M/S. GUJARAT STATE FERTILIZERS CO.versusCOLLECTOR OF CENTRAL EXCISE

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

                           FEBRUARY 28, 1997

            [S.P. BHARUCHA AND S.B. MAJMUDAR, JJ.)                                B

      Central Excises and Salt Act, 1944/Central Excise Rules, 1944/Tariff
Act, 1985:

        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
  · two exemption notifications could not be made available to the appellant
    since the ultimate product manufactured by it by captively consuming
B 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 notifications was required to be construed in that light. It was also
         GUJ. STATE FERTIL!ZERS CO. v. COLLECTOR OF C.E.                    563

contended for the Revenue that to a common man 'fertilizer' would denote A
only a soil fertilizer which could be utilised by the agriculturists and,
therefore, the term 'fertilizer' as employed by the notifications must be
given its ordinary meaning as accepted in common parlance.

      Allowing the appeals, this Court
                                                                                   B
       HELD : 1. The Collector of Central Excise (Appeals) as well as the ·
CEGAT patently erred in law in taking the view that notification No. 40 of
1985 did not cover captively consumed ammonia utilised by the appellant
as input for manufacturing molten urea. Notification No. 75 of 1984 also
applied to raw naptha utilised by the appellant for manufacturing am- C
monia and molten urea. The condition for earning· concessional rate of
duty under notificati9n No. 75 of 1984 on raw naptha and total exemption
from duty as per notification No. 40of1985 on ammonia have been fully
satisfied by the appellant. The show cause notices were clearly incompetent
and were liable to be quashed and were rightly vacated by the Assistant
Collector. [569-B-F]                                                        D
      2. Raw naptha is enumerated in column (2) of the table of the
Schedule to Notification No. 75 of 1985 as an item on which concessional
rate of duty was permitted subject to the condition in column (4) thereof
that raw naptha must be intended for use hi the manufacture of fertilizers         E
and ammonia. Admittedly raw naptha purchased by the appellant from the
open market was In fact utilised by it in manufacture of ammonia; and thus
the condition laid down in column (4). of the Notification got fully satisfied.
However, raw naptha can also be said to have been utilised in manufactur-
ing molten urea, which is a chemical fertilizer covered by the term 'fertilizer'
as employed by this very condition in column (4). Thus this condition can          F
be said to have been fully complied with by the appellant. [571-A-D]

       3.1. Notification No. 40of1985 exempts goods of description mention
in column (2) of the table and falling under chapters 25, 27, 28, 29 and 31
or 32, as the case may be, of the Schedule to the Tariff Act, 1985 subject
to the condition laid down in the corresponding entry in column (3) G
thereof. Ammonia is mentioned at serial No. 3 of column (2) of the table.
The condition for earning exemption from excise duty on ammonia, as laid
down in column (3) is that ammonia should be used in manufacture of
fertilizers. Admittedly ammonia was captively consumed by the appellant
in manufacturing molten urea. [571-E,H]                                     H
    564                    SUPREME COURT REPORTS                    [1997) 2 S.C.R.

A          3.2. The term 'fertilizer' is genus which may consist of various species
    of fertilizers, namely, chemical fertilizer, soil fertilizer, animal or vegetable
    fertilizers, as seen from description of various types of fertilizers found in
    chapter 31 of the Schedule to the Tariff Act. Further; the chapter notes of
    the chapters referred to by the said notification have to be read as part
    and parcel of the notification. Note to chapter 31 dealing with fertilizers
B   clearly states that Heading No. 3L02 would cover mineral or chemical
    fertilizers even when they are not used as fertilizers. Therefore, if molten
    urea covered by Heading 31.02 was not to be used as fertilizer and on the
    other hand was utilised as an input for producing melamine, still it would
    remain a chemical fertilizer within the sweep of chapter 31 and as such it
C   could not be said that ammonia which was captively consumed for
    manufacturing molten urea had not satisfied the condition for earning
    total exemption under Notification No. 40 of 1985. [573-A-C]

          Fenner (India) Ltd. v. Collector of Central Excise, Madurai, (1995) 77
D E.L.T. 8 SC, relied on.

          3.3. The view taken by the CEGAT that molten urea was not a
  ·fertilizer at all is not correct. In view of entry in clause (2), sub-clause (A)
   (viii) of Note 2 under Heading 31.02, Chapter 31 of Schedule to the Tariff
   Act, 1985, liquid urea is considered to be a chemical fertilizer. The excise
E authorities themselves permitted clearance of chemical fertilizer, molten
   urea, under sub-heading No. 31.02 of Chapter 31. [573-E]

          4.1. The object and purpose of the exemption has to be culled out
    from the express language of the notifications. If the express language of
F   the notifications does not indicate a contrary intention, full effect has to
    be given to the wide terminology employed by the notifications; otherwise
    the result would be that in trying to search for the supposed intention
    underlying the notifications, the intention flowing from the express lan-
    guage of the notification would get stultified or truncated. [574-F)

G      , M/s. Hemraj Gordhandas v. H.H. Dave, Assistant Collector of Central
    Excise &,Customs, Surat and Ors., (1978) 2 E.L.'J;. (J. 350), followed.

