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TMI Blog2011 (4) TMI 1011X X X X Extracts X X X X X X X X Extracts X X X X ..... ng any action against the petitioner company in pursuance of notice F.No. V(Ch.31) 15-109/0A/2003, dated 1-11-2003 (Annexure : L) and be further pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, direction or order quashing and setting aside demand notice V.(Ch.31) 15-109/OA/2003, dated 1-11-2003 (Annexure : L). (2) That Your Lordships may be pleased to issue a Writ of Certiorari or any other appropriate writ, direction or order, holding and declaring that Prilled Ammonium Nitrate (PAN) obtained from Ammonium Nitrate Melt (ANM) was not excisable goods and process of prilling/evaporating moisture was not "manufacture" under the Central Excise law; (3) That Your Lordships may be pleased to issue a Writ of Prohibition or any other appropriate writ, direction or order, completely and permanently prohibiting the respondents, their servants and agents from taking any action against the petitioner company on the basis that PAN was an excisable goods and process of prilling/evaporating moisture was "manufacture" under the Central Excise law; (4) That Your Lordships ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and therefore, all Central Excise officers should ensure that no excise duty was paid on such Prilled Ammonium Nitrate obtained from Ammonium Nitrate Melt and no Modvat credit of such duty, even if paid, was allowed. 4. It appears that the predecessor of the petitioner Company, that is, Bhagwati Nitrate Pvt. Ltd. was discharging duly liability on Prilled Ammonium Nitrate till 1989. However. based upon the decision of the Tribunal in the case of Anil Chemicals (P) Ltd. as well as the Circular issued by the Government, Bhagwati Nitrate was forced by the Excise Department to stop paying excise duty on Prilled Ammonium Nitrate from the year 1981 onwards and to surrender and cancel the excise registration. The petitioner Company, therefore, when it took over the running business of the said company with effect from 1st November. 2001, was also not liable to pay any excise duly on Prilled Ammonium Nitrate obtained from Ammonium Nitrate Melt. The petitioner Company, however, filed a letter with the Assistant Commissioner of Central Excise, in charge of the petitioners' factory on 12th December, 2001 informing the said officer that the petitioner Company had taken over the running ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2000 (119) E.L.T. 707, held that the principle laid down in Anil Chemicals (P) Ltd. was incorrect and the principle laid down in M/s. I.D.L. Chemicals Ltd. was the correct one. Even after rendering of the above referred judgment by the Larger Bench of the Tribunal, no objection was raised by the Central Excise authorities against the petitioners clearing Prilled Ammonium Nitrate without payment of duty and the Circular dated 19th July, 1989 issued by the Board also remaied in force. The petitioners, therefore, continued to remove Prilled Ammonium Nitrate obtained from duty paid Ammonium Nitrate Melt without payment of excise duty. The petitioner company took over the business of the unit from 1st November, 2001 after the decision in the case of Supreme Chemicals Works v. Collector of C. Ex., Jaipur was rendered by the Larger Bench of the Tribunal. The petitioner company also approached the Central Excise authorities by a specific letter dated 12th December, 2001 requesting or clarification if there was any change in the legal position about payment of duty on Prilled Ammonium Nitrate obtained from Ammonium Nitrate Melt. It is the case of the petitioners that having discussed perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excise registration and start paying duty on Prilled Ammonium Nitrate. The petitioner Company, therefore, obtained Central Excise registration under protest and started paying excise duty on Prilled Ammonium Nitrate obtained from duty paid Ammonium Nitrate Melt. 6. It is at this stage that the petitioners have filed the present petition seeking the reliefs noted hereinabove except the relief prayed for vide paragraph 9(AA). Subsequently, it appears that by a show-cause notice dated 1st November, 2003 issued by the Commissioner. Central Excise & Customs, Vapi, the extended period of limitation came to be invoked against the petitioners and Central Excise duty on Coated Prilled Ammonium Nitrate came to be demanded, alongwith penalty and interest. The petitioners, therefore, moved an amendment and were permitted to challenge the aforesaid show-cause notice. 