TMI Blog2011 (4) TMI 1011X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal in I.D.L. Chemicals Ltd. v. Collector of Central Excise (1993 - TMI - 82628 - CEGAT, NEW DELHI ) as well the decision of the Larger Bench of the Tribunal in Supreme Chemical Works v. Collector of C.Ex. Jaipur (2000 -TMI - 48825 - CEGAT, NEW DELHI) till the same came to be withdrawn by Circular No. 848/06/2007-CX., dated 18th April. 2007. In the circumstances, in the light of the law laid down by the Apex Court in the above referred decisions, it was not permissible to the respondents to act contrary to the Circular dated 19th July, 1989 till the same came to be withdrawn on 18th April, 2007. - Special Civil Application No. 15713 of 2003, - - - Dated:- 19-4-2011 - Harsha Devani and R.M. Chhaya, JJ. Shri Paresh M. Dave, Advocate, for the Petitioner. S/Shri Gaurang H. Bhatt and Purvish J. Malkan, Standing Counsels, for the Respondent. [Judgment per : Harsha Devani, J. (Oral)]. This petition under Article 226 of the Constitution of India has been filed with the following substantive prayers :- (1) That Your Lordships may he pleased to issue a Writ of Mandamus or a writ in the nature of Mandamus or any other appropriate writ, direction or order, qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise Tariff Act. The petitioners obtain Ammonium Nitrate Melt, a chemical having composition of NH4NO3 and remove by process evaporation/prilling extra moisture from the Ammonium Nitrate Melt which according to the petitioners does not result in any change in the chemical composition at all of he duty paid Ammonium Nitrate Melt purchased by the petitioners from the open market. Prilled Ammonium Nitrate is used for mining and stone quarrying industries for blasting purposes although, by itself Prilled Ammonium Nitrate is not an explosive but it acquires capability of exploding in conjunction with some reacting agent. It is the case of the petitioners that as a result of removal of extra moisture from Ammonium Nitrate Melt by evaporation/prilling process, no new product with distinctive name, use or characteristics comes into existence. 3. The Tribunal in the case of Collector of Central Excise, Aurangabad v. Anil Chemicals (P) Ltd., Aurangabad, 1985 (21) E.L.T. 889, held that mere improving the quality and purity of Ammonium Nitrate Melt was not manufacture of new or different goods and accordingly. Prilled Ammonium Nitrate was not excisable goods liable to, excise duty once ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trate Flakes on the other hand, were having different physical characteristics as well as commercial names and applications. Even after the said decision, the petitioners or any other similarly situated units who were obtaining Prilled Ammonium Nitrate from Ammonium Nitrate Melt were not directed by the Central Excise authorities to obtain registration as manufacturer and to pay excise duties on Prilled Ammonium Nitrate obtained from Ammonium Nitrate Melt. It is the case of the petitioners that the trade as well as the excise authorities had accepted that the issue decided by the Tribunal in the case of M/s. I.D.L. Chemicals Ltd. v. Collector of Central Excise (supra) was different and, therefore, the decision of the Tribunal had not application to the activities of obtaining Prilled Ammonium Nitrate from Ammonium Nitrate Melt. The Circular dated 19th July, 1989 issued by the Board was also not withdrawn by the Board or the Government. The petitioner Company continued to remove Prilled Ammonium Nitrate from its factory in the normal commercial way, that is, under the bills and challans but without paying excise duty thereon. Subsequently, in another case of Supreme Chemical Works, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry by the Central Excise authorities, the petitioner company was not directed to pay duty on Prilled Ammonium Nitrate or to obtain excise registration for that activity. The petitioners thereafter filed a declaration on 17th January, 2003 before the Assistant Commissioner of Central Excise declaring therein that the process undertaken by the petitioner Company was not manufacture and the product in question was not excisable, to which there was no direction or response from the Central Excise authorities to the petitioners for paying excise duty on Prilled Ammonium Nitrate or for obtaining Central Excise registration for the process of obtaining Prilled Ammonium Nitrate from duty paid Ammonium Nitrate Melt. On 31st March, 2003, Preventive Officers of the Central Excise Department from Vapi visited the petitioners unit and seized records and documents lying in the factory under panchnama dated 31st March, 2003. Thereafter, the petitioner Company filed a declaration under Rule 9 of the Rules on 14th May, 2003 with the Assistant Commissioner of Central Excise once again declaring that the process undertaken by the petitioners was not manufacture and Prilled Ammonium Nitrate was not e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relief in terms of para 9(FF) with a clarification that this interim relief is confined to the stay off he impugned notice dated 1-11-2003 at Annexure L to the petition and that this interim relief does not extend to any demand for the period after 11-6-2003. 