           Steel Authority of India Ltd. v. Collector of Central Excise, (1996) 88
     E.L.T. 314 SC; Prince Khadi Woollen Handloom Prod. Coop. Ind!. Society
H    v. Collector of Central Excise, (1996) 88 E.L.T. 637 SC, relied on.
      GUJ. STATE FERTILIZERS CO. v. COLLECTOROFC.E. [S.B. MAJMUDAR,J.]565


           4.2. On the express language of the notification an inevitable con- A
    clusion follows that the Central Government meant to exempt excise duty
    on the captively consumed ammonia if it had resulted in the manufacture
    of fertilizers and as it had resulted in the manufacture of molten ureas
    which by itself was a chemical fertilizer covered by Chapter 31 expressly
    mentioned in the said notification, the scope and ambit of the said notifica- B
    tion could not be curtailed on the basis of the supposed_ latent intention
    underlying the said notification, namely, that only soil fertilizer was re-
    quired to be produced by captive consumption of ammonia and not any
    other type of fertilizer like molten urea which was a chemical fertilizer. In
    the absence of any such restrictive words in the side notifica~ion, the
    express and wide terminology 'fertilizer' employed therein cannot be cur- C
    tailed by apy process of reasoning about the supposed intention of the
    Central Government, underlying the issuance of the said notification, nor
    can it be said that the supposed object or purpose of exemption should be
    kept in view. [574-G-H, 575-A]

         The Tata Oil Mills Co. Ltd. v. Collector of Central Excise, (1989) 43 D
    ELT 183, referred to.

          5. As a result if the appellant becomes entitled to claim any refund
    of excise duty paid by it, such refund claim if any, submitted by the
    appellant before the appropriate authority will have to be decided in        E
    accordance with law. [578-B]


-
,
          CIVIL APPEALLATE JURISDICTION: Civil Appeal Nos. 3041-
    46 of 1991.

         From the Judgment and Order dated 19.4.91 of the Customs and            F
    Gold (Control) Appellate Tribunal, New Delhi in Order No. 404-09 of
    1991-C.

         D;A. Dave and Ms. Meenakshi Arora for the Appellant.

         K.N. Bhat, Additional Solicitor General, N.K. Bajpai S.D. Sharma G
    and P. Parmeswaran for the Respondent.

         The Judgment of the Court was delivered by

        S.B. MAJMUDAR, J. : These six appeals are preferred by the
    common appellant, M/s Gujarat State Fertilisers Company, against the H
   566                   SUPREME COURT REPORTS                 [1997) 2 S.C.R.

A central excise authorities, being aggrieved by common judgment and order
   dated 19.4.1991 rendered by the Customs and Gold (Control) Appellate
  Tribunal ('CEGAT' for short). The appellant contends that it is entitled to
   concessional rate of excise duty on raw naptha consumed by it at its factory
  .at Vadodara for manufacturing ammonia which was captively consumed
B for manufacturing molten urea. That claim for concessional rate of duty is
   based on Notification No. 75 of 1984 dated 1.3.1984, as amended from time
   to time, issued by the Central Government in exercise of its powers
   conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944
   promulgated under the Central Excises and Salt Act, 1944. The appellant
   also claimed total exemption from excise duty on the manufactured am-
C monia utilised by it for production of molten urea by captivc;:Jy consuming
   the aforesaid ammonia manufactured out of raw naphtha. The said claim
   is based on a similar exemption notification issued by the Central Govern-
   ment being Notification No. 40 of 1985 dated 17.3.1985, as amended from            •
   time to time. The aforesaid manufactured molten urea was further captively
D consumed for manufacturing melamine. This claim based on the aforesaid
   exemption notifications was sought to be negatived by issuance of six show
   cause notices by the excise authorities on the ground that the aforesaid
   exemption notifications were not applicable to raw naphtha utilised for
   manufacturing ammonia as well as to ammonia captively consumed for
E manufacturing molten urea on the ground that the ultimate product
   manufactured out of it was melamine which was not a fertiliser. It was also
   coniended by the excise authorities that molten urea which was manufac-
   tured out of ammonia was not by itself a soil fertiliser and, therefore, on
   the express terihs of the exemption notifications, the appellant _was not
F entitled to get the benefit of concessional rate of excise duty on raw
   naphtha utilised by it for manufacture of ammonia as well as of total
                                                                                  -
                                                                                  /
   exemption from excise duty on ammonia which was utilised in the manufac-
    ture of molten urea. The aforesaid show cause notices were issued by the
   Superintendent of Central Excise, Vadodara, to the appellant on various
    dates between 12.5.1986 and 28.5.1987. The appellant was called upon to
G show cause as to why duty should not be recovered at full rate on the
    quantity of raw naphtha and ammonia utilised by the appellant for produc-
   tion of molten urea during the period in question and as to why conces-
   sional rate of duty on raw naphtha under Notification No. 75 of 1984 and
   exemption to ammonia under Notification No. 40 of 1985 should not be
H disallowed.
      GUJ. STATE FERTILIZERS CO. v. COLLECTOR OF C.E. [S.B. MAJMUDAR, J.] 567

