1988 (7) TMI 415 - AT - Central Excise

Summary

Issues Involved:
1. Whether the ANFO can be taken to be the result of a process of manufacture?
2. Whether ANFO can be considered as goods for the purpose of Central Excise levy?
3. Whether ANFO can be considered as a prepared explosive?
4. Whether the demand beyond a period of 6 months could be raised due to alleged suppression of facts?

Summary:

1. Whether the ANFO can be taken to be the result of a process of manufacture?
The Tribunal observed that ANFO is produced by mixing ammonium nitrate of explosive grade with a small proportion of fuel oil, resulting in a new product known as ANFO. This product is used for blasting purposes and has a distinct name, character, and use. The Tribunal cited the Supreme Court's judgment in Union of India and Ors. v. Delhi Cloth and General Mills Co. Ltd. and Ors. 1977 ELT (J 199), which held that manufacture implies a transformation resulting in a new and different article with a distinctive name, character, or use. Therefore, the Tribunal held that ANFO is the result of a process of manufacture.

2. Whether ANFO can be considered as goods for the purpose of Central Excise levy?
The Tribunal noted that ANFO is manufactured for a particular need and is used as a standard product for blasting, mining, etc. It finds a separate mention in the Chemical Dictionary and the Harmonised Coding System of CCCN under the heading "Prepared Explosives." The Tribunal held that irrespective of whether ANFO is actually marketed or not, it is capable of being marketed and thus qualifies as goods for the purpose of Central Excise levy. This view aligns with the decision of the Delhi High Court in J.K. Synthetics Ltd. v. Collector of Customs, Delhi 1985 (21) ELT 410 (Delhi).

3. Whether ANFO can be considered as a prepared explosive?
The Tribunal observed that ANFO is described as a high explosive in the Condensed Chemical Dictionary and is specifically prepared for blasting rocks. The Tribunal rejected the appellants' plea that ANFO is not an explosive but a phlegmatising agent, as this was not backed by any technical authority. The Tribunal held that ANFO is a prepared explosive falling under Chapter 36 of the Central Excise Tariff, as evidenced by the Explanatory notes to the Harmonised Coding System of CCCN.

4. Whether the demand beyond a period of 6 months could be raised due to alleged suppression of facts?
The Tribunal noted that the demand was raised u/r 9(2) read with Section 11A(1) of the Central Excises and Salt Act, 1944, alleging suppression of facts by the appellants. However, the Tribunal found no basis for the Collector's allegation that the appellants' non-compliance was with the intention to evade payment of duty. The Tribunal held that the extended time limit of five years could not be invoked in the absence of any finding of mala fide intention or clandestine manufacture. Therefore, the duty demand was limited to a period of six months from the date of receipt of the show cause notice by the appellant.

Conclusion:
The appeals were partially allowed, upholding the levy of duty on ANFO but limiting the demand to a period of six months.