Customs, Excise and Gold Tribunal - Delhi
Kesoram Cement vs Collector Of C.E. on 2 February, 1988
Equivalent citations: 1989(40)ELT413(TRI-DEL)
ORDER V.P. Gulati, Member (T)
1. This is an appeal against the order of the Collector of Central Excise, Hyderabad. Brief facts of the case are that the appellants manufactured the product described as 'ANFO' which is manufactured by mixing Ammonium Nitrate and diesel oil/furnace oil without obtaining the Central Excise licence and utilised the same captively without payment of Central Excise duty. A duty of Rs. 1,13,401.33 paise has been demanded by the lower authority in respect of ANFO manufactured and utilised during the period 1.3.86 to 31.10.86 holding the goods to be assessable under Chapter Heading 3601.00 treating the same to be prepared explosives.
2. The learned advocate for the appellants pleaded that ANFO is nothing but a simple mixture of Ammonium nitrate and fuel oil. He pleaded that the appellants purchased duty paid prilled Ammonium nitrate assessable under Tariff Heading 68, and mixed 100 units of Ammonium Nitrate with 6 units of furnace oil and a simple mixture thus obtained is what constituted ANFO. He conceded that the mixture so obtained was an explosive, but pleaded that Ammonium Nitrate itself is also an explosive and the mixing of the diesel oil etc. did not bring into existence any new product. He pleaded that in no other Collectorate, the duty was being charged on ANFO. He pointed out that ANFO being manufactured by the appellants was for captive consumption and was not marketable as such. He pleaded that in case it was held against the appellants that ANFO was chargeable to duty as a prepared explosive, the appellants should be given the benefit of Modvat Rules under Rule 57-A, notwithstanding the fact the appellants had not applied for the benefit of MODVAT Rules in terms of Rule 57-A earlier. He pleaded that the appellants had all the records available for verification as to the inputs utilised for the purpose of the Modvat Rules. He pleaded that the appellants were under the bona-fide impression and belief that no duty was chargeable on the appellants' goods. Otherwise, they would have applied for the benefit of Modvat available in respect of these goods and the resultant levy of duty payable would have been very small. He pleaded that non-compliance with some of the procedural aspects of the Rules for availment of the Modvat under Rule 57-A should not act as a bar for the purpose.
3. The learned JDR for the appellants Sh. A.S. Sunder Rajan pleaded that the Central Excise Tariff was based on the harmonious system of coding of the Harmonised Commodity Description & Coding System of Customs Co-operation Council and it would be relevant to refer to the Explanatory Notes to this for the purpose of understanding the scope of the Tariff entries under Chapter 36. He pointed out that in the Explanatory Notes under Heading 36.02, prepared explosives have been specifically covered and ANFO figures under that heading. He pleaded that notwithstanding the fact that Ammonium Nitrate with fuel oil was in the nature of prepared explosive which is a product known differently from Ammonium Nitrate in the trade. In this connection, he stated that internationally also, as seen from the Explanatory Notes to Harmonised coding system, ANFO was recognised as a product apart from Ammonium Nitrate as a prepared explosive.
4. We observe that it is not disputed that the appellants use the explosive grade Ammonium Nitrate prills and mix there with small quantities of fuel oil to produce a mixture which serves the purpose of blasting the rocks. No doubt the process of manufacture is a simple one. It is, however, seen from the order of the lower authority who has cited from the Condensed Chemical Dictionary, 9th Edition published by Van Nostrand Reinhold Company revised by Gessner G. Hawley the prills are described as under :
"Prill - small round or accular aggregates of a material usually a fertilizer, that are artificially prepared. In the explosives field prills - and - oil consists of 94% coarse porous ammonium nitrate prills and 6% fuel oil...".
It is seen prills are porous. The oil obviously, is absorbed in the porous prills to some extent, thus changing the character of the ammonium nitrate as an explosive. It appears that the use of the Ammonium Nitrate in a mixture with fuel is a standard procedure used for blasting purposes. As mentioned by the learned departmental representative, ANFO though being a simple mixture is recognised as a product apart from Ammonium Nitrate and is considered as a prepared explosive as evidenced by the Explanatory Notes to the Harmonised Coding System of Customs Co-operation Council. Since prepared explosives are specifically covered under the Tariff, irrespective of the fact that the ANFO is prepared by a simple mixture of prills and the oil, it has to be considered for the purpose of the Tariff as an item falling under Chapter 36 as it answers to the specific description of prepared explosives for the purpose of Central Excise levy. The appellants' grievance is also that the lower authority has not considered their plea for Modvat relief in terms of Rule 57-A. We observe that the lower authority has not given any findings on their this plea. In the circumstances, their this plea for Modvat in terms of Provision 57-A and other provisions in this regard has to be considered. The facts regarding the eligibility of the appellants to the benefit of Modvat under Rule 57-A etc. are not available on record for giving our findings on this plea of the appellants. We, therefore, find it a fit case for remand for this limited purpose. We, in view of the above, upheld the order of levy of duty on ANFO and remand the case to the lower authority for consideration of the appellants' plea for benefit of Modvat in terms of Rule 57-A and other provisions of the law in that regard.