            The appellant by its replies to these show cause notices contended A
    that as a public limited company, it was engaged in the manufacture of
    fertilisers, ammonia and.chemicals. That one of the raw materials used for
    the manufacture of ammonia was raw naphtha which was purchased by the
    appellant. That ammonia manufactured by it which falls under Chapter 28
    of the Schedule to the Central Excise Tariff Act, 1985 ('Tariff Act' for B
    short) was captively consumed by it in it.s Urea Plant for manufacture of
    molten urea. It was submitted by the appellant that molten urea was
    classified by the excise authorities under Chapter 31, which refers to
    fertilisers and duty was paid on molten urea as a chemical fertiliser under
    Heading 31.02 which covers nitrogenous mineral and chemical fertiliser.
    The molten urea was then captively consumed in its Melamine Plant for C
    the manufacture of melamine which was not a fertiliser. The case of the
    appellant was that though molten urea was not used for manufacture of
    fertiliser, it still remained classifiable as a fertiliser, regardless of its use.
    Relevant chapter notes were relied upon by the appellant in this connec-


-   tion.

            The Assistant Collector of Central Excise after considering the
    appellant's case came to the conclusion that raw naphtha was utilised by
                                                                                   D


    the appellant in manufacturing ammonia which in its turn was utilised for
    manufacturing molten urea and that as molten urea was a chemical fer-
    tiliser, the benfit of both the afore3aid notifications was available to the E
    appellant. Consequently, the show cause notices were discharged by six

-   orders passed by the Assistant Collector between 12.11.1986 and February
    1989.

          The Collector of Central Excise, Vadodara, in exercise of powers F
    vested in him under Section 35-E of the Act directed the Assistant Collec-
    tor to file appeals to the Collector, Central Excise (Appeals) against the
    aforesaid orders on the ground that molten urea which was classifiable
    under Chapter 31 Heading 31.08 was further used in the manufacture of
    melamine and hence the appellant would not be entitled to the benefit of
    the aforesaid notifications as the spirit of the notifications was that am- G
    monia should be used in the manfufacture of a soil fertiliser and not any .
    other commodity.

           Pursuant to the directions of the Collector, the Assist~nt Collector
    filed six appeals on diverse dates to the Collector, Central Excise (Ap-       H,
    568                   SUPREME COURT REPORTS                    [1997] 2 S.C.R.

A peals). The appellant filed cross-objections submitting iri the alternative
    that assuming that molten urea was not a fertiliser, even then it was entitled
    to the benefit of Notification No. 217 of 1986 dated l st March 1986 which
    exempted captively consumed excisable goods used for the manufacture of
    excisable final products as set out in the Table annexed to the said
    notification. As ammonia covered by Chapter 28 was mentioned as input
B   and molten urea covered by Chapter 31 was shown as output in the said
    notification, even under that notification no duty was payable on molten
    urea.

           The Collector, Central Excise (Appeals) by his diverse orders be-
C   tween 13.3.1989 and 25.7.1989 allowed the appeals by holding that as
    molten urea was not a soil fertiliser and as the final product melamine was
    also not a soil fertiliser, the benefit of the aforesaid twin notifications was
    not available to ammonia and raw naphtha respectively. The appellant
    thereafter preferred six appeals before the .C:EGAT. The CEGAT by the
D   impugned common order dismissed all these appeals agreeing with the
    view of the Collector, Central Excise (Appeals) that ammonia was used in
    a continuous process for ultimately manufacturing melamine which was not
    a fertiliser and as molten urea which was an intermediate product was also
    not a soil fertiliser, the benefit of these notifiactions was not available to
                                                                                      -
    the appellant.
E
            The impugned common order of the CEGAT was challenged by Shri
    Dave, learned Senior Counsel appearing for the appellant on diverse
    grounds. In the first instance, Shri Dave submitted that the CEGAT had
    patently erred in law in taking the view that raw naphtha utilised by the
                                                                                      -
F   appellant in manufacturing .ammonia did not earn the concessional rate of
    duty as per Notification No. 75 of 1984. It was submitted by him that raw
    naphtha was utilised by the appellant in manufacturing ammonia and also
    fertiliser, namely, molten urea which is a chemical fertiliser and that the
    notification nowhere lays down any condition for its applicability, that the
    raw naphtha should be soil fertiliser and not chemical fertiliser. Similarly,
G   it was contended that the appellant was entitled to the benefit of total
    exemption from excise duty as per Notification No. 40 of 1985 dated
    17.3.1985 as amended from time to time as ammonia covered by the said             '
    notification was captively consumed in manufacture of fertiliser, namely,
    molten urea which was a chemical fertiliser. Shri Dave submitted that even
H   though molten urea might have ultimately resulted in the manufacture of
  GUJ.STATEFERTILIZERSCO. v. COLLECTOROFC.E. (S.B. MAJMUDAR,J.]569


