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TMI Blog2001 (3) TMI 638X X X X Extracts X X X X X X X X Extracts X X X X ..... Testing and Cleaning charges of the Oxygen Gas Cylinders to their respective buyers. It has been alleged that the appellant s process of Inspection, Testing and Cleaning were also amounting to manufacture as defined in Section 2(f) of the Central Excise Act, 1944, as it includes any process incidental or ancilliary to the completion of manufactured product. When the appellant reduced the price of Gas after introduction of Adv. rate in place of specifie rate w.e.f. 1-3-1994. That, on investigation, it was found that in M/s. Vikas Industrial Gases Ltd., Vikas Nagar, Sonbhadra the assessable value of Gases ranges from Rs. 10 to 14/- per cubic Meter whereas in the appellant s case the assessable value ranges from Rs. 6/- to Rs. 7/- per cubic metre. Accordingly, a show cause notice dated 28-1-1999 was issued under Rule (9) read with Section 11A(1) of the Central Excise Act, 1944, 173Q read with Sec. 11AC and Section 11AB of the Central Excise Act, 1944 for the violation of the provisions of Rule (9) read with Section 4 of the Act. 3. Pursuant to above show cause notice the above impugned order was passed, confirming the demand of Rs. 12,31,346/- under Rule 9 and Section 11A(2) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Cleaning charges of cylinders without having any specific records and thus raised and realised the amount of debit notes in the guise of inspection, testing and cleaning charges after levy of Adv. duty w.e.f. 1-4-1994. 6. The Adjudicating Authority in his findings has observed that inspection, testing and cleaning of cylinders are governed under Gas Cylinder Rules, 1981 which are framed under the Explosive Act where each cylinder shall be labelled with the name of Gas and the name and address of the person by whom the cylinder was filled with Gas and also following the procedures as laid down in Rules 39 to 44 of Gas Cylinder Rules, 1981. Thus the above processes are mandatory and ancilliary to manufacture and the Adjudicating Authority has made findings that the process of inspection, testing and cleaning of cylinders prior to filling the Gas amounts to manufacture under Section 2(f) of Central Excise Act. He has also observed that though the cost of packing as mentioned in para 3(10)(iv) of defence reply of the appellants, has not been included in the assessable value being durable and returnable, yet the expense, incurred in making them in a position to be used shall be inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also will be aware of the implications of Gas Cylinder Rules, 1981. The Adjudicating Authority has observed that it has been admitted by the appellants that Inspection, Testing and Cleaning of Gas Cylinders are mandatory and ancilliary to manufacture and as per the decision of Apex Court in the case of C.C.E. v. Rajasthan State Chemical Works (S.S.) E.L.T. 444 (S.C. 3-Member Bench Order) - 1991 (4) ECC-473 - AIR 1991-SC-2222, the issue has been defined as under :- Any activity or operation which is an essential requirement and is so related to the further operation for end result, would be a process in or in relation to manufacture. 10. Thus it is to be examined whether the durable and returnable gas cylinders when Inspected, tested and cleaned separately then as a result of this activity or operation whether it will be called an essential requirement and will be related to the further operation of end result i.e. manufacture of Gases and amounts to manufacture under Section 2(f) of the Central Excise Act, 1944. Now it has to be examined whether the work of inspection, testing and cleaning of Gas Cylinders is incidental or ancilliary to the completion of a manufactured produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of empty bottles of Aerated waters returned from customers and amount realised for sorting, cleaning and examination of bottles is not includible in the assessable value of the aerated water since such activities relate to preparing the bottles for bottling and cannot be treated as an activity of manufacturing process of Aerated water. 12 In the case law cited at Sl. Nos. 2 and 3 and 4 above it has been held that Service and Maintenance charges of Cylinders and Tonners of durable and returnable nature for supply of Chlorine Gas etc. is not includible in assessable value. That in the Board s circular cited at Sl. No. 5 above, it reads :- In view of the above the two Board s circulars dated 2-2-1988 and 10-5-1982 cited above in para 1 may to treated as withdrawn and charges like the retention charges, the rental and charges incurred for maintenance and service of the durable and returnable containers may not be included in the assessable value. 13. Thus it has been clarified that in case of durable and returnable containers their value is not required to be included in the assessable value and so the question of including any repair and maintenance charges of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rges will form part of assessable value of Gases manufactured by the appellants. How these charges will come into play as manufacturing cost and manufacturing profit of Gases without any proper explanation and detailed discussions. The Gas Cylinders (Packing material which are durable and returnable in nature) are inspected, tested and cleaned for filling the Gases. If these are not taken into use even after Inspection, testing and cleaning, they will be as packing material and will have no relativity with the process of manufacture of Gases. The Adjudicating Authority has also failed in investigating the case whether this Inspection, testing and cleaning charges are not the charges which have been derived from the manufacturing cost and manufacturing profit by the appellants by any factual record or evidence. If the cost of Gases have been lowered by the appellants, the same should have been investigated by the Department through facts on record and evidence and should have been discussed at length. The Adjudicating Authority has based the reliance only on debit notes issued in respect of Inspection, Testing and cleaning charges which, as discussed in foregoing paras, is not the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to their customers. 18. I find that the above letter of M/s. Vikas Industrial Gases has got to meaning in the light of show cause notice issued to the appellants. In the show cause notice there is no allegation that appellants have recovered a part of the price of gas in a clandestine manner by not showing the same in the books of accounts. Whatever amounts were realised from customers have been duly shown in the books of accounts of the appellants. Here the dispute is confined to whether the inspection, testing and cleaning charges recovered by the appellants are part of the assessable value or not? There is no dispute that inspection, testing or cleaning of cylinders has in fact been done. Thus the cleaning and service charges of gas cylinders of durable and returnable nature do not form part of assessable value as per various judgments of Hon ble Supreme Court, the Tribunals and the Board s Circular cited supra. 19. In the appellant s own case of M/s. Rewas Gases (P) Ltd., Waithan, Sidhi, M.P. the Commissioner Central Excise (Appeals), Bhopal, have passed his order-in-appeal No. 625-CE/BPL/2000, dated 4-5-2000 that service charges incurred on cylinders are not includible in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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