2016 (1) TMI 1055 - AT - Central Excise

Gas filing activity - Demand on duty - whether the activity undertaken by the appellant amounts to manufacture? - marketability - Held that - As seen that in the case of Shivam Industries (2012 (12) TMI 341 - CESTAT, NEW DELHI) this Tribunal has observed that the adoption of any other treatment rendered the product marketable to the consumer. Admittedly, in this case the consumers are Vanaspati manufacturers who are industrial users or manufacturers. Therefore, the same will not term as consumer. In fact, they are the processors of the goods. In the case in hand, as the buyer are not consumer as per Chapter Note 9 of Chapter 28 of CETA, 1985. Further, we also hold that the gas is already marketable in its original form and the activity undertaken by the appellant does not render the gas marketable which is already marketable. Therefore, we hold that the activity undertaken by the appellant does not amount to manufacture. Consequently, the appellant are not liable to pay duty. - Decided in favour of assessee.

Summary

Issues:
Whether the activity of filling hydrogen gas into cylinders amounts to manufacture under the Central Excise Tariff Act, 1985.

Analysis:
The appellant was engaged in marketing hydrogen gas cylinders filled from gas received through a pipeline. The Revenue contended that this activity constituted manufacturing, leading to duty demands, penalties, and interest. The appellant argued that filling gas did not change its character, citing precedents where similar activities were not considered manufacturing. The Revenue relied on legal provisions stating that rendering products marketable constitutes manufacture.

The Tribunal analyzed the appellant's activities, focusing on the process of compressing, filtering, and dehydrating the gas before filling it into cylinders. The key issue was whether these activities made the gas marketable. Chapter Note 5 of Chapter 27 deemed compression of natural gas as manufacturing. However, Chapter Note 9 of Chapter 28 excluded compressor activities from manufacturing. The Tribunal had to determine if the appellant's activities rendered the gas marketable.

The Revenue's argument likened the appellant's activity to packing/repacking, but the Tribunal found this interpretation unsuitable for the case. Precedents, such as the Ammonia Supply Company case, supported the view that filling gas into smaller containers did not amount to manufacturing. The Tribunal emphasized that the crucial issue was whether the activity made the product marketable.

Referring to the Shivam Industries case, the Tribunal clarified that rendering a product marketable to consumers did not include industrial users or manufacturers. As the gas was already marketable in its original form and the buyers were industrial users, not consumers, the Tribunal concluded that the appellant's activity did not amount to manufacturing. Consequently, the duty demands were set aside, and the appeals were allowed with any necessary relief.

In conclusion, the Tribunal ruled in favor of the appellant, determining that the activity of filling hydrogen gas into cylinders did not constitute manufacturing under the Central Excise Tariff Act, 1985. The judgment highlighted the distinction between rendering products marketable to consumers and industrial users, ultimately leading to the dismissal of duty demands and penalties.