8. Mr. Paresh Dave, learned advocate appearing on behalf of the petitioners, at the outset submitted that the relief prayed for vide paragraph 9(A) would not survive inasmuch as the seized records and documents have already been returned to the petitioners. 8.1 Mr. Dave further submitted that insofar as the issue as to whether the process of prilling amounts to manufacture or not, the Tribunal in the case of Collector of Central Excise, Aurangabad v. Anil Chemicals (P) Ltd., Aurangabad, 1985 (21) E.L.T. 889, alter considering the process in detail, had held that the same does not amount lo manufacture which position had been accepted by the Department, it was submitted that the Central Board of Excise and Customs had vide Circular No. 44 of 1989 clarified that the conversion of Ammonium Nitrate Melt into Ammonium Nitrate Prilled is not a process of manufacture since Prilled Ammonium Nitrate is not different from Ammon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te obtained from Ammonium Nitrate by the petitioner company was a different product and it was recognised as well as brought and sold as a distinctive good in the trade and as such it was not open to the respondent authorities to treat Prilled Ammonium Nitrate as exciseable goods. On behalf of the petitioners it was further contended that in the case of IDL, Chemicals Ltd. (supra) and Supreme Chemical Works (supra) the process or the product involved were not the same as in the present case. Referring to the said decisions, it was submitted that it is apparent that neither of them deals with a process by which concentration of Prilled Ammonium Nitrate was increased without any change in the chemical or physical properties of Ammonium Nitrate. Therefore, these decisions have no application of whatsoever nature to the issue as to whether prilling/evaporation of moisture of Ammonium Nitrate Melt was manufacture under the Central Excise law or not. According to the learned advocate, the observation made in para 16 of the Larger Bench decision in the case of Supreme Chemical Works (supra) was clearly per incuriam as the issue decided in the case of Anil Chemicals Pvt. Ltd. (supra) was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il Chemicals (P) Ltd., it was pointed out that in the said case, the Prilled Ammonium Nitrate which was a form of Ammonium Nitrate having higher purity of 99.5% was obtained from Ammonium Nitrate Melt solution having 75%-82% content and it was in the light of the said facts that the Tribunal held that there is no authority whatsoever for saying that concentrating a product will by that fact alone produce a different product. It may, perhaps, be said that there has been processing and a manufacture but if the result is the production of the same good, even of higher purity, then the manufacture/processing cannot have the effect of making the purer product liable by that fact alone to excise duty. The Tribunal was of the view that a manufacture under the Central Excises and Salt Act is required to be manufacture that creates an excisable good . A manufacture that does not have this effect is of no interest to central excise. It was submitted that in the case of Supreme Chemical Works (supra), the crude lumps of Ammonium Nitrate. Calcium Ammonium Nitrate and Ammonium Nitrate Melt were different in nature from the final product namely Ammonium Nitrate which was produced as a result of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting attention to the show-cause notice, it was submitted that the respondents have sought to invoke the larger period of limitation and that in the facts and circumstances of the case, it is apparent that the same could not have been invoked as the ingredients of the proviso to Section 11A of the Act would not be satisfied. It was, accordingly, submitted that the impugned show-cause notice deserves to be quashed and set aside and the petitioners are entitled to the reliefs prayed for in the petition as well consequential reliefs. 