melamine which was admittedly not a fertiliser, on the express 'language of A
these exemption notifications, the appellant had made out a case for relief
as claimed by it and that the CEGAT had wrongly assumed that the
notifications necessarily required the product manufactured by the appel-
lant to be only soil fertiliser and not fertiliser of any other type and that
express terminology of the notifications did not have such a restrictive
meaning. It was alternatively contended that in any case, Notification No. B
217 of 1986 applied to the facts of the present case and even on that
ground, the demand-cum-show cause notices were liable to be quashed.
Shri Bhat, learned Additional Solicitor General, on the other hand, con-
tended that the express terminology employed by exemption Notification
No. 75 of 1984 dated 1.3.1984 and Notification No. 40 of 1985 dated C
17.3.1985 had to be appreciated in the light of the connotation of the term
'fertiliser' as understood in common parlance and should not be read in
the light of the subsequent Tariff Act which might have brought on the
statute book relevant Chapters 31 or 32. Therefore, the wording of those
chapters and the chapter notes could not be relied upon to cull out the D
meaning of the term 'fertiliser' as employed by these notifications. Ul-
timately when the express terminology of these notifications was noticed by
him making direct reference to the concerned chapters of the Tariff Act
he did not pursue this point any further. However, his main contention was
that on a conjoint reading of the relevant clauses of the notifications, it
must be held that the Central Government wanted to exempt either par- E
tially or wholly excise duty for only those products which were consumed
in a continuous process for ultimately manufacturing soil fertilisers which
were to be made available to agriculturists for improving the yield of crops
and, therefore, if the final product which emerged was melamine, which
was not a fertiliser at all, the intermediate products as inputs which had F
gone into the manufacturing of the final product of melamine in this
continuous process of manufacture could not earn any concession or full
exemption from excise duty. Learned Additional Solicitor General sub-
mitted that the aforesaid real object underlying the issuance of these
notifications had to be kept in view and the express terminology employed
by these notifications was required to be construed in that light. It was also G
contended by him that the CEGAT had rightly taken the view that as raw
naphtha which was utilised for manufacturing ammonia and ammonia
which in its turn was utilised in manufacturing molten urea could not get
the benefit of the aforesaid exemption notifications as molten urea was not
                                                                             H
    570                    SUPREME COURT REPORTS                   [1997) 2 S.C.R.

A a soil fertiliser and the exemption notifications were issued only with a view
    to making soil fertilisers cheaper so as to get them within the reach of
    farmers in a more advantageous manner. That it was not the intention of
    the exemption granting authorities to give any benefit to the consumers of
    final product like melamine which was not a fertiliser at all.
                                                                                      -
B         Having given our anxious consideration to_ these rival contentions, we
  have reached the conclusion that the CEGAT had erred in not accepting
  the contention of the appellant convassed before it. Reasons are obvious.
  It is not in dispute between the parties that the appellant which is a public
  limited company is engaged in manufacturing fertiliser ammonia and
c chemicals at its factory situated on the outskirts of Vadodara in Gujarat
  State. That one of the raw materials used by it for manufacture of ammonia
  is raw naphtha which is purchased by it from open market. During the
  relevant period, ammonia was covered by Chapter 28 of the Schedule to
  the Tariff Act of 1985. Ammonia manufactured by the appellant was
  captively consumed by it in its Urea Plant for the manufacture of molten
D urea. Under the Central Excise Tariff Act, the excise authorities classified
  molten urea under Chapter 31 thereof dealing with fertilisers. That duty
  was being paid by the appellant at the relevant time on molten urea under
  Chapter Heading 31.02 which covered nitrogenous mineral and chemical
                                                                                      -
  fertilisers. It_ is no doubt true that molten urea in its turn was also captively
E consumed by the appellant in its Melamine Plant for manufacture of
  melamine which admittedly is not a fertiliser.

