Central Excise - Levy of Central Excise duty on crystallizing coated ammonium nitrate and allowing of Modvat Credit of such duty - Clarification regarding - Central Excise - 56/89

Central Excise - Levy of Central Excise duty on crystallizing coated ammonium nitrate and allowing of Modvat Credit of such duty - Clarification regarding Circular No. 56/89 Dated 21-9-1989 [From F. No. 105(6)89-CX.3] Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi Subject : Central Excise - Levy of Central Excise duty on crystallizing coated ammonium nitrate and allowing of Modvat Credit of such duty - Clarification regarding. In the context of the old CET, the CEGAT had decided in the case of CCE, Aurangabad v. M/s. Anil Chemicals Pvt. Ltd., Aurangabad (CEGAT order No. C-462/85 dated 7-6-1985) that no duty would be chargeable on prilled Ammonium Nitrate manufactured from out of duty-paid Ammonium Nitrate melt since firstly, both Ammonium Nitrate melt and prilled Ammonium Nitrate would fall under T.I. 68 of the old CET and once duty liability has been discharged on Ammonium Nitrate melt falling under T.I. 68 of the old CET and secondly, the process of conversion of Ammonium Nitrate melt into prilled Ammonium Nitrate could not be treated as a process of manufacture since no new product come into being as a result of the said process, and mere improving the quality or purity could not amount to manufacture, the CEGAT had added. The said CEGAT order was accepted after consulting the Chief Chemist, CRCL, New Delhi. Although the said CEGAT order was passed in the context of the old CET it was equally relevant and applicable in the context of the new CET also because firstly, all Ammonium Nitrate under the new CET would be classifiable only under heading No. 31.02 of the new CET. This is amply clarified by Chapter Note 2(a)(ii) of Chapter 31 of the new CET which states that Ammonium Nitrate, whether or not pure, is covered by heading No. 31.02. Chapter Note 2(A)(ii) of Chapter 31 of the HSN also clarifies similarly, HSN sub-heading No. 3102.30 under HSN heading No. 31.02 also classifies 'Ammonium Nitrate, whether or not in aqueous solution under the same subheading. Ammonium Nitrate is also excluded from the scope of Chapter 28 by the exclusion notes at (D) on page 231 of the HSN. Secondly , there is no Chapter Note or Section Note in the new CET to indicate that the conversion of Ammonium Nitrate melt into prilled Ammonium Nitrate would be a process of manufacture. Against this background, the Board had issued instructions in their F. No. 105/3/89-CX.3, dated 19-7-1989 to the effect that no Central Excise duty should be paid on prilled Ammonium Nitrate as obtained from Ammonium Nitrate melt and no MODVAT credit of such duty, even if paid, should be allowed. 2. After the issue of these instructions, several representations have been received, stating that the said guidelines would be inapplicable to the process of conversion of Ammonium Nitrate melt into crystalline coated Ammonium Nitrate because this process deserves to be considered as a process of manufacture. The matter has been got examined in consultation with the Dy. Chief Chemist, CRCL., New Delhi who has clearly opined that the process of conversion of Ammonium Nitrate melt into crystalline coated Ammonium Nitrate could not be considered as a process of manufacture (Copy of the opinion of the Dy. Chief Chemist, CRCL, New Delhi is enclosed) (Encloser not printed). 3. The Board agrees with the views of the Dy. Chief Chemist CRCL, New Delhi in the matter and accordingly clarifies that the guidelines contained in the Board's letter F.No. 105/3/89-CX.3, dated 19-7-1989 would apply, mutatis mutandis, to the process of conversion of Ammonium Nitrate melt into crystalline coated Ammonium Nitrate. 4. The above guidelines may be brought to the notice of the lower field formations. 5. All pending assessments may be finalised on the above basis.