| SooperKanoon Citation | sooperkanoon.com/32351 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Mumbai |
| Decided On | Sep-19-2003 |
| Judge | S T S.S., K Kumar |
| Reported in | (2003)(158)ELT759Tri(Mum.)bai |
| Appellant | Anil Chemical and Industries |
| Respondent | The Commissioner of Central |
2. Appellant being manufacturer of explosives, is registered with Department of Explosives. In the Explosive licence issued by Department of Explosives, Plot No. 49 has been declared as support plant, which includes specifically designed vehicle known as Bulk Delivery Systems (BDS). BDS has three independent compartments, where three ingredients required for manufacture of explosives can be stored without being mixed during the time of transportation. The said vehicle has mechanized system by which three ingredients can be mixed in the desired proportion in order to get required explosive, depending upon nature of strata, kind of blast etc. required in the mines. The mixing of three duty paid ingredients is carried out in the mobile vehicle when stationary at the mine site to manufacture explosive and such mixture is simultaneously charged into the boreholes of the mines.
3. the issue is whether appellant is manufacturing SMS explosives (Site Mixed Slurry Explosives), which is supplied to NCL for blasting. SMS explosive is manufactured in the mines after mixing three duty paid ingredients viz. PAN, Emulsion Matric and Diesel Oil. As a result, the goods manufactured in mines or workshop situated in mines are exempt from payment of Central Excise Duty by virtue of various exemption notifications such as 182/87 and 63/95.
4. the three duty paid ingredients stored in three independent compartments of BDS vehicle are taken to mines, where BDS vehicle carrying three duty paid ingredients is weighed prior to entering into the mines and again at the time of exit from mines. In other words, the BDS vehicle is first weighed at the time of entry and then again on exit, so as to verify the difference in the weight at two different points. The difference in weight is treated as quantity of explosive supplied to the mines. No invoice is raised at the time of clearance of three duty paid ingredients in the BDS vehicle. On the quantity of material supplied and payments were made by M/s NCL on the basis of such invoices.
5. The three ingredients are not use in pre-determined quantity for obtaining explosive by mixing, as requirement of blast varies from hold to hole depending on strata and bore hole depths.
6. Appellant in the year 1993-94, made representation before the Central Board of Excise & Customs (hereinafter referred as CBEC), wherein they duly explained the geographical location of Plot No. 48 and 49, besides explaining the activities being carried out in the said plots. It was further explained that final mixing of three ingredients is carried out in the mines in the BMD vehicle. As a result of representation, made by the appellant and after due consideration, it is submitted that physical verification carried out by the Department, CBEC vide letter dated 7.7.1994 clarified that exemption under notification No. 182/87 is available in their case and BMD vehicle wherein mixing is being carried out in the mines falls within the scope of workshop, as contemplated in the aforesaid notification i.e. 63/1995 and 7/98. As a result of clarification issued by CBEC on the representation made by the Appellant, CBEC intimated to Commissioner Raipur, vide letter dt. 7.7.1994 about the extension of benefit of exemption notification No. 182/87 to the Appellant.
7. Appellant, in view of exemption being granted to the explosives manufactured in mines, informed the Coal India Limited (CIL) about grant of exemption. In the letter dt. 8.7.94, appellant informed CIL that now onwards, they would charge basic price, without any incidence of excise duty.
8. Central Excise Authorities issued six Show Cause Notices for the period January 1997 to May 1999 for recovery of Duty amounting to Rs. 4,10,27,681/- by alleging that Plot No. 48 and 49 are in fact one unit and explosives emerges at Plot No. 48 and 49, as a result of application of Section VI of the Central Excise Tariff Act. It was further stated that BMD vehicle cannot be treated as workshop, consequently exemption granted to goods manufactured in a workshop is not available to the Appellant.
9. After issuance of these six Show Cause Notices, Revenue issued 7th Show Cause Notice dt. 7.9.1994 to Dec. 1996, by invoking the extended period of limitation in terms of Section 11-A of the Central excise Act, besides the allegation of manufacture of Explosives at Plot No. 48 and 49, in view of note 2 to Section VI of the Central Excise Tariff Act, Revenue alleged that appellant had recovered the amount of Central Excise Duty from the customer, i.e. Coal India Limited by representing on the invoice that excise duty is discharged. In the Show Cause Notice, the classification of Emulsion Matrix was also disputed and it was proposed to be classified as chemical product under Chapter 38 of the Central Excise Act.
10. The Commissioner, after hearing the parties and considering the material on record, vide the order impugned before us, decided the following Show Cause Notices and relying upon Board's F. No. 108/2/95/Cx-3 dated 31.7.97 to the effect ".....Board has taken in view that the Commissioner of Central Excise, Raipur may go ahead with recovery of duty, if due, from M/s.