         In the light of these background facts on which there is no dispute
  the short controversy posed for our consideration will have to be resolved.
p We have, therefore, to turn to the concerned two notifications which are
  brought on the anvil of scrutiny before us. Notification No. 75of1984 dated
  1.3.1984, as amended from time to time, sought to grant a concession in
  the rates of central excise duty as specified in the Schedule to the said
  notification on goods of the description specified in column (2) of the
  Table subject to intended use or condition as laid down in column (4)
G thereof. The Table to the said notification mentioned at sl. no.2 raw
  naphtha as the commodity on which concessional rate of duty was per-
  mitted subject to the condition mentioned in column (4) which provided
  that raw naphtha must be intended for use in the manufacture of fertilisers
  and ammonia. We are not concerned with the proviso to the said condition
H mentioned in column (4). Now a mere look at the said notification shows
       GUJ. STATE FERTILIZERS CO. v. COLLECTOR OF C.E. [S.B. MAJMUDAR, J.j 571

     that when raw naphtha was utilised for manufacture of fertilisers and             A
     ammonia, it would earn the concessional rate of duty. It is not in dispute

..   between the parties that raw naphtha which the appellant purchased from
     the open market was in fact utilised by it in manufacture of ammonia even
     leaving aside the further question as to whether it was utilised for manufac-
     ture of any fertiliser. It is, therefore, difficult to appreciate as to how the   B
     CEGAT could persuade itself to hold that because ammonia manufactured
     out of raw naphtha had resulted in molten urea which was not a soil
     fertiliser, the benefit of the aforesaid notification could not be made
     available to the appellant which had utilised raw naphtha in its Plant.
     Moment it was shown that raw naphtha was wholly utilised by the appellant
     for manufacturing ammonia, the condition laid down in column (4) of the           C
     notification got fully satisfied. On this short ground, the reasoning of the
     CEGAT for not extending the benefit of concessional rate of duty on raw
     naphtha to the appellant cannot be sustained. However, as discussed
     hereinafter, raw naphtha can also be said to have been utilised in manufac-
     turing molten urea which is a chemical fertiliser covered by the term             D
     'fertiliser' as employed by this very condition in column (4). Thus this
     condition can be said to have been fully complied with by the appellant.

           Then next we turn to exemption Notification No. 40 of 1985 dated
     17.3.1985. As per the said notificatjon, as amended from time to time, it
     had been laid down that the Central Government was pleased to exempt E
     goods of the description mentioned in column (2) of the Table and falling
     under Chapters 25, 27, 28, 29 and 31 or 32, as the case may be, of the
     Schedule to the Tariff Act, from the whole of the duty of excise leviable
     thereon under Section 3 of the Central Exdses and Salt Act, 1944, subject
     to the conditions, if any, laid down in the corresponding entry in column F
     (3) thereof. Column (2) of the Table referred to the description of goods
     and at sl. no. 3 is mentioned ammonia. Thus ammonia which was manufac-
     tured by the appellant out of raw naphtha came under the sweep of the
     said exemption notification. The condition for earning exemption from
     excise duty on ammonia as laid down in column (3), which is relevant for
     our present purpose, is Condition No. (ii) which provides that ammonia G
     should be used in the manufacture of fertilisers. It is not in dispute that


--   ammonia was captively consumed by the appellant in manufacturing molten
     urea. Therefore, the moot question is whether ammonia could be said to
     have been utilised for manufacturing any fertiliser. It is no doubt true that
     molten urea in its turn became an input for producing the final product, H
    572                   SUPREME COURT REPORTS                      (1997] 2 S.C.R.

A namely, melamine which admittedly was not a fertiliser. But as required by
    the express language of the notification we have to find out whether molten
    urea which was manufactured out of ammonia was a fertiliser or not. It is
    now well settled by a catena of decisions of this Court that for deciding
    whether an exemption notification gets attracted on the facts of a given
                                                                                         ...
    case, the express language of the exemption notification has to be given its
B   due effect. In this connection, we may refer to a decision of this Court to
    which our attention was invited by Shri Dave, learned Senior Counsel for
    the appellant. In Mis Hemraj Gordhandas v. H.H. Dave, Assistant Collector
    of Central Excise & Customs, Surat and Ors., (1978) 2 E.L.T. (J. 350)], a
    Constitution Bench of this Court speaking through Ramaswami, J. has
C   made the following pertinent observations in paragraph 5 of the Report :