7. By an order dated 20th January 2004 [2004 (173) E.L.T. 456 (Guj.)], rule came to be issued in the petition and the Court after examining the case on merits for the purpose of grant of interim relief, passed a detailed order expressing a prima facie view that the process carried on by the petitioner is differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on such Prilled Ammonium Nitrate as obtained from Melt Ammonium Nitrate and no Modvat credit of such duty, even if paid, is allowed. It was submitted that the said Circular held the field even on the date of filing of the petition and subsequent thereto inasmuch as despite the decision of the Tribunal in the case of I.D.L. Chemical Ltd. v. Collector of Central Excise as well as in the case of Supreme Chemical Works v. Collector of Central Excise, Jaipur (supra), the revenue had not changed its stand and had continued with the above referred Circular. It was submitted that all along it was the view of the respondents that the petitioners are not liable to pay central excise duty on Ammonium Nitrate obtained by it from Ammonium Nitrate Melt as it did not amount to manufacture. It was submitted that the change in the view of the respondents was based upon the decision of the Larger Bench of the Tribunal in the case of Supreme Chemical Works v. Collector of Central Excise, Jaipur (supra) and that the impugned show-cause notice was also based upon the said decision of the Tribunal. 8.2 Inviting attention to the decisions of the Tribunal in the above referred cases, it was submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on payment of duty for being sent to their Hyderabad unit and that duty was paid by the assessee on the Ammonium Nitrate Fakes cleared for being despatched to their Hyderabad unit in terms of the classification lists approved by the Department from time to lime, it was submitted that it was in the background of the said facts, viz., the product namely Ammonium Nitrate flakes emerging after processing of the melt in the assessee's factory had different physical characteristics and commercial name that the Tribunal held that the conversion of Ammonium Nitrate Melt into Ammonium Nitrate flakes amounts to manufacture within the meaning of Section 2(f) of the Central Excise and Salt Act, 1944. Referring to the decision of the Tribunal in the case of Supreme Chemical Works (supra), it was pointed out that the process which was employed in the said case was much different from the process of prilling employed by the petitioners. In the said case the duty paid inputs used for procuring Ammonium Nitrate products were crude lumps of Ammonium Nitrate, damaged Calcium Ammonium Nitrate and Ammonium Nitrate melt. All these were mixed in water in order to remove impurities like mud etc. The solu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners. It was accordingly submitted that considering the facts of the said case, the Tribunal while deciding the said case was not Justified in holding that the settled law laid down in CCE, Aurangabad v. Anil Chemicals (P) Ltd. was incorrect. 8.3 Next, it was submitted that despite the different decisions of the Tribunal, the respondents had still continued with the Circular dated 19th July, 1989 and the same had not been rescinded. It was submitted that the officers of the Department are bound by the Circulars issued by the Board and till the Circulars stand, the officers cannot take a different view, in support of the said submission, the learned advocate for the petitioners placed reliance on the decisions of the Supreme Court in the case of Ranadey Micronutrients v. Collector of Central Excise, 1996 (87) E.L.T. 19 (S.C.), in the case Paper Products Ltd. v. Commissioner of Central Excise, 1999 (112) E.L.T. 765 (S.C.) and in the case of Collector of C.Ex., Vadodara v. Dhiren Chemical Industries, 2002 (139) E.L.T. 3 (S.C.). 8.4 The learned advocate invited attention to Circular No. 848/06/2007-CX., dated 18th April, 2007 whereby, the Board had decided to accept th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a subsequent decision. It was submitted that in the light of the subsequent decision of the Larger Bench of the Tribunal in the case of Supreme Chemicals Works (supra), it cannot be said that the earlier Circular dated 19th July, 1989 holds the Held till the issuance of the subsequent Circular dated 18th April, 2007. The learned counsel invited the attention of the Court to the affidavit-in-reply filed on behalf of the respondents, and more particularly to paragraph 6 thereof wherein the process adopted by the predecessor of the petitioner has been set out to submit that the process itself indicates that the petitioners were carrying out manufacturing activities. 