Central Excise - Levy of Central Excise Duty on prilled ammonium nitrate and allowing of Modvat Credit of such duty - Clarification regarding - Central Excise - 44/89

Central Excise - Levy of Central Excise Duty on prilled ammonium nitrate and allowing of Modvat Credit of such duty - Clarification regarding Circular No. 44/89 Dated 19-7-1989 [From F. No. 105/3/89-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 prilled ammonium nitrate and allowing of Modvat Credit of such duty - Clarification regarding. It is stated that the CEGAT, in the case of C.C.E., Aurangabad v. Anil Chemicals Pvt. Ltd., 1985 (21) E.L.T. 889 has held that the conversion of ammonium nitrate melt into ammonium nitrate prilled pherical is not a process of manufacture since prilled ammonium nitrate is not different from ammonium nitrate melt, but only of higher concentration. Moreover, mere improving the quality or purity does not amount to 'manufacture'. The CEGAT, inter alia, had held that it may perhaps be said that there has been processing and a manufacture but if the result is in the production of the same goods, even of a higher purity, then the manufacture/processing cannot have the effect of making the purer product liable, by that fact alone, to excise duty. A manufacture under the Central Excises and Salt Act, 1944 is required to be a manufacture that creates "excisable goods". A manufacture that does not have this effect is of no interest to central excise. The said order has been accepted by the Government. As a result of the acceptance of the said order, no excise duty can be lawfully charged or be required to be paid on such prilled ammonium nitrate as is obtained from "ammonium nitrate melt" since as per Section 3 of Central Excises and Salt act, 1944, Central Excise Duty is chargeable only on manufacture of excisable goods. Despite this clear legal position, it has been reported to the Board that, in some Central Excise Collectorates the assessees are allowed to pay duty on prilled ammonium nitrate whereas in other Collectorates it is otherwise. This has given rise to divergence in assessment practice, and has a bearing on Modvat. Since prilled ammonium nitrate is generally used in the manufacture of explosives to which Modvat benefits are available, some manufacturers of explosives who are getting prilled ammonium nitrate on payment of duty are availing themselves of Modvat Credit for paying duty on explosives whereas the manufactures of explosives who are getting prilled ammonium nitrate duty-free are not availing themselves of Modvat while paying duty on explosives manufactured by them. This has placed one section of explosives manufacturers at a disadvantage vis-a-vis another section of the explosives manufacturers. 2. The Board desires that every jurisdictional Collector of Central Excise should strictly ensure that no Central Excise duty is paid on such prilled ammonium nitrate as obtained from melt ammonium nitrate and no Modvat Credit of such duty, even if paid, is allowed. 3. The above guidelines may be brought to the notice of the lower field formations. 4. All pending assessments may be finalised on the above basis.