2004 (1) TMI 95 - HC - Central Excise

Summary

Issues:
Interpretation of Circular No. 44/89 regarding excise duty on Prilled Ammonium Nitrate, applicability of CEGAT judgments, validity of departmental circulars, manufacturing process of Prilled Ammonium Nitrate, and grant of interim relief against recovery of past dues.

Analysis:
1. Interpretation of Circular No. 44/89: The petitioners argue that Circular No. 44/89 exempts Prilled Ammonium Nitrate from excise duty as it is obtained from Ammonium Nitrate Melt without involving manufacturing. They rely on past decisions like Ranadey Micronutrients and Paper Products Ltd. where departmental circulars were deemed binding.

2. Applicability of CEGAT Judgments: The respondents, however, rely on CEGAT judgments in Supreme Chemical Works and IDL Chemicals cases to assert that prilling constitutes manufacturing, contrary to the earlier Anil Chemicals case. The respondents argue that Circular No. 44/89 is no longer applicable post the CEGAT decisions.

3. Validity of Departmental Circulars: The court notes that Circular No. 44/89 remains uncancelled despite the CEGAT rulings. Citing legal precedents, the court emphasizes that departmental circulars hold weight even if not explicitly supported by statutory provisions, thus supporting the petitioners' stance.

4. Manufacturing Process of Prilled Ammonium Nitrate: The court distinguishes the process of making Prilled Ammonium Nitrate from Ammonium Nitrate Melt from the manufacturing process outlined in MO Circular No. 23/98, emphasizing that prilling involves no change in chemical composition, unlike the processes described in the circular.

5. Grant of Interim Relief: Considering the strong prima facie case made by the petitioners and the historical acceptance by the department that prilling does not amount to manufacturing, the court grants interim relief against recovery of past dues before June 11, 2003. However, relief is not extended beyond this date, as the petitioners have been paying excise duty since then.

In conclusion, the court upholds the petitioners' claim for interim relief based on the interpretation of Circular No. 44/89, the distinction in manufacturing processes, and the historical departmental stance on prilling. The judgment provides a detailed analysis of the legal arguments presented by both parties and sets a clear boundary for the relief granted, considering the evolving legal interpretations in the field of excise duty on Prilled Ammonium Nitrate.