            '' ......It is well estabilished that in a taxing statute there is no room
            for any intendment but regard must be had to the clear meaning
            of the words. The entire matter is governed wholly by the language
            of the notifaction. If the tax-payer is within the plain .terms of the
D           exemption it cannot be denied its benefit by calling in aid any
            supposed intention of the exempting authority. If such intention
            can be gathered from the construction of the words of the notifica-
            tion or by necessary implication therefrom, the matter is different
            but that is not the case here ...."
E
    In Steel Authority of India Ltd. v. Collector of Central Excise, (1996) 88
    E.L.T. (S.C.), one of us S.P. Bharucha, J. speaking for a Bench of two
    learned Judges, while dealing with an exemption notification in connection
    with raw naphtha laid down in paragraph 5 of the Report that due.
    emphasis had to be given to the clear language of the condition mentioned
F   in the exemption notification. Same view was reiterated in the case of
    Prince Khadi Woollen Handloom Prod. Coop. Ind/. Society v. Collector of
    Central Excise, (1966) 88 E.L.T. 637 (S.C.).

          In the light of the aforesaid settled legal position, we have, therefore,
G to confine ourselves to the express language employed by the exemption
    granting authority in its wisdom while it issued Notification No. 40 of 1985.
                                                                                         --
    As noted earlier, the notification clearly refers to the goods of description
    specified in column (2) of the Table annexed to the notification and falling
    under enumerated chapters of the Tariff Act. One of the chapters men-
H   tioned therein is Chapter 31. The said chapter deals with fertilisers. Note
      0UJ. Sl'ATE FERTILIZERS CO. v. COLLECTOR OF C.E. [S.B. MAJMUDAR. J.] 573


    No. 1 of the said chapter Jays down that Heading Nos. 31.02, 31.03, 31.04 A
    and 31.05 cover mineral or chemical fertilisers, even when they arc clearly
    not to be used as fertilisers. When we turn to Heading no. 31.02, Sub-head-
    ing No. 3102.00, we find the description of goods which refers to mineral
    or chemical fertilisers, nitrogenous. Extracts from Central Excise Tariff of
    India 1987-88 by Shri R.K. Jain show that so far as Chapter 31 dealing with B
    fertilisers is concerned, Heading No. 31.02, amongst others, applies also to
    urea, whether or not pure. The said entry is found in clause (2), sub-clause
    (A)(viii) of Note 2 under Heading No. 31.02. Sub-clause (D) of clause (2)
    of Notes under Heading No. 31.02 shows that liquid fertilisers consisting
    of the goods of sub-paragraph (A)(ii) or (viii) above are also included in
    the said heading. It, therefore, becomes obvious that liquid urea is con-
                                                                                 c
    sidered to be a chemical fertiliser. It is also not in dispute that the excise
    authorities themselves permitted clearance of chemical fertiliser, molten
    urea, under sub-Heading No. 31.02 of the said chapter. It must, therefore,
    be held that the view taken by the CEGAT that molten urea was not a
    fertiliser at all, is not connect. It is difficult to appreciate as to how the D
    CEGAT could come to that conclusion when it was not called upon to go
    into that question by either of the parties before it. The only contention
    before CEGAT was whether the term 'fertiliser' in each of the exemption
    notifications covered chemical fertiliser like molten urea or was confined
    only to soil fertiliser. There was no controversy between the parties as to E
    whether molten urea was chemical fertiliser or not. It was an admitted
    position between them that it was a chemical fertilizer exigible to excise
    duty under Tariff Item 31.02. Excise Authorities themselves accepted the
    classification to that effect from time to time and had raised no objection
    on that score at any time. It is, therefore, difficult to appreciate how the F
    CEGAT could persuade itself to hold by making out entirely a new and a
    third case for the parties to the effect that molten urea was not a fertiliser
    at all, specially in the absence of such a pleading of any party much less
    there being any evidence on the point.

           Consequently, on a conjoint reading of the express terms of Notifica- G
    tion No. 40 of 1985 and the relevant headings and sub-headings of Chapter
    31 of the Tariff Act, it must be held that the appellant by captively
    consuming ammonia had manufactured molten urea, a chemical fertiliser.
    It is difficult to appreciate the contention of Shri Bhat, learned Additional
•   Solicitor General that the spirit of the notification was to give the benefit H
    574                   SUPREME COURT REPORTS                  [1997) 2 S.C.R.

