1985 (6) TMI 182 - AT - Central Excise

Summary

Issues Involved:
1. Whether prilling of ammonium nitrate constitutes "manufacture" u/s 2(f) of the Central Excises and Salt Act, 1944.
2. Whether prilled ammonium nitrate is liable to duty under Item 68 of the Central Excise Tariff Schedule.

Summary:

Issue 1: Whether prilling of ammonium nitrate constitutes "manufacture" u/s 2(f) of the Central Excises and Salt Act, 1944.
The Assistant Collector of Central Excise, Aurangabad, held that the process of prilling, which involves concentrating ammonium nitrate from 75%-82% to 99%, constitutes "manufacture" u/s 2(f) of the Central Excises and Salt Act, 1944. This was based on the rationale that the end-product, prilled ammonium nitrate, is used for different purposes such as explosives, drug industries, and textile industries, and cannot be used in its initial form. However, the Appellate Collector disagreed, stating that once a product has paid duty under Item 68, it cannot be subjected to the same duty again as long as it remains within that heading. The Appellate Tribunal examined authoritative texts and found that prilling does not change the fundamental nature of ammonium nitrate, and thus does not constitute "manufacture" as defined by the Act.

Issue 2: Whether prilled ammonium nitrate is liable to duty under Item 68 of the Central Excise Tariff Schedule.
The department argued that prilled ammonium nitrate, being a new product with a new name, character, or use, attracts central excise duty under Item 68. They cited various judgments to support their claim. However, the Tribunal noted that prilled ammonium nitrate retains the same chemical properties as the original ammonium nitrate and is not a new product. The Tribunal emphasized that ammonium nitrate, whether prilled or not, is still the same commodity and has already paid duty under Item 68. Therefore, it cannot be made to pay the same duty twice unless the law explicitly provides for such action. The Tribunal concluded that prilled ammonium nitrate does not qualify for additional duty under Item 68.

Conclusion:
The appeal was rejected, affirming that prilling of ammonium nitrate does not constitute "manufacture" and prilled ammonium nitrate is not liable to be charged to duty under Item 68 of the Central Excise Tariff Schedule when it has already suffered duty under the same item.

Separate Judgment:
Member (T) G. Sankaran agreed with the main order but provided a different interpretation of the Bombay High Court judgment in the New Shakti Dye Works case. He clarified that processed fabrics were considered different from unprocessed fabrics and thus liable to duty under "cotton fabrics, all sorts," even if the base fabric had already suffered duty. However, he concurred that prilled ammonium nitrate, made from duty-paid ammonium nitrate, is not liable to additional duty under Item 68.