Customs, Excise and Gold Tribunal - Delhi
Associated Cement Co. Ltd. vs Collector Of Central Excise on 31 July, 1996
Equivalent citations: 1996(87)ELT129(TRI-DEL)
ORDER A.C.C. Unni, Member (J)
1. The captioned appeal is directed against the order-in-original of Additional Collector dated 26-3-1990 by which the Additional Collector confirmed the demand of duty of Rs. 1,07,150.37 and a penalty of Rs. 50,000/- on the appellants.
2. Brief facts relevant for the purposes of considering the present appeal are:
The appellants are engaged in the manufacture of cement falling under Chapter Heading 2502.02 of the Central Excise Tariff Act. The raw material required for manufacture of cement, namely, lime stone is obtained from the appellants' mines at Sindola, 8 to 9 km. from their cement factory. For extraction of lime stone from mines, the appellants use a mixture of Ammonium Nitrate and Fuel Oil (ANFO for short) as an explosive in the proportion of 94 : 6. ANFO falls under Chapter Heading 36.02. The materials are obtained by the appellants from the market and the mixing is done at the mines before they are used as explosives. Appellants also hold a licence under the Indian Explosives Act, 1884.
3. On 25-7-1988 appellants were informed by a letter by the Inspector of Central Excise stating that ANFO used in the mines by the appellants were classifiable under Chapter Heading 36 and as such was chargeable to duty at the rate of 20% adv. By their reply dated 19-8-1988, the appellants contended that excise duty was not payable on ANFO since the ingredients thereof were already duty paid. The department sent a show cause notice on 7-12-1989 alleging that the appellants had consumed/cleared during the period 1986 to 1988 ANFO chargeable to duty to the extent of Rs. 1,07,150.37 without obtaining Central Excise licence under Rule 174 and without filing classification list or price list and without following the procedure under Central Excise Law. The SCN also invoked the extended period of limitation under Proviso to Section 11A of the Central Excises & Salt Act, 1944. By reply dated 17-12-1989 the appellants denied the allegation of suppression of facts. In the adjudication which followed, the appellants made elaborate submissions before the Additional Collector and denied the charges contained in the show cause notice and also denied the liability to pay duty, as demanded. The appellants contended that mixing of Ammonium Nitrate and Diesel Oil did not amount to manufacture, that mixing was done without the use of any electricity or other source of power; that the mixture did not result in any chemical reaction and it remained a mixture and did not become a chemical compound; that ANFO did not come within the classification of "Prepared Explosives" under Chapter Heading 3602.00; that Notification No. 167/86, dated 1-3-1986 provided complete exemption for products produced without the aid of power which included their product; that even otherwise their product was fully exempted from duty by virtue of Notification No. 281/86, dated 24-4-1986, since the mixture was prepared in the mines itself and not in any other place; that ANFO was not "goods" within the meaning of Section 2 inasmuch as it cannot be bought and sold in the market because of its very short shelf life; and that there is no suppression or clandestine operation on their part justifying the invoking of the extended time limit of five years or for levying penalty on them. The Additional Collector in his order found that during the relevant period "Prepared Explosives" were covered under Chapter Heading 3602.00; that according to HSN at pages 504 and 505 explosives consisting of mixtures based on Ammonium Nitrate (which included ANFO) will come under Chapter Heading "Prepared Explosives". The Additional Collector also found that the issue was covered by the Tribunal's decision in Singareni Collieries Co. Ltd v. Collector of Central Excise, reported in 1988 (37) E.L.T. 361, in which the meaning of the expression "Prepared Explosives" was elaborately considered. It was held in that order that there was no definition of "Prepared Explosives" in the Central Excise Tariff and for understanding its meaning HSN could be looked into. The HSN description "Prepared Explosives" cover ANFO, being a mixture based on Ammonium Nitrate; that Notification No. 167/86, relied upon by the appellants exempted specified goods without the aid of power falling under Heading 3602 besides other goods. The said Notification was amended by Notification No. 12/87, dated 23-1-1987 which came into effect from 10-2-1987. By this amendment only Heading No. 3604 was included in the Notification. While during the period 1-3-1986 