9. Opposing the petition. Mr. Gaurang Bhatt, learned standing counsel appearing on behalf of the respondents submitted that in the light of the decision of the Tribunal in the case of Supreme Chemicals Works, the decision of the Tribunal in the case of Collector of Central Excise, Aurangabad v. Anil Chemicals (P) Ltd. no longer held the field and as such, the revenue authorities were bound by the subsequent decision of the Tribunal. It was submitted that in view of the subsequent decision of the Tribunal in the case of Supreme Chemical Works, the Circular issued by the Board on 19th July, 1989, became redundant, non-est and non-operative and as such rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nitrate Flakes amounts to manufacture as the Ammonium Nitrate Flakes emerging after processing of the melt undeniably had different physical characteristics and commercial name, it was submitted that in the process adopted by the petitioners also, the Ammonium Nitrate Melt was converted into a product having different physical characteristics and different commercial name inasmuch as the product was in a solid form and was commercially known as Prilled Ammonium Nitrate instead of Ammonium Nitrate Melt from which it was obtained. It was submitted that in the circumstances, the issue involved in the case of the petitioners is directly covered by the subsequent decisions of the Tribunal and as such, the prilling carried out by the petitioners on Ammonium Nitrate Melt to obtain Prilled Ammonium Nitrate would amount to manufacture and as such, there is no warrant for holding that the process adopted by the petitioners does not amount to manufacture. It was submitted that in the circumstances, the respondent No. 2 was Justified in issuing the show-cause notice in question and that the product of the petitioners is liable to central excise duty in respect of the manufacturing activity ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the petitioners were not directed to pay duly on the Prilled Ammonium Nitrate or to obtain Central Excise registration for that activity. Thereafter, the Preventive Officers of the Central Excise Department visited the petitioners unit on 31st March, 2003 and seized records and documents lying in the factory after which quite a lot of correspondence ensued on the subject of excisability of Prilled Ammonium Nitrate. It was only after the Superintendent of Central Excise (Prev.) visited the petitioners factory on 11th June, 2003. that the petitioners were informed to obtain Central Excise registration and start paying duty on Prilled Ammonium Nitrate pursuant to which the petitioner company obtained Central Excise registration under protest and also started paying excise duties on the Prilled Ammonium Nitrate obtained by it from duty paid Ammonium Nitrate Melt. However, the petitioner company was not allowed to avail Cenvat credit of duties paid on Ammonium Nitrate purchased by it even though Ammonium Nitrate and Prilled Ammonium Nitrate were covered under the Cenvat Scheme. Being aggrieved by the action of the respondents in requiring the petitioner company to pay excise duties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smuch as the same were contrary to the existing circulars of the Board and as such, could not be sustained. In the ease of Collector of C.Ex., Vadodara v. Dhiren Chemicals (supra) a Constitutional Bench of the Supreme Court has gone to the extent of saying that regardless of the interpretation placed by the Supreme Court on a particular phrase, if there are circulars which have been issued by the Central Board of Excise and Customs which place a different interpretation upon the said phrase, that interpretation will be binding upon the revenue. 14. From the principles propounded in the aforesaid decisions, it is apparent that it is not permissible for the officers of the Central Excise department to act contrary to the Circulars issued by the Board. In the facts of the present case, of the Circular No. 44/89 dated 19th July, 1989 the Board had desired that every jurisdictional Collector of Central Excise should strictly ensure that no Central Excise duty is paid on such prilled ammonium nitrate as obtained from melt ammonium nitrate and no Modvat Credit of such duty, even if paid is allowed. The said Circular continued to hold the field despite the subsequent decision of the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has arrived at the conclusion that considering the inputs used by the assessee, namely, Ammonium Nitrate Melt 75%- 82% which was converted into a higher concentration in a prilled form having a higher purity of 99.5%. no new or fresh excisable goods have come into existence different from the raw material from which it was made. The Tribunal, accordingly, held that to prill and coat Ammonium Nitrate does not make it a manufacture for the purpose of preparing and fitting it into a new item, for Prilled Ammonium Nitrate. The Prilled Ammonium Nitrate remains Ammonium Nitrate, a good not elsewhere specified. In I.D.L. Chemicals Ltd. v. Collector of Central Excise (supra), the process adopted by the assessee therein does not appear to be by way of prilling and the nature of inputs and the final product used therein are also not clear. Insofar as the decision of the Larger Bench of the Tribunal in the case of Supreme Chemical Works is concerned, as rightly contended by the learned advocate for the petitioners, the process employed for producing the product Ammonium Nitrate in the said case as well as the inputs used for procuring the Ammonium Nitrate product were much different from the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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