V.P. Gulati, Member (T)

1. This is an appeal against the order of Collector of Central Excise, Hyderabad. The issue involved in the appeal is the classification of ANFO. The product is produced by mixing ammonium nitrate with fuel oil and used for the purpose of blasting of rocks. This appeal was heard along with other appeals on the same issue in the case of M/s. Singareni Collieries Ltd., in Appeal Nos. E/462/88-C, E/2577/87-C and the matter was argued by another advocate on behalf of the appellants in that case.

2. In the proceedings in this case, a show cause notice was issued on 7.4.1987 and the duty was demanded in respect of ANFO produced and captively consumed by the appellants for the period upto 9th February, 1987 as prepared explosives under Heading 3601.00 upto 9.2.1987 and Heading 3602.00 from 10.2.1987. They were alleged to have manufactured the goods without the Central Excise licence and cleared the same without payment of duty and observing the necessary Central Excise formalities as required under the Central Excise Law. Contravention of Rules, 9(1), 173B, 173C, 52A, 173G, 174 of the Central Excise Rules, 1944 was indicated and the duty was demanded under Rule 9(2) read with Section 11A of the Central Excises and Salt Act based on the value under Rule 6A(ii) of the Central Excise Valuation Rules, 1975. Two show cause notices were issued by the Assistant Collector. The Collector adjudicated the case and duty was demanded from the appellants for the period set out in the show cause notice and also levied a penalty of Rs.5,000/- on the appellants.

3. The learned Consultant for the appellants pleaded that the goods produced by the appellants were a simple mixture of ammonium nitrate and furnace oil and that the Collector himself is not clear as to the nature of the goods produced as at one place he has described the goods as compound while at the other place, he has described the same as a mixture. He pleaded that the goods are only a simple mixture of the two ingredients and the same has not been refuted by the Collector. He pleaded that the appellants plea that the goods were not an explosive was not refuted by the Collector and he referred to para 7 of the order of the Collector. He pleaded that the Collector took note of the goods as described in the Chemical Dictionary by Gessner G. Hawley without communicating the same to the appellants in the show cause notice and to that extent, he pleaded that the appellants were denied the benefit of meeting the point in this regard. He also pleaded that the goods were not marketable and these were prepared for immediate use by the appellants. He pleaded that it was for the Department to prove that the goods were marketable. The learned Consultant during the course of arguments, also pleaded that the appellants were eligible to benefit of Notification No. 281/86 dated 24.4.1986 but when it was pointed out to him that this claim was not made before the lower authorities and also this ground has not been taken in the grounds of appeal and that no basis has also been laid by the appellants in the facts of the case, he withdrew his plea stating that he does not press the same.

4. He pleaded that the part of the demand was barred by limitation as in their case, the demand could be raised only for 6 months period reckoned from the date of receipt of show cause notice by them and that there was no warrant for raising demand for extended time limit under Section 11A. He pleaded that the Department itself was in doubt as to whether the goods were leviable to duty or not. In this connection, he cited the letter of the Inspector of Central Excise, Mancherial sent to the appellants and drew our attention to the relevant portion reproduced below for convenience of reference.

It has been clarified by the Central Board of Excise Customs that ANFO is appropriately classifiable under Chapter 36 of Central Excise Tariff Act, 1985 as explosive. Hence, you are requested to observe a