2024 (10) TMI 1127 - AT - Central Excise

Process amounting to manufacture or not, in terms of note 9 to chapter 38 of the Central Excise Tariff Act, 1985 - activity undertaken by the appellants in filling of imported Hepta Propane / FM-200 gas from bulk mother container to empty cylinders of different sizes - clearance of impugned goods are liable to pay Central Excise duty or not - levy pf penalty. HELD THAT - The records of the case indicate that the imported gas is refilled into seamless cylinders with super pressure in order to obtain the required 25 bar or 360 per square inch parameter, by use of nitrogen gas. Such filling up of container under heavy pressure cannot be equated to a process of treatment to render the product marketable, since there is no perceptible change brough out in the imported product. The facts of the case indicate that the imported FM 200 gas and nitrogen gas remained as it is, after they were refilled into the seamless cylinders. Therefore, it is opined that the assertion made by the learned Commissioner (Appeals) for treating the process of refilling as amounting to manufacture is not duly supported by factual evidences or any supporting technical documents. The Circular No. 342/58/97-CX dated 08.10.1997 was issued by CBEC in the specific context of doubts raised in respect of receiving of liquid chemicals in bulk in containers and offloading the same into available empty vessel and consequent delivery of these materials in the very same condition to customers against orders. It had been specifically clarified that the question of whether an operation amounts to repacking or not, has to be decided on facts; and activities such as simply transferring the material from one container to another container may not be categorised under the scope of this description packing for deeming it as manufacture. The impugned order, insofar as it had categorised the activity undertaken by the appellants as amounting to manufacture, in the present case is not legally sustainable. It is found that on a similar set of facts, in the case of M/S 3M INDIA LTD., SHRI SAMEER AGARWAL, SHRI SUNIL BANTHIYA, SHRI D.K. SURESH, SHRI AMIT LAROY, SHRI B. SRIKANTH, SHRI MILIND JOGLEKAR, M/S INDI CANS AND SHRI J. CHANDRAKANTH VERSUS COMMISSIONER OF CENTRAL EXCISE, BANGALORE-III AND OTHERS 2023 (2) TMI 729 - CESTAT BANGALORE , the Co-ordinate Bench of the Tribunal has dealt with the similar issue of deemed manufacture as per chapter note 38 and have held that injecting raw material into cans would not amount to adopting any treatment on the raw materials to render the product marketable. The Hon ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE, VADODARA VERSUS M/S VADILAL GASES LTD. ORS. 2017 (1) TMI 1311 - SUPREME COURT have held that mixing of gases and making them available to consumers in smaller cylinders, did not make gases marketable as they did not chemically mix/react with each other and retained their character, without any new commodity being created and hence this would not amount to manufacture in terms of the chapter note. Thus, activity undertaken by the appellants in filling of imported Hepta Propane / FM-200 gas from bulk mother container to empty cylinders of different sizes is not a process of manufacture in terms of note 9 to chapter 38 of the Central Excise Tariff Act, 1985. Therefore, the impugned order passed by the learned Commissioner (Appeals) cannot be sustained on merits. Accordingly, the impugned order is set aside and the appeal is allowed in favour of the appellants.

Summary

Issues Involved:

1. Whether the activity of filling imported Hepta Propane / FM-200 gas into empty cylinders amounts to 'manufacture' under Note 9 to Chapter 38 of the Central Excise Tariff Act, 1985.
2. Whether the clearance of the impugned goods is liable for Central Excise duty and consequential penal action under the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Manufacture under Note 9 to Chapter 38 of CETA:

The primary issue was whether the appellants' activity of filling imported FM-200 gas into cylinders constitutes 'manufacture' as per Chapter Note 9 to Chapter 38 of the Central Excise Tariff Act, 1985. The Tribunal examined the definition of 'manufacture' under Section 2(f) of the Central Excise Act, 1944, which includes processes incidental to the completion of a manufactured product or specified in chapter notes. The chapter note in question deems activities such as labeling, relabeling, repacking from bulk to retail packs, or any other treatment rendering the product marketable as 'manufacture.'

The Tribunal found that the appellants' activity did not involve labeling or repacking in the sense intended by the chapter note. The process was identified as filling gas into cylinders of varying sizes, which did not equate to repacking from bulk to retail packs. Furthermore, the Tribunal noted that the imported gas remained unchanged after being filled into the cylinders, and the addition of nitrogen gas was merely to maintain pressure, not to alter the product's marketability or characteristics. Thus, the Tribunal concluded that the activity did not constitute 'manufacture' under the relevant chapter note.

2. Liability for Central Excise Duty and Penal Action:

Given the conclusion that the activity did not amount to 'manufacture,' the Tribunal addressed the issue of excise duty liability. Since the activity was not considered manufacturing, the goods were not subject to Central Excise duty under the provisions of the Central Excise Act, 1944. Consequently, the appellants were not liable for any penal action related to duty evasion.

The Tribunal referred to previous judicial pronouncements and CBEC circulars, which clarified that mere transferring of materials from one container to another does not constitute repacking or manufacturing. The Tribunal also cited similar cases where the mixing or filling of gases did not result in a new marketable product, reinforcing the decision that no manufacturing took place.

Conclusion:

The Tribunal set aside the impugned order, ruling in favor of the appellants. It determined that the activity of filling FM-200 gas into cylinders did not constitute 'manufacture' under Chapter Note 9 to Chapter 38 of CETA, and therefore, the goods were not liable for Central Excise duty or penalties. The appeal was allowed, and the order dated 28.10.2013 was annulled.