1988 (2) TMI 324 - AT - Income Tax

Summary

Issues:
- Appeal against order of Collector of Central Excise, Hyderabad regarding manufacturing and utilization of ANFO without Central Excise license and payment of duty.
- Classification of ANFO under Chapter Heading 3601.00 as a prepared explosive.
- Applicability of Modvat Rules under Rule 57-A for the benefit of the appellants.
- Interpretation of Central Excise Tariff based on the Harmonised Commodity Description & Coding System.
- Recognition of ANFO as a separate product apart from Ammonium Nitrate in the trade.

Analysis:
1. The appeal was made against the Collector of Central Excise, Hyderabad's order concerning the manufacturing and utilization of ANFO without the necessary license and payment of duty. The lower authority demanded a duty of Rs. 1,13,401.33 in relation to ANFO manufactured and used during a specific period, treating it as assessable under Chapter Heading 3601.00 as a prepared explosive.

2. The advocate for the appellants argued that ANFO is a simple mixture of Ammonium Nitrate and fuel oil, asserting that the Ammonium Nitrate used was duty paid and that the resulting mixture did not create a new product. He contended that the appellants should be entitled to Modvat Rules benefits under Rule 57-A, despite not previously applying for it, as they believed no duty was chargeable on their goods.

3. The JDR for the respondent highlighted that the Central Excise Tariff is based on the Harmonised Commodity Description & Coding System, emphasizing the Explanatory Notes under Heading 36.02, which specifically cover prepared explosives like ANFO. He argued that internationally, ANFO is recognized as a distinct product from Ammonium Nitrate as a prepared explosive.

4. The Tribunal observed that the appellants used explosive grade Ammonium Nitrate prills mixed with fuel oil for blasting rocks. Despite the simple manufacturing process, the porous prills absorb the oil, altering the character of Ammonium Nitrate to function as an explosive. The Tribunal agreed with the classification of ANFO as a prepared explosive under Chapter 36, as per the Tariff, irrespective of the simplicity of its mixture. The Tribunal remanded the case to the lower authority to consider the appellants' plea for Modvat relief under Rule 57-A, as the lower authority did not address this aspect in its order.