TMI Blog1985 (6) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... em 68. The Asstt. Collector said that duty paid 75% concentrated ammonium nitrate melt is processed and converted into prilled ammonium nitrate. The ammonium nitrate melt cannot be used as such unless water is evaporated. The end-product manufactured by the party is used for different purposes such as raw materials for explosives, drug industries, textile industries and even though it is a physical conversion, the conversion of ammonium nitrate melt to prilled ammonium nitrate will amount to manufacture as per the provisions of Section 2(f) of the Central Excises and Salt Act, 1944. The ammonium nitrate melt as such cannot be used for the purposes for which prilled ammonium nitrate is used. 3. The Appellate Collector, however, differed from this view and said that once a product had paid duty under Item 68, it cannot be subjected to the same duty a second time as long as it remained in that heading. He depended for his decision on a number of decisions, namely, 1982 E.L.T. 10 (Bombay), Tribunal decision in 1984 (3) ETR 734 and Bombay High Court decision in 1977 E.L.T. J 34, M/s. Empire Dyes and Manufacturing Co., Tribunal decision in 1983 E.L.T. 1123 = 1983 (2) ETR 147 Golden Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect and the processed cloth cannot escape duty in view of the specific entry in the tariff. There is no specific entry for prilled ammonium nitrate to differentiate it from ammonium nitrate. The reliance by the department on the decision about coffee was also unsound. The chicory coffee was a completely different product and was understood to be a different product from plain chicoriless coffee. To buttress his argument, he quoted 1980 E.L.T. 268 (Bombay) Colgate Palmolive, 1980 E.L.T. 343 (Supreme Court) on Pineapple; 1980 E.L.T. 696 re : Sandoz. 6. The prilled ammonium nitrate is still an ammonium nitrate and cannot be described as anything else. It has no different properties that the unprilled ammonium nitrate did not have. The appeal deserves to be rejected. 7. The department came back to say that turning ice to water and water to steam is a manufacture and so is this process of prilling. 8. We will briefly examine the character of the ammonium nitrate from one or two authoritative books. Kirk-Othmer s ENCYCLOPAEDIA OF CHEMICAL TECHNOLOGY, Third Edition Vol. 2, page 525 describes Ammonium Nitrate- Ammonium nitrate, NH4NO3, formula weight 80.0, does not occur in n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The presence of free oxygen in the decomposition products indicates that ammonium nitrate, which has an oxygen balance of 20%, acts as an oxidizing agent as well as a strength-producing material in explosive and propellant charges. In this respect a resemblance may be seen between ammonium nitrate and ammonium perchlorate [7790-98-9], another stable compound that can act explosively. Although the reactions shown for ammonium nitrate are the ones characteristic of the two extremes of controlled decomposition and complete detonation, decomposition may take place according to both equations in varying ratios. Also, varying amounts of higher oxides of nitrogen may be formed. 9. The ENCYCLOPAEDIA informs us that ammonia and nitric acid are the two basic raw materials in the manufacture of ammonium nitrate. 10. Under Manufacture, the book explains the raw materials used, the process steps like neutralization, evaporation and control of particle size and properties. At page 529, the book contains this paragraph on Prilling Process- The prilling process for production of ammonium nitrate is a system in which concentrated ammonium nitrate solution (95% or 99+%) is sprayed downw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a weight basis about 70% the disruptive strength of nitreglycerin. A violent explosion occurred in Oppau, Germany (31) in 1921 when 4500 tons of ammonium sulfate-ammonium nitrate mixture detonated with tremendous destructive force. Careful investigation of conditions preceding the disaster revealed that it had been customary at this location to blast the material with dynamite to break up the coked mass. Previous tests and continued use of this procedure had indicated the blasting practice to be safe, yet the disaster did occur. A thorough study in the following year of the explosibility of ammonium nitrate found it to be altogether safe for handling, when properly treated. The report by Munroe (32) concluded that ammonium nitrate, when stored by itself . . . and apart from explosive substances is for transportation and storage, not an explosive. A subsequent disaster occurred in 1947 at Texas City, Texas, where explosions took place on two freighters loaded with several thousand tons of ammonium nitrate. Both explosions, which occurred many hours apart in time, followed vigorous fires aboard the vessels. The ammonium nitrate, which was packed in heavy paper containers o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is reported that Munroe concluded that ammonium nitrate, when stored by itself... and apart from explosive substances is, for transportation and storage, not an explosive , a very significant observation. 