to 9-2-1987 "Prepared Explosives" were covered under Heading 3601 which was not included in the Notification No. 167/86, dated 1-3-1986 from 10-2-1987 "Prepared Explosives" were covered under Heading 3602. Since this Heading was not covered by the Notification No. 167/86, as amended by Notification No. 12/87, dated 23-1- 1987 which came into effect from 10-2-1987 "Prepared Explosives" were not covered by general exemption Notification No. 167/86 after 1-3-1986. The adjudicating officer, therefore, held that ANFO was not entitled for any exemption under Notification No. 167/86 during the entire period referred to in the show cause notice. The Additional Collector, therefore, found that the process by which ANFO was produced by the appellants amounted to a process of manufacture. Relying again on the Tribunal's decision in the case of M/s. Singareni Collieries Co. Ltd. (supra), the Additional Collector found that even though ANFO is not marketed, it is a marketable commodity. Further, the impugned order found that the appellants had neither informed the Excise Department about the manufacture of the product nor had they filed any classification list, price list or maintained records, required under the Central Excise Law.
4. In the grounds of appeal before us, appellants have reiterated the submissions made by them before the adjudicating officer and contended that the Excise Authorities themselves became aware of the excisability of the product only after the Tribunal's decision in M/s. Singareni Collieries Co. Ltd. (supra) in 1988. The appellants had been engaged in the activity of making ANFO for a number of years and had taken necessary licence under the Explosives Act. These facts were known to everybody and there was no question of suppression of any fact. Further, the product was not subject to any duty under the erstwhile tariff. If from 1-3-1986, under the new tariff duty had become leviable, it was for the local officers of the Department to make a survey to bring the said product under the excise net which was not done. In any case, the appellants had no dishonest motive or deliberate intention to evade duty, hence neither the extended period of limitation was applicable nor imposition of heavy penalty justified. The appellants, therefore, prayed for the setting aside of the impugned order.
5. None appeared before us for the appellants. The appellants had filed some further written arguments reiterating their contentions and submissions filed earlier. The Departmental Representative, Shri Sanjeev Sachdeva, opposing the appeal contended that the Additional Collector's order had discussed and disposed of all the contentions of the appellants, namely, the process of manufacture of the product, the nature of the product and it being excisable goods, applicability of exemption notification No. 167/86, the invoking of the extended period of limitation for issuing a show cause notice and the liability for penalty. On these counts, the impugned order had given clear findings which, according to him, were correct and sustainable.
6. We have carefully considered the submissions made and perused the records.
7. On the question whether mixing of Ammonium Nitrate with Diesel Oil in the proportion referred to aforesaid would amount to manufacture within the meaning of Section 2, the Additional Collector has clearly found that ANFO came within the meaning of "Prepared Explosive" under Chapter 3602.00. The Tribunal in the case of M/s. Singareni Collieries Co. Ltd. (supra) had clearly found that in the absence of any definition of the term in the Central Excise Tariff Act, HSN could be relied upon to understand the scope of the said term. Since HSN clearly included mixtures based on Ammonium Nitrate within the scope of "Prepared Explosives" vide pages 504 and 505, we find no reason for differing from the findings of the Additional Collector based on the earlier Tribunal's decision in the case of M/s. Singareni Collieries Co. Ltd. (supra). On the question whether the mixing of Ammonium Nitrate with Diesel Oil within the mines and without the use of power were covered by the Exemption Notification No. 167/86, the adjudicating officer has clearly found that during the period from 1-3-1986 onwards "Prepared Explosives" were not covered by the said Notification. Appellants have not brought anything on record to show that this was not the position. We further find that the earlier Tribunal's decision in the case of M/s. Singareni Collieries Co. Ltd. (supra), provides a complete answer to all the points raised in appeal. In view of the above, we find no merit in the present appeal and the same is accordingly rejected and the impugned order confirmed.