2018 (5) TMI 1450 - AT - Central Excise

Manufacture - marketing of Hydrogen Gas Cylinders - The department was of the view that filling and marketing of hydrogen gas cylinders with label amounted to manufacture in view of Chapter Note 9 of Chapter 28 of Central Excises and Salt Act as applicable at that time - extended period of limitation - Held that - Tribunal in the case of Goyal M.G. Gases Pvt. Limited vs. CCE, Chandigarh 2016 (1) TMI 1055 - CESTAT NEW DELHI , where it was held that the activity undertaken by the appellant does not amount to manufacture therefore, the appellant is not liable to pay duty. Repacking of gas by the appellant does not amount to manufacture as marketable - demand not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the activity of filling and marketing of hydrogen gas cylinders amounts to manufacture under Chapter Note 9 of Chapter 28 of the Central Excises and Salt Act?
- Whether the appellant is liable to pay duty, interest, and penalty as demanded by the department?

Analysis:
1. The appellant, engaged in marketing hydrogen gas cylinders filled from gas received through a pipeline, appealed against a demand for duty, interest, and penalty. The appellant, earlier registered as a manufacturer, sought to surrender the license and operate as a trader following similar actions by other units. The department contended that the filling and labeling of cylinders constituted manufacture under Chapter Note 9 of Chapter 28 of the Central Excises and Salt Act.

2. The department issued a show cause notice invoking the extended period of limitation, demanding a significant amount from the appellant. The jurisdictional Commissioner confirmed the demand and imposed a penalty. The appellant contested, citing a similar case before the Tribunal and arguing that the activity did not amount to manufacture as per relevant legal provisions.

3. The Tribunal analyzed previous cases and relevant legal provisions. Referring to Chapter Note 5 of Chapter 27 of the Central Excise Tariff Act, it was noted that the process of compression, similar to the appellant's activity, amounted to manufacture. However, Chapter Note 9 of Chapter 28, applicable in this case, did not classify the activity as manufacture.

4. The Tribunal considered the definition of manufacture and the concept of rendering a product marketable to consumers. Citing precedents, it emphasized that the activity of repacking gas into cylinders did not constitute manufacture, especially when the consumers were industrial users or manufacturers, not end consumers. The Tribunal concluded that the gas was already marketable in its original form, and the appellant's actions did not alter this marketability.

5. Based on the analysis, the Tribunal set aside the impugned order, ruling that the appellant was not liable to pay duty. The judgment clarified that the repacking of gas by the appellant did not amount to manufacture as defined under Chapter Note 9 of Chapter 28. Consequently, the demand against the appellant was deemed unsustainable, and the appeal was allowed with any consequential relief.