S. Duggal, Member (J)

1. This matter, by way of a revision petition, filed by Pyrites Phosphates Chemicals Ltd., a Government of India Undertaking, before the Central Government under section 36 of the Central Excises and Salt Act, 1944, has been transferred to the Tribunal, to be disposed of as an appeal because of provisions of section 35P of the said Act. It is accordingly being taken as such for disposal.

2. The appellant is stated to be engaged in mining and marketing of phosphorite, and one of the area of its activities is Mussoorie Phosphorite Deposits, commonly known as Mussoorie-Phos. They state to have commenced their operations some time in September, 1969 but in the beginning, they were marketing the run of mine in its virgin form without any treatment but in the year 1973, they started crushing of the rock phosphate mine, and marketed the same as mineral fertilisers.

3. Some time in May 1975, they addressed a letter to the Superintendent, Central Excises, Dehradun for clarification as to whether their preparation of the fertilisers, the process whereof was explained, attracted the provisions of excise laws, including obtaining of licence and payment of excise duty and it was on this enquiry that the concerned Superintendent of Excise intimated to them that rock fertilisers fell under Tariff Item 14HH, and the same was excisable, as such. They were also advised by means of subsequent letter dated 28/30-6-1975 to obtain a licence, further reiterating the stand that excise duty was payable on this product known as Rock Phosphate, including all past clearances and the appellant was directed to make a note of the said fact and proceed accordingly. This correspondence was followed by a notice of demand dated 14-9-1977, revised subsequently by means of notice dated 27-12-1977, whereby the appellant was called upon to show cause as to why duty calculated at Rs. 35,04,904.44 be not paid, which calculation was made on the basis of price list as on 15-9-1975 approved by the proper officer. The original demand was under rule 9 of the Central Excise Rules, to which rule 10 was added in the subsequent notice.

4. The appellant contested this demand by filing a detailed reply, as reproduced in the Order-in-Original on the following pleas :-

(1) That their was a Government of India Undertaking.

(2) That, though they started mining operations in December, 1959, but actual marketing of crushed phosphates was started in August 1973 and prior to that ROM was being marketed in its virgin form.

(3) That ROM and phosphorite were not specified in the First Schedule of the Central Excise Tariff and therefore no duty was leviable on the goods cleared in virgin form which was cleared to the extent of 14,926.695 M.T.

(4) That, excise duty was chargeable only on the goods cleared and not on goods manufactured.

(5) That they had incurred storage, transit, crushing, grinding and handling losses and no duty was chargeable on the quantity so lost.

(6) That, as a result of crushing and grinding there was a change in the physical form of phosphorite mined by them and in the absence of any chemical treatment it cannot be stated that any new product came into being and that mere change in the form did not amount to manufacture.

This point was sought to be fortified by reference to a number of Supreme Court and High Court Rulings.

(7) That, it was on their own initiative that they had sought clarification from the Department whether their product was dutiable or not and that on being advised the rock phosphate had been classified as a fertiliser; they started paying duty from 1-4-1976 although they were not convinced that duty was payable on their product.

(8) That, even the ground phosphorite could not be classified as a General Fertilizer as it could be used as a Fertilizer only in selected soils whereas chemical fertilizers can be used in all types of soils.

(9) That, under rule 9(2) duty could be demanded within the period specified in rule 10 and that pe