ORDER

The appellants manufacture explosives from ammonium nitrate melt 80% at a plant in Rourkela, Orissa. The said ammonium nitrate is purchased from SAIL, which also has a plant in Rourkela.

2. On 11th June, 1969 an Exemption Notification under the Central Excises and Salt Act, 1944, (No. 164/1969) was issued by the Central Government exempting ammonium nitrate from the whole of the excise duty leviable thereon if it was intended to be used in the manufacture, inter alia, of explosives, provided that the procedure set out in Chapter X of the Central Excise Rules, 1944, was followed. The appellants applied for a licence under the said Chapter X in respect of the said ammonium nitrate for use in the manufacture of explosives. The licence having been granted, the appellants enjoyed the benefit of the said Exemption Notification.

3. At all relevant times, ammonimu nitrate was classified as a fertiliser under Tariff Item 14HH. On 16th April, 1977 a show cause notice wa issued to SAIL by the Superintendent in the Office of the Assistant Collector of Central Excise, Rourkela, to show cause why ammonium nitrate should not be reclassified under Tariff Item No. 68. On 10th August,