A only to soil fertilisers as final product which could be utilized by the
   cultivator in agriculture and with that end in view the notification was
   promulgated. On the express language of the notifications it is not possible
   for us to agr~e with this contention. If that was the view of Central
   Government while promulgating the said notifications, nothing prevented
B the Central Government from indicating that it was not seeking to cover
   the goods mentioned in Chapter Heading No. 31 or in not confining the
   said exemption notification only to soil fertilisers. In the absence of any
   such restrictive words in the said notification, the express and wide ter-
   minology 'fertiliser' employed in the notification cannot be curtailed by any
C process of reasoning about the supposed intention of the Central Govern-
   ment underlying the issuance of the said notification. It is also not possible
   to agree with the contention of Shri Bhat, learned Additional Solicitor
   General placing reliance on a decision of this Court in The Tata Oil Mills
   Co. Ltd. v. Collector of Central Excise, (1989) 43 E.L.T. 183 S.C. that the
D supposed object and purpose of exemption should also be kept in view. In
   paragraph 6 of the Report, Ranganathan, J. speaking: for a two-Member
   Bench of this Court has observed that in trying to understand the language
  .used by an exemption notification, one should keep in mind two important
   aspects : (a) object and purposes of the exemption and (b) the nature of
   the actual process involved in the manufacture of the commodity in relation
E to which exemption was granted. It must be kept in view that the object
   and purpose of the exemption has to be culled out from the express
   language of the notification. If the express language of the notification does
   not indicate a contrary intention conveyed by the wide words employed by
   the notification, full effect has to be given to the wide terminology
F employed by the notification otherwise the result would be that in trying
   to search for the supposed intention underlying the notification, the inten-
    tion flowing from the express language of the notification would get stul-
   tified or truncated. To recapitulate, on the express language of the
    notification an inevitable conclusion follows that the Central Government
G meant to exempt excise duty on the captively consumed ammonia if it had
    resulted in the manufacture of fertilisers and as it had resulted in the
    manufacture of molten urea which by itself was a chemical fertiliser
    covered by Chapter 31 expressly mentioned in the said notification, the
    scope and ambit of the said notification could not be curtailed on the basis
H of the supposed latent intention underlying the said notification, namely,        o
  GUJ. SfATE FERTILIZERS CO. v. COLLECTOR OF C.E. [S.B. MAJMUDAR, J.] 575


 that only soil fertiliser was required to be produced by the. captive con- A
sumption of ammonia and not any other type of fertiliser like molten urea
which was a chemical fertiliser. If the contention of Shri Bhat, learned
Additional Solicitor General, is accepted, Condition No. 2 as laid down by
the said notification will have to be redrafted by adding the restrictive
words 'soil fertiliser' instead of the wide word 'fertiliser' as employed by B
the exemption granting authority in its wisdom. It is obvious that the term
'fertiliser' is genus which may consist of various species of fertilisers,
namely chemical fertiliser, soil fertiliser, animal or vegetable fertilisers, as
seen from description of various types of fertilisers found in Chapter 31 of
the Tariff. It has also to be noted that the chapter notes of the Chapters C
referred to by the said notification have to be read as a part and parcel of
the said notification. In this connection, we may usefully refer to a decision
of this Court is Fenner (India) Ltd. v. Collector of Central Excise, Madurai,
(1995) 77 E.L.T. 8 S.C. wherein one of us S.P. Bharucha, J. speaking for
a two-Member Bench of this Court observed that the Tariff Schedule
contained rules for its interpretation which required that for legal purposes D
classification would be determined on terms of the headings and any
relative Section or Chapter Notes. As we have already seen Note to
Chapter 31 dealing with fertilisers clearly that Heading No. 31.02 would
cover mineral or chemical fertilisers even when they are not used as
fertilisers. Therefore, it must be held that if molten urea as covered by E
Heading No. 31.02 was not to be used as fertiliser and on the other hand
was utilised as an input for producing melamine, still it would remain a
chemical fertiliser within the sweep of Chapter 31. If it remained a fer-
tiliser, it could not be said that ammonia which was captively consumed
for manufacturing molten urea had not satisfied the condition for earning F
total exemption under Notification No. 40 of 1985 as ammonia had resulted
in the manufacture of molten urea being a fertiliser.

      That takes us to the consideration of the main submission canvassed
by Shri Bhat, learned Additional Solicitor General, that the CEGAT had
taken the view that ammonia which was utilised by way of captive con- G
sumption by the appellant for manufacture of molten urea was subjected
to a continuous process of manufacturing which had resulted in the end
product melamine which was admittedly not a fertiliser. That may be so.
However, the question remains whether ammonia could be said to have
been used in the manufacture of molten urea which was a chemical H
    576                    SUPREME COURT REPORTS                    [1997] 2 S.C.R.

