Per S.L. Peeran : The appellants are aggrieved with the order-in-original dt. 29.12.87 passed by the Collector of Central Excise & Customs, Bhubaneswar. By this order, the ld. Collector has confirmed duty demand of Rs. 17,297.28 on 654.2 FC of Liquid Oxygen Explosives, valued at Rs. 1,15,315.26 manufactured and issued by the assessee to M/s. Orissa Mining Corpn. during the period from 1.3.86 to 31.5.86 under Rule 9 (2) of the Central Excise Rules, 1944 read with Section 11A of the Central Excise & Salt Act, 44. For the contravention of the various provisions of the Central Excise Rules, the Collector has imposed a penalty of Rs. 17,000/- under Rule 173Q of the Central Excise Rules, 1944. The facts of the case are that the assessee had obtained L-4 Licence on 30.5.86 for manufacture of Liquid Oxygen Explosives, though they started manufacturing liquid oxygen explosives from earlier period. During the months of March, April and May'86, they manufactured and cleared 280.4 FC, 216.0 FC and 157.8 FC of liquid oxygen explosives and cleared the same to M/s. Orissa Mining Corpn. The department proceeds on the ground that the liquid oxygen explosives is a manufactured product attracting Central Excise Duty under Chapter 36 and is chargeable to duty @ 15% ad valorem. The department also relied on the assessee's letter dt. 8.9.86, wherein they have claimed the exemption from duty under Notification No. 179/77 dt. 18.6.77 on the ground that the same was manufactured without the aid of power. The ld. Collector in his order has held that the assessee is aware from 1.3.86 about liquid oxygen explosives being not exempted from duty and therefore, they were required to have taken licence and has held that they have suppressed the facts of production and also not recording the details in the statutory records, and by not submitting the price list and classification list, and also not clearing the goods under cover of gate pass and on payment of duty in P.L.A. The ld. Collector has also held that they were not entitled to the benefit of Modvat credit, they had not filed any declaration.

The appellants did not appear for hearing but instead sought the case to be decided on merits. The appellant's stand before the Collector is that they have been clearing the Liquid Oxygen Explosives for many years without payment of duty, since the products were not exigible goods. It was their plea that no manufacturing process is undertaken for the production of liquid oxygen explosives. The soaking of jute stick powder in bags is only a mean for blasting at the site. They had pointed out that there is no specified premises for the soaking of jute stick powder bags in the liquid oxygen. The actual premises where blasting was done falls quite often under different Central Excise jurisdiction far apart from their various depots including Deitari. They have pleaded that the jute stick powder bags soaked in liquid oxygen have short shelf life. That they are required to be used at a specified time and place and the process of soaking bags to be arranged accordingly. Therefore, they had stated that the item cannot be considered as marketable item and levy of excise duty does not arise. They had further contended that Liquid Oxygen is not manufactured exigible goods falling within the meaning of Chapter 36 of the Tariff Act under the description of Prepared Explosives of Central Excise Tariff Act, 1985 read with Section 2 (F) of Central Excises & Salt Act, 1944. They have stated that when the Finance Bill for 1986-87 was passed, they were little bit confused with the' description 'Prepared Explosives' and as abundant precaution they voluntarily submitted an application for Central Excise, Licence on 20-5-86, which was granted on 30.5.86. Therefore, they had no intention to suppress any fact before Government authorities. They have submitted that the material item is not dutiable as per Central Excise Act, and that they had discharged all the duty liabilities arisi