2017 (6) TMI 712 - AT - Central Excise

Manufacture - Whether the activity of transfer of Acetic acid from tankers to 35 Kgs Carbuoys amounts to manufacture or not in terms of Note 11 of Chapter 29 of the CETA? - Held that - the Board has clarified vide Circular No.910/30/2009-CX dated 16.12.2009 that the activity does not amount to manufacture. Once it is found that in terms of the said Chapter Note, the activity does not amount to deemed manufacture, the other issue whether the assesse-respondent is eligible for exemption under N/N. 38/97 CE dated 27.6.1997 and N/N. 9/98 CE dated 2.6.1998, does not survive for consideration. Appeal allowed - decided in favor of assessee.

Summary

Issues involved:
1. Whether the transfer of Acetic acid from tankers to 35 Kgs Carbuoys amounts to manufacture.
2. Availability of benefit of Exemption Notification for the activity of transfer.

Analysis:
1. The main issue in this case is whether the transfer of Acetic acid from tankers to 35 Kgs Carbuoys amounts to manufacture as per Note 11 of Chapter 29 of the Central Excise Tariff Act. The assessees were registered as a Dealer for issuing Modvatable invoices and procured Acetic acid in tankers from M/s EDI Parry (I) Ltd. The goods were then transported to their premises and transferred to 35 Kgs carbuoys with proper labeling. The statutory records accounted for all receipts and disposals. The question is whether this activity constitutes manufacturing under the relevant provisions.

2. Another issue raised is the availability of the benefit of Exemption Notification if the activity of transferring the acid to the containers (carbouys) of 35 Kgs is considered as manufacturing. If the activity does not amount to deemed manufacture as per Chapter Note 11, then the question of eligibility for exemption under specific notifications does not arise for consideration. The relevant Chapter Note states that certain treatments like labelling or repacking from bulk packs to retail packs amount to manufacture.

3. The Board clarified through Circular No.910/30/2009-CX that transferring goods from tankers into smaller drums does not constitute manufacturing. The Circular referred to a previous judgment of the Tribunal in the case of Ammonia Supply Co. Following this, the Supreme Court in a recent judgment involving similar circumstances held that gases coming in tankers were not considered bulk packs, and repacking/relabelling did not amount to manufacture. The Supreme Court also approved the Tribunal's decision in the Ammonia Supply Co. case, noting that the Tribunal's order had attained finality.

4. Considering the above precedents and legal interpretations, the Tribunal found that since the activity of transferring Acetic acid did not amount to deemed manufacture, there was no basis for a duty demand. Consequently, the question of the availability of exemption did not require determination. As a result, the Tribunal set aside the Order-in-Appeal and allowed the appeal filed by the assessee, while dismissing the Department's appeal. The cross-objection filed by the respondent against the Department's appeal was also disposed of accordingly.