13. At page 532, the ENCYCLOPAEDIA continues that the economic status of ammonium nitrate has changed greatly since World War II. Before this war, its principal use was as an ingredient of high explosives but since then the greatest proportion of ammonium nitrate produced goes into fertilizer. Following World War II, ammonium nitrate became the leading nitrogen fertilizer in the United States and in the world. 14. Another authority gives us useful clues, Hawley s THE CONDENSED CHEMICAL DICTIONARY has an article on ammonium nitrate. On grades, it writes usually expressed in per cent of nitrogen, as 20.5% N; 33.5% N. FGAN is a fertilizer grade, prilled and usually coated with kieselguhr . On hazards, it writes may explode under confinement and high temperatures, but not readily detonated. It should be noted that the fertilizer grade FGAN is prilled. 15. The purity of the ammonium nitrate has nothing to do with its use as an explosive. When it is intended for use in nit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment was trying to fit the oil. The Court went into the nature of the oil the processes it was subjected to, and concluded that the heading would not accommodate the oil because that oil had not qualified to be accommodated there. The question the Court examined was whether the processes had qualified the oil for assessment under a heading with a definite description of what commodities it would accept. In the South Bihar Sugar Mill judgment, the Supreme Court arbitrated upon a dispute whether the kiln gas was carbon dioxide because it contained carbon dioxide. The department contended that it was carbon dioxide, the factory meanwhile claiming that it was not carbon dioxide, because, for one thing, its carbon dioxide content was too low while other gases like nitrogen were present in larger volumes. The Supreme Court judged that the gas was not a carbon dioxide gas because the gas was not known and did not have the characteristics of carbon dioxide but was known as kiln gas. Furthermore, the gas had not been compressed and Item 14H at the time accepted only compressed carbon dioxide. For various reasons, the Court prohibited the department from assessing the kiln gas as carbon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mited - 1983 E.L.T. 1736. These judgments, however, are firstly on the retrospective amendment of the Central Excises and Salt and Additional Duties of Excise (Amendment) Act, 1980, and the retrospective amendment of Tariff Items No. 19, No 22 and of the definition of manufacture in Section 2(f) of the Central Excises and Salt Act, 1944. There was a dispute between the assessees and the central excise in regard to the levy of duty on processed fabrics. The manufacturers said that there was no difference between a processed fabric and an unprocessed grey fabric. This point of view had been upheld once by the Gujarat High Court necessitating the amendment Act with its retrospective effect. By this amendment, manufacture of cotton fabrics falling in Item 19(1 )-I in the Central Excise Act was enlarged to include bleaching, mercerising, dyeing etc., and of man-made fabrics falling in Item 22(1) to include bleaching, dyeing, printing etc. Thus, the items themselves came to acquire two sub-items one, fabrics not processed and the other, fabrics processed. Both the Hon ble Courts i.e. Bombay High Court and the Supreme Court, upheld the retrospective amendment and consequently the recovery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trate is to be used in the manufacture of nitrous oxide. There is no authority that we have been able to find that will support the department s proposition that prilling turns an ammonium nitrate into an explosive. It does nothing of the kind and its explosive nature is one it already had before prilling. We have further seen the CONDENSED CHEMICAL DICTIONARY report about a fertilizer grade ammonium nitrate FGAN being prilled and coated with kieselguhr. 23. The greatest barrier before the department, however, is the fact that the ammonium nitrate has already paid duty under Item 68. Having paid this duty and having retained its character, as a fertilizer, as a raw material for the manufacture of nitrous oxides, oxidizer, explosive and catalysts, we cannot say that it has become a new and fresh excisable goods, different from the raw material from which it was made even if we overlook the fact that it has already paid the duty which the department now wants it to pay. No commodity can be made to pay the same duty twice unless the law provides for such an action. At present the law does not sanction this. The dyeing of a cotton fabric makes it a manufacture as defined in the law ..... X X X X Extracts X X X X X X X X Extracts X X X X
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