Anil Chemicals and not-with-standing the Boards letter F. No. 108/3/93/CX-3 dt. 7/7/94" concluded that on merits, exemption under Notification 182/87 dated 10.7.87 and 63/95 dated 16.3.95 were not available to the appellants and they were liable to pay appropriate Central Excise duty as leviable on bulk explosives manufactured by them. Since it was alleged in the Show Cause Notice dated 3.9.99 that the party had recovered Central Excise duty over and above the price of Bulk Explosive sold by them to M/s. CIL/NCL Singrauli and the Central Excise duty so recovered was not paid to the Government Exchequer during the period 7th September 94 to December 96, the party had not paid Central Excise duty on the explosive manufactured and sold by them and they had not disputed the allegation of non-payment of duty. Therefore, on examination of the statements recorded and the defence replies submitted, he found that on 8.7.94, the appellants had written a letter to Shri J.B. Dasgupta, Additional Chief Materials Manager, Coal India Limited, Calcutta informing them that Central Excise Department had given the expected duty relief to them and, therefore, henceforth they would not be charging the Central Excise duty on Bulk Explosive supplied and the costing and the pricing of the explosives for the period prior and subsequent and they are creating a veil in as much as the Commissioner Invoices beared the term "Appropriate duty is discharged" and there was an endorsement that excise duty and sales tax payable extra as legally leviable would go to denote that Central Excise Duty element was being realised. He concluded that it was a fact that the party had collected Central Excise duty which was therefore, required to be deposited and since it was not deposited, the same was required to be an arrear to be recovered and penalties under the provisions of Central Excise Rules were leviable. Thereafter, he quantified the duty demands to Rs. 8,03,72,796.00 in all the 7 Show Cause Notices and ordered the same to be recovered. He also thereafter, passed the following order: (i) "Emulsion Matrix", manufactured by M/s. Anil Chemical and Industries Ltd., Waidhan, is a chemical substance classifiable under Chapter 38 of Central Excise Tariff as miscellaneous chemical product.
(ii) Plot No. 48 & 49 jointly form an integral unit of the party to manufacture the "Bulk Explosive" at Udyog Deep Industrial Area, Waidhan.
(iii) The moment all the ingredients such as Prilled Ammonium Nitrate, Emulsion Matrix and Diesel Oil are put up in sets i.e. in the compartments of B.L.S. with the intention to mix together to obtain explosive, it is classifiable as "Prepared Explosive/Bulk Explosive" under H. No. 3602 of Central Excise Tariff attracting relevant Central Excise duty".
(iv) The exemption under Notification No. 182/87-CE dtd. 10.07.87 (as amended) and 63/95-CE dtd. 16.03.95 (as amended) is not available to M/s. Anil Chemical & Industries Ltd., Waidhan and they are liable to pay the appropriate Central Excise duty as leviable on Bulk Explosives manufactured by them.
(v) M/s. Anil Chemicals and Ind. Ltd. are hereby ordered to pay an amount of Central Excise duty to the tune of Rs. 8,03,72,796.00 (Rupees Eight Crore Three Lakhs Seventy Two Thousand Seven Hundred and Ninety Six only) leviable on the "Bulk Explosives/Prepared Explosives" manufactured and sold by them to M/s. Coal India Ltd./Northern Coal Fields Ltd. Singrauli during the period September' 1994 to May' 1999" and imposed a penalty to the tune of Rs. 4,26,2767,783.00 (Rupees Four Crore Twenty Six Lakhs Sixty-Seven Thousand Seven Hundred and Eighty Three only) under Section 11 AC of the Central Excise Act and a penalty of Rs. 50,00,000 (Rupees Fifty Lakhs only) under Rule 173 Q of the Central Excise Rule, 1944.
11. The appellants have strongly urged before us, the copy of the Board's letter dtd. 31.7.97 relied upon by the Commissioner was not supplied to them. The learned DR for Revenue could not supply the same to us. Therefore, what has prompted the Board to changes its mind in 31.7.97 to have allowed the proceedings to go ahead and the benefit of exemption which they had determined was available to the appellants as communicated vide letter dtd. 7.7.97 should be denied is not available on records. Non supply of letter dtd. 31.7.97, which the Commissioner has recorded in a 'cryptic fashion' and the fact that consequent to earlier letter dtd. 7.7.94 of the Board, the appellants were led to believe that the 'entity is exempted' and they acted on that belief as is apparent from the record of correspondence exchanged with Coal India Limited and other Customers, it can be concluded that the charge in view and non supply of reasons thereof as communicated vide Board's letter dt. 31.7.97 have caused grave prejudice and denial of natural justice to the appellants. The supply of this letter and thereafter the option of the appellants to cross examine the authors thereof and make their submission thereafter is necessary. For this purpose, the order is required to be set aside and remitted back for De Novo adjudication.
12. During the De Novo adjudication, it would be open to the appellants to take up such other issues and pleas as they opt, to defend the show cause notices. In that view of the matter, no determination on other related issues raised before us are being arrived at by us. The appeals are being remitted back to the original authority for De Novo adjudication after setting aside the impugned order.