Customs, Excise and Gold Tribunal - Delhi
Indian Oxygen Ltd. vs Collector Of Central Excise on 2 August, 1995
Equivalent citations: 1995(80)ELT573(TRI-DEL)
ORDER S.L. Peeran, Member (J)
1. The appellants are aggrieved with the order-in-original dated 29-12-1987 passed by the Collector of Central Excise & Customs Bhubaneswar. By this order, the ld. Collector has confirmed duty demand of Rs. 17,297.28 on 654.2 FC of Liquid Oxygen Explosive, valued at Rs. 1,15,315.26 manufactured and issued by the assessee to M/s. Orissa Mining Corpn. during the period from 1-3-1986 to 31-5-1986 under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A of the Central Excises & Salt Act, 1944. For the contravention of the various provisions of the Central Excise Rules, the Collector has imposed a penalty of Rs. 17,000/- under Rule 173Q of the Central Excise Rules, 1944. The facts of the case are that the assessee had obtained L-4 Licence on 30-5-1986 for manufacture of Liquid Oxygen Explosives, though they started manufacturing liquid oxygen explosives from earlier period. During the months of March, April and May, 1986, they manufactured and cleared 280.4 FC, 216.0 FC and 157.8 FC of liquid oxygen explosives and cleared the same to M/s. Orissa Mining Corpn. The department proceeds on the ground that the liquid oxygen explosive is a manufactured product attracting Central Excise Duty under Chapter 36 and is chargeable to duty @ 15% ad valorem. The department also relied on the assessee's letter dated 8-9-1986, wherein they have claimed the exemption from duty under Notification No. 179/77, dated 18-6-1977 on the ground that the same was manufactured without the aid of power. The ld. Collector in his order has held that the assessee is aware from 1-3-1986 about liquid oxygen explosives being not exempted from duty and therefore, they were required to have taken licence and had held that they have suppressed the facts of production and also not recording the details in the statutory records, and by not submitting the price list and classification list, and also not clearing the goods under cover of gate pass and on payment of duty in P.L.A. The ld. Collector has also held that they were not entitled to the benefit of Modvat credit, they had not filed any declaration.
The appellants did not appear for hearing but instead sought the case to be decided on merits. The appellants' stand before the Collector is that they have been clearing the Liquid Oxygen Explosives for many year without payment of duty, since the products were not exigible goods. It was their plea that no manufacturing process is undertaken for the production of liquid oxygen explosives. The soaking of jute stick powder in bags is only a means for blasting at the site. They had pointed out that there is no specified premises for the soaking of jute stick powder bags in the liquid oxygen. The actual premises where blasting was done falls quite often under different Central Excise jurisdictions far apart from their various depots including Deitari They have pleaded that the jute stick powder bags soaked in liquid oxygen have short shelf life. That they are required to be used at a specified time and place and the process of soaking bags to be arranged accordingly. Therefore, they had stated that the item cannot be considered as marketable item and levy of excise duty does not arise. They had further contended that Liquid Oxygen is not manufactured exigible goods falling within the meaning of Chapter 36 of the Tariff Act under the description of Prepared Explosives of Central Excise Tariff Act, 1985 read with Section 2(f) of Central Excises & Salt Act, 1944. They have stated that when the Finance Bill for 1986-87 was passed, they were little bit confused with the description 'Prepared Explosives' and as abundant precaution they voluntarily submitted an application for Central Excise Licence on 20-5-1986, which was granted on 30-5-1986. Therefore, they had no intention to suppress any fact before Government authorities. They have submitted that the material item is not dutiable as per Central Excise Act, and that they had discharged all the duty liabilities arising out of despatches made from Deitari from 1-3-1986 to 21-8-1986 by depositing the money through T.R. 6 Challan No 6, dated 12-11-1986 and thereby they have proved their bona fides. That considering the withdrawal of Notification No. 179/77 as was applicable to LOX and their contention that LOX was not manufactured as per Section 2(f) of the Central Excises & Salt Act, 1944, could be gathered from Govt. of India issuing exemption Notification No. 387/86-C.E., dated 22-8-1986. Therefore, they have submitted that the alleged purported notice to show-cause for the material period from 1-3-1986 to 31-5-1986 is not enforceable and they have not mis-represented any facts and therefore the demands were required to be dropped.
2. We have heard ld. JDR, Shri J.P. Singh. Ld. DR submitted that the soaking of the jute stick powder in bags is only a means for blasting at the site. They were manufacturing liquid oxygen exmplosives which was clearly classifiable under Chapter 36 and the same was not exempted under Notification No. 179/77, dated 18-6-1977. He submitted that the item is classifiable under Heading 36.01 and in this context, he relied on the ruling rendered in the case of Associated Cement Co. Ltd. v. Collector of Central Excise as reported in 1989 (40) E.L.T. 159, wherein the Tribunal has held that ANFO obtained by mixing together 'Ammonium nitrate and fuel oil' is classifiable as 'prepared explosives' under Chapter 36 of Central Excise Tariff. While holding this view, the Tribunal has relied on the ruling of Singareni Collieries Co. Ltd. v. CCE as reported in 1988 (37) E.L.T. 361. In this case of Singareni Collieries Co. Ltd., the Tribunal has held that process of Mixing of 'Ammonium nitrate and fuel oil' results in emergence of ANFO, a nigh explosive product, having its own distinctive name, character and use and therefore, it satisfied the definition of manufacture of goods as per Section 2(f) of Central Excises & Salt Act, 1944. The ld. DR also relied on the ruling rendered in the case of Kersoram Cements v. CCE as reported in 1989 (40) E.L.T. 413 wherein the Tribunal has held that ANFO is a prepared explosive, and drew strength from the Explanatory Notes to the Harmonised Coding System of Customs Cooperation Council and hence it was held to be classifiable under Chapter 36 of the Central Excise Tariff Act, 1985. The Tribunal however remanded the case to the lower authoirities to consider the plea of Modvat as claimed by the appellants, in that case.
3. We have carefully considered the submissions made by both the sides and have perused the judgments cited by ld. DR. The appellants had been clearing the goods on payment of duty and the goods were admittedly sold to Orissa Mining Corpn. The Liquid Oxygen Explosives has a specific name, use and character. They are known in the market and they are also traded. The plea of the appellant that the soaking of the jute stick powder in bags does not have shelf life, has no connection to the product in issue. The question before us is the exigibility of the product liquid oxygen and not about the process of blasting. This liquid oxygen is utilised as a product in the process of blasting. The liquid oxygen is a separate commodity and we are not concerned with the question of manner and use before blasting. The liquid oxygen has to be considered as goods within the meaning of Section 2(f) of the Central Excises & Salt Act. Therefore, the Collector was justified in holding the item as goods. The appellants have contended that there has been no suppression of facts and they were paying duty in respect of clearances made from their unit at Daitari. They have also claimed Modvat. In the case of Kesoram Cements, the Tribunal remanded the case to the lower authorities to consider the case of Modvat. Therefore, in the interest of justice, it is necessary to remand the case as there was no suppression for invoking larger period. They are also entitled to Modvat. The matter is remanded to the lower authorities for de novo consideration. In that view of the matter, we hold that the impugned goods are chargeable to duty under Chapter Heading 36.01 of the Central Excise Tariff Act, 1985 and that the question of limitation and claim of Modvat is remanded to the lower authorities for de novo consideration.