H.R. Syiem, Member (T)

1. The Collector of Central Excise (Appeals), Bombay decided in his Order-in-Appeal No. M-2420/AUR-80/84, dated 4th December, 1984 that prilled ammonium nitrate was not liable to duty. The factory M/s. Anil Chemicals Pvt. Limited, Aurangabad buy ammonium nitrate of 75% to 82% and by the process of prilling concentrate, convert the ammonium nitrate to 99%. This process of concentration was held by the Assistant Collector of Central Excise, Aurangabad, to be a process of manufacture and he directed the factory to pay duty of Rs. 74,846.82 by his Order No. V. 68(4)-5/TB/84/1443, dated 21st February, 1984.

2. The factory buys ammonium nitrate from M/s. Rashtriya Chemicals and Fertilizers. This ammonium nitrate is cleared on payment of duty under item 68. The Asstt. Collector said that duty paid 75% concentrated ammonium nitrate melt is processed and converted into prilled ammonium nitrate. The ammonium nitrate melt cannot be used as such unless water is evaporated. The end-product manufactured by the party is used for different purposes such I as raw materials for explosives, drug industries, textile industries and even though it is a physical conversion, the conversion of ammonium nitrate melt to prilled ammonium nitrate will amount to manufacture as per the provisions of Section 2(f) of the Central Excises and Salt Act, 1944. The ammonium nitrate melt as such cannot be used for the purposes for which prilled ammonium nitrate is used.

3. The Appellate Collector, however, differed from this view and said that once a product had paid duty under Item 68, it cannot be subjected to the same duty a second time as long as it remained in that heading He depended for his decision on a number of decisions, namely, 1982 E.L.T. 10 (Bombay), Tribunal decision in 1984 (3) ETR 734 and Bombay High Court decision in 1977 E.L.T. J 34, M/s. Empire Dyes and Manufacturing Co., Tribunal decision in 1983 (2) ETR 147 Golden Paper.

4. The learned Counsel for the department quoted the decisions of the Supreme Court in DCM Civil Appeal No. 168-170 of 1980 and the South Bihar Sugar Mill case also of the Supreme Court Civil Appeal No. 289-311/65-MANU/SC/0112/1968 : AIR 1968 S.C. 922 : 1978 E.L.T. (J 336) (S.C.). He argued that in these two judgments the Supreme Court laid down the rule that if a new product has arrived with a new name, character or use, there has been a manufacture and central excise duty is attracted to that goods. The Bombay High Court in 1983 E.L.T. 1736 New Shakti Dye Works Pvt. Limited approved the recovery of duty on processed cotton fabric even though the base grey fabric had been subjected to duty once already. The Andhra High Court in MANU/AP/0075/1982 : 1984 (15) E.L.T. 32 Brooke Bond India said that chicory coffee mixture was a distinct commercial commodity differing from the two ingredients, chicory and coffee, and therefore, was liable to duty under Item 68 of the central excise tariff. He read the article on prilling in the Kirk-Othmer ENCYCLOPAEDIA. He said that this was not a fertilizer, there has also been a chemical process of coating with oil and there was a process of removal of water. A new product has emerged and the fertilizer is converted into an explosive etc. He then quoted 1984 E.L.T. 434 Indian Cable Co. and MANU/CE/0106/1984 : 1984 (18) E.L.T. 319 Lallubhai Amichand. The Tribunal has ruled that aluminium sheets and aluminium circles are not commercially the same articles. It ruled that circles should be treated as manufactures and that they were liable to duty even if made from duty paid sheets. He next quoted 1983 E.L.T. 1192 and added to them, 1984 E.L.T. 317 where even tyre scraps were ruled by the Tribunal to be manufactures.

5. The learned Counsel for M/s. Anil Chemicals said that the Appellate Collector's order have not been refuted by the department. The department argues that the prilling is done in a factory costing crores of rupees but it is impossible to see what this has got to