A   fertiliser. We have to recall that molten urea itself is an excisable com-
    modity even though it might have been exempted from payment of excise
    duty by a notification issued by the Central Government. But for the said
    exemption notification molten urea would have been required to bear the
    full duty. As seen earlier, it has been classified as a chemical fertiliser under
    Heading 31.02 by the authorities themselves. For levying excise duty on
B
    such a commodity, namely, molten urea, if the department takes the view
    that it is to be subjected to excise duty as a chemical fertiliser on its
    clearance even for captive consumption, it is difficult to appreciate the
    contrary stand of the very same authority that it would cease to be a
    fertiliser for the purpose of exemption Notification No. 40 of 1985, even
c    though ammonia results in the manufacture of the same excisable item,
     namely, molten urea. Such a stand cannot be permitted to be adopted by
     the department, as it would amount to blowing hot and cold at the same
     time. If molten urea is treated to be an excisable item under Heading 31.02
     as a· chemical fertiliser, it has to be treated on the same lines while
D    construing the sweep of exemption Notification No. 40 of 1985 which
     expressly refers to Chapter 31 amongst others. In short, molten urea must
     be treated to be a fertiliser for the purpose of its exigibility to duty under
     Heading 31.02 of the Tariff Act and simultaneously also for the purpose
     of exemption Notification No. 40 of 1985. It is also easy to visualise that if
E    molten urea would have been sold by the appellant in outside market
     instead of being captively consumed further for the manufacture of
     melamine, it would have borne full duty subject to exemption notification,
     if any, under Tariff Item 31.02. Only because it was captively consumed in
     the onward process of manufacture which had resulted into melamine, it
     could not be said that the final product for the purpose of Excise Act had
F    not emerged in the shape of molten urea by the captive consumption of
     ammoma.

          Shri Bhat, for the Revenue, next contended that the term 'fertiliser'
  as employed by the notification must be given its ordinary meaning that is
G accepted in common parlance. He submitted that to a common man
  fertiliser would denote only a soil fertiliser which could be utilised by the
  agriculturist for improving his agricultural yield. It is difficult to appreciate
  this contention. As noted earlier, the notification in terms seeks to encom·
  pass in its coverage goods of the description falling under Chapters 25, 27,
H 28, 29 and 31 or 32 of the Tariff Act. Whe~ there is an express reference
   GUJ. STATE FERTILIZERS CO. v. COLLECTORO~C.E. [S.B. MAJMUDAR,J.]577


in the notification covering the goods, amongst others, those referred to in     A
Chapter 31 and as Chapter 31 in its turn includes chemical fertilisers, it is
difficult to appreciate how despite such an express reference in the
notification, the supposed common parlance test can be adopted. In fact,
such was not the contention of the department even before the CEGAT
or for that matter before the Assistant Collector or the Collector (Ap-          B
peals). The only stand of the department was that exemption Notification
No. 40 of 1985 would not apply to ammonia as it had resulted into the final
product melamine which was not a fertiliser and the intermediate product
of molten urea was utilised in a continuous process of manufacture and,
therefore, it must be held that ammonia was captively consumed for the
purpose of manufacturing the ultimate product of melamine and not                C
molten urea. On the express language of the notifications, in question, it is
not possible to agree with the contention of Shri Bhat, learned Additional
Solicitor General that the term 'fertiliser' employed by the said notification
must be understood by adopting the common parlance test to be referred
to soil fertiliser only.                                                         D

       As a result of the aforesaid discussion, it must be held that the
Collector of Central Excise (Appeals) as well as the CEGAT had patently
erred in law in taking the view that Notification No. 40 of 1985 did not
cover captively consumed ammonia utilised by the appellant as input for          E
manufacturing molten urea. It must also be held that Notification No. 75
of 1984 applied to raw naphtha utilised by the appellant for manufacturing
ammonia and molten urea. The condition for earning concessional rate of
duty under Notification No. 75 of 1984 on raw naphtha and total exemption
from duty as per Notification No. 40 of 1985 on ammonia must be held to
have been fully satisfied by the appellant. Hence show cause notices were        F
clearly incompetent and were liable to be quashed and were rightly vacated
by the Assistant Collector.

      In view of the aforesaid conclusion, it is not necessary to go into the
alternative contention canvassed by Shri Dave, learned Senior Counsel for        G
the appellant, about the applicability of Notification No. 217 of 1986 dated
2.4.1986 as amended frcm1 time to time.

     In the result, these appeals succeed and are allowed. The common
judgment and order rendered by the CEGAT in all the six appeals as               H
    578                  SUPREME COURT REPORTS                  [1997] 2 S.C.R.

A confirming in its turn the appellate orders passed by the Collector of
    Central Excise (Appeals) are quashed and set aside and instead six orders
    passed by the Assistant Collector, Central Excise, Vadodara, between
    12.11.1986 and February, 1989 are confirmed. As a result of our decision,
    if the appellant becomes entitled to claim any refund of excise duty paid
B   by it pursuant to the impugned order of the CEGAT as confirming the
    orders of Collector of Central Excise (Appeals), such refund claim, if any,
    submitted by the appellant before the appropriate authorities will have to
    be decided in accordance with law. In the facts and circumstances of the
    case, there will be no order as to costs.

C R.P.                                                       Appeals allowed.