No. 01 to 27 above.
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The amending notification 7/99-CE dated 28.02.1999 did the following –
(ii) in the Table, against S. No 28, for the entry in column (3), the following shall be substituted, namely:-
All goods consumed in the manufacture of goods specified at S. Nos 1 to 27 above-
(i) whether within the factory of production of such goods; or
(ii) in any other factory
In the test result, the Chemical Examiner reported that the sample of Linear Alkyl Benzene sulphonate is an organic surface active agent and he also reported that the same is known to find mentioned as synthetic detergents.
The appellant, therefore, submits that there is no doubt that the product Acid Slurry is a synthetic detergent and exempted under notification 88/88. In the alternative, even if it is considered that the Acid Slurry is a product which is used for manufacture of synthetic detergents, the same is also exempted under Sr. No. 28 of the notification. It is further informed that this entry was substituted vide notification 7/99 dated 28.02.1999 and according to the amendment, even the goods manufactured and used by the assessee in their other unit is also exempted. Inasmuch as since the Acid Slurry was used by the appellant in their other unit, the amendment being a substitution of entry, the same is clarificatoryin nature and is to be given retrospective effect.
The AR emphasized that Acid Slurry itself is not a detergent and same is not used as detergent;that Acid Slurry is used as input for manufacture of detergent; that exemption is provided only to detergent which is ready to use as detergent, therefore, even though the Acid Slurry may have characteristic of organic surface active agent but it is not a detergent. Inasmuch as appellant is not eligible for exemption notification 88/88-CE. Furthermore, the amending notification 7/99-CE cannot be said to be clarificatory and benefit of exemption cannot be extended to the appellant. Also, Spent Sulphuric acid is a byproduct and being excisable goods, is liable to duty.
The Bench adverted to the notifications mentioned & extracted above and observed thus -
"8. From the above entry it can be seen that only synthetic detergent falling under 3402 is exempted. In the present case the goods manufactured and cleared by the appellant is Acid Slurry (organic surface active agent). This product may have characteristic as a cleaning agent but the Acid Slurry is not sold and purchased in the consumer market as a synthetic detergent. The Acid Slurry is one of the inputs used in the manufacture of synthetic detergent cake or powder. Therefore Acid Slurry itself cannot be treated as synthetic detergent. As per the definition of synthetic detergent it is used for washing clothes etc., the Acid Slurry cannot be used for washing clothes or any other substance. Acid Slurry is one of the inputs used in the manufacture of synthetic detergent. In the trade parlance also, Acid Slurry is not known as synthetic detergent. The chemical laboratory report of chemical examiner though show that the Acid Slurry found mentioned in the literature as synthetic detergent but that itself is not sufficient to decide that the synthetic detergent mentioned in the notification satisfies synthetic detergent its primary use for washing of clothes etc. All synthetic detergent which are sold in the market is a formulation of Acid Slurry and various inputs such as sodium carbonate, dolomite powder, perfume and colour etc. Therefore, there is a difference between Acid Slurry and synthetic detergent."
As regards the submission of the appellant that the amending notification has a retrospective effect, the CESTAT held –
"…We disagree with this submission for the reason that as per un-amended entry the goods which were not used within the same factory was liable to duty and after amendment it became exempted even if the same is used in other factory of the assessee. Therefore, the amendment is vital which makes a product non-dutiable and dutiable before and after the amendment. Therefore, it cannot be said that the amendment is of clarificatory nature…"
Relying upon the Larger Bench decision in Keti Chemicals, the Bench concluded that Spent Sulphuric Acid which emerges during the course of manufacture of Acid Slurry is an excisable product.
In fine, the impugned order was upheld and the appeal was dismissed.
(See 2017-TIOL-4458 -CESTAT-MUM)