9.1 Insofar as the contentions raised on the merits of the case namely, that the decision of the Tribunal in the case of Anil Chemicals (P) Ltd. was based upon a different process than that which was under consideration before the Tribunal in the case of Supreme Chemical Works, the learned counsel submitted that the Supreme Court in the case of Union of India & Others v. Delhi Cloth General Mills, 1977 (1) E.L.T. (J199) which has been referred to by the Tribunal in the said decision held that the word 'manufacture' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rangabad, the Board had issued Circular dated 19th July, 1989 accepting the said decision wherein it has been held that conversion of Ammonium Nitrate Melt into Ammonium Nitrate Prilled was not a process of manufacture since Prilled Ammonium Nitrate was not different from Ammonium Nitrate Melt, but only of higher concentration. The Board also desired every jurisdictional (Collector of Central Excise to strictly ensure that no central excise duty was paid on such Prilled Ammonium Nitrate as obtained from Melt Ammonium Nitrate and no Modvat credit on such duty, even if paid, was allowed. 11. Subsequently, despite the decision of the Tribunal in the case of I.D.L. Chemicals Ltd. v. Collector of Central Excise (supra) as well as the decision of the Larger Bench of the Tribunal in the case of Supreme Chemical Works v. Collector of C.Ex., Jaipur (supra), the Board did not rescind the aforesaid Circular and continued with it. In the circumstances, it can be safely assumed that the Board never intended to withdraw the said Circular at the relevant time presumably for the reason that the process of conversion of Ammonium Nitrate Melt into Ammonium Nitrate Prilled carried on by the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ched this Court by way of the present petition. In the meanwhile, by the impugned show-cause notice, the respondent No. 2 demanded central excise duty on the Prilled Ammonium Nitrate as well as penalty and interest thereon. 12. A perusal of the impugned show-cause notice indicates that the same had been issued on 1st November, 2003, that is, prior to the date of the issuance of the subsequent Circular dated 18th April, 2007 by the Board withdrawing the earlier circular dated 19th July, 1989 issued by it whereby it had directed the Jurisdictional Collectors of Central Excise to ensure that no central excise duty was paid on such Prilled Ammonium Nitrate as obtained from Melt Ammonium Nitrate. 13. The Supreme Court in the case of Ranadey Micronutrients v. Collector of Central Excise (supra) held that the whole objective of issuance of circular by the Board is to adopt a uniform practice and to inform the trade as to how a particular product will be treated for the purposes of excise duty. It does not lie in the mouth of the revenue to repudiate a circular issued by the Board on the basis that it is inconsistent with a statutory provision. Consistency and discipline are of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/2007-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. In the circumstances, the action of the respondents in requiring the petitioners to obtain central excise registration and pay excise duties on the Prilled Ammonium Nitrate obtained by it from Ammonium Nitrate melt as well as in issuing the impugned show-cause notice seeking to recover central excise duty in respect of the Prilled Ammonium Nitrate obtained from it from Ammonium Nitrate Melt prior 18th April 2007, are clearly contrary to the then existing Circular of the Board, viz., the Circular No. 44/89-CX.3, dated 19th July, 1989 and as such, as held by the Apex Court in the case of Paper Products Ltd. (supra), the show- cause notice and the consequential demand are ab initio bad and as such, cannot be sustained. 15. However, insofar as the relief prayed for vide paragraph 9(B) of the petition whereby the petitioners seek a declaration that Prilled Ammonium Nitrate (PAN) obtained fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e product were crude lumps of Ammonium Nitrate, damaged Calcium Ammonium Nitrate and Ammonium Nitrate Melt. Thus, three types of inputs were mixed together in water and processed thereafter. From the very nature of inputs used therein, it is evident that the inputs as well as the final product were not the same inasmuch as damaged Calcium Ammonium Nitrate and crude lumps of Ammonium Nitrate cannot be equaled with the end product viz., Ammonium Nitrate in the form of fine powder particles, which appears to be product different both in characteristics and well as name from the inputs used for manufacture thereof. 17. In the aforesaid premises, considering the fact that the process of obtaining Ammonium Nitrate which was subject matter of consideration before the Tribunal in the case of Supreme Chemicals Works v. Collector of C.Ex., Jaipur (supra) was different from the process employed in the case of Anil Chemicals (P) Ltd., prima facie it appears that the Larger Bench of the Tribunal while holding that the statement of law laid down in C.C.E, Aurangabad v. Anil Chemicals (P) Ltd. (supra) is incorrect, has not examined the aforesaid facts. In the circumstances, insofar as the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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