2024 (7) TMI 1312 - SCH - Central Excise

Levy of Excise Duty - Process amounting to manufacture or not - activity of filling and marketing hydrogen gas cylinders - HELD THAT - In the instant case, the process involved is that the gas received by the appellant through the pipeline has some accumulation of moisture and in order to remove the same from the gas, the compressor has an inbuilt system of drying the moisture. The treatment employed by the respondent-herein is oil filtration for the removal of moisture from gas by drying the inbuilt system of compressing gas into the cylinders. The said process does not amount to a manufacturing process. There are no merit in the appeal. Hence, the appeal is dismissed.

Summary

Issues Involved:
1. Whether the activity of filling and marketing hydrogen gas cylinders constitutes manufacturing under Chapter Note 9 of Chapter 28.
2. Whether the respondent-assessee is liable to pay excise duty on the activity undertaken.

Analysis:
1. The main issue in this case was whether the process of filling and marketing hydrogen gas cylinders by the respondent-assessee constituted manufacturing as per Chapter Note 9 of Chapter 28. The respondent-assessee argued that their activities did not amount to manufacturing as they only compressed and filled the gas into cylinders without altering its classification under the Central Excise Tariff Act. The CESTAT, in its order dated 20.03.2018, held that the activity undertaken by the respondent-assessee did not amount to manufacturing, thereby ruling in favor of the respondent-assessee.

2. The appellant revenue contended that the filling and marketing of hydrogen gas cylinders with labels constituted manufacturing under Chapter Note 9 of Chapter 28, leading to the issuance of a show cause notice demanding excise duty and penalty. However, the Supreme Court, in its judgment, analyzed the process involved in detail. The Court noted that the process employed by the respondent-assessee, which included removing moisture from the gas through oil filtration during compression, did not amount to a manufacturing process. Consequently, the Court dismissed the appeal filed by the appellant revenue, upholding the CESTAT's decision that the respondent-assessee was not liable to pay excise duty on the activity undertaken.

3. The Court's decision was based on the interpretation of the manufacturing process under Chapter Note 9 of Chapter 28 and the specific activities carried out by the respondent-assessee in filling and marketing hydrogen gas cylinders. By analyzing the nature of the process and the absence of any substantial alteration in the gas during the activity, the Court concluded that the respondent-assessee's actions did not fall within the ambit of manufacturing as defined under the Central Excise laws. As a result, the appeal was dismissed, and the respondent-assessee was not held liable to pay excise duty on the said activity.

4. The judgment highlights the importance of a nuanced understanding of manufacturing processes and the specific activities involved in determining the liability to pay excise duty. By examining the technical aspects of the process undertaken by the respondent-assessee and comparing it with the legal definition of manufacturing, the Court provided a comprehensive analysis that clarified the applicability of excise duty in this case. The decision serves as a precedent for similar cases involving the classification of activities under excise laws and underscores the significance of a detailed examination of the factual and legal aspects in such matters.