1996 (7) TMI 143 - SC - Central Excise

Why ammonium nitrate should not be reclassified under Tariff Item No. 68/ Held that - The reclassification of ammonium nitrate by the order of the Central Board dated November, (sic) 1980, casts upon the appellants the obligation to pay the excise duty that is leviable as a result. Such obligation does not arise merely by reason of an agreement between SAIL and the appellants but also by virtue of the provisions of Chapter X of the Central Excise Rules, 1944. The appellants suffer adverse civil consequences and have, therefore, the locus to challenge the reclassification. There is no forum other than the High Court under Article 226 where they can do so, and the High Court was in error in not entertaining the latter writ petition and referring the appellants to a civil suit. Insofar as the earlier writ petition is concerned, the High Court ought, for the same reason, to have dealt with the contention of the appellants that ammonium nitrate remained exempt from excise duty by reason of the Exemption Notification until 21st July, 1979, when ammonium nitrate was removed from the purview thereof. The judgments and orders of the High Court in appeal must be set aside. Appeal allowed.

Summary

Issues:
1. Classification of ammonium nitrate under Tariff Item 68.
2. Validity of reclassification by the Central Board.
3. Applicability of Exemption Notification No. 164/1969.
4. High Court's dismissal of writ petitions and referral to civil suit.

Analysis:
1. The case involved the classification of ammonium nitrate under Tariff Item 68. Initially classified as a fertilizer under Tariff Item 14HH, a show cause notice was issued for reclassification. The Central Board, after consultation, reclassified it under Tariff Item 68, leading to a demand for excise duty by the Superintendent, which was contested by the appellants.

2. The validity of the reclassification by the Central Board was challenged by the appellants through a writ petition. The appellants argued that the burden of excise duty fell upon them due to the reclassification, giving them the right to challenge it. The Court agreed that the appellants had the locus to challenge the reclassification under Article 226 and criticized the High Court for not entertaining the writ petition and referring the appellants to a civil suit.

3. The Exemption Notification No. 164/1969 exempted certain fertilizers, including ammonium nitrate, from excise duty if used in the manufacture of explosives. The appellants had followed the necessary procedures to enjoy this exemption. However, the Central Board's reclassification decision led to a demand for excise duty, causing a dispute regarding the applicability of the exemption notification.

4. The High Court's dismissal of the writ petitions and the referral to a civil suit were deemed erroneous by the Supreme Court. The Court set aside the High Court's judgments, except for the constitutionality issue, and restored both writ petitions for further consideration on their merits. The appellants were entitled to challenge the reclassification and assert their rights under the Exemption Notification through the writ petitions.