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TMI Blog2023 (8) TMI 936X X X X Extracts X X X X X X X X Extracts X X X X ..... s. These gases fall under Chapter 28 of CETA, 1985. The department was of the view that these activities amounted to 'manufacture' as defined under the Central Excise Act, 1944 read with Central Excise Tariff Act, 1985. The appellant had not taken registration as a manufacturer and was not paying Central Excise duty on the goods (gases) so manufactured. The officers visited the site on 06.12.2012 and conducted verification. It was revealed that:- (i) The appellant was procuring duty paid Liquid Oxygen and Liquid Argon in bulk form and stored the same in bulk containers in their factory premises. The liquid oxygen and liquid argon was then converted into respective gases, and the repacked in cylinders and were cleared to their various industrial consumers. (ii) The appellant procured Carbon dioxide in retail cylinders from suppliers and mixed the Carbon dioxide with the Argon gas in retail cylinders and thus have produced Argon-Carbon dioxide gas mixture and sold in retail cylinders to their consumers. 1.1. According to department, the above activities amounted to 'manufacture' in terms of Chapter Note 9 to Chapter 28 of CETA, 1985 which reads as under: "In re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by department against such order, the same was disposed on monetary limits. (c) Pursuant to the decision passed by Commissioner (Appeals) the appellant requested the department to permit the surrender of registration as a manufacturer. The department vide letter dt. 26.02.2006 accepted the surrender of registration. (d) Similar SCN dt. 7.12.2009 was issued to the appellant's Hyderabad unit for the period 11/2008 to 9/2009 alleging that as per the changed provision of law i.e. Chapter Note 9 to Chapter 28, the activities under taken by the appellant amounts to 'manufacture'. The said Note 9 of Chapter 28 reads as under: "in relation to products of this chapter, labelling or relabeling of the containers or repacking from bulk to retail packs or the adoption of any other process to render the product marketable to the consumer, shall amount to manufacture." The original authority vide OIO No. 2/2010 dt. 18.6.2010 after considering the changed provision of law also, held that the activity does not amount to 'manufacture' and dropped the proceedings. The department filed appeal before the Commissioner (Appeals) and vide OIA No. 38/2010 dt. 30.11.2010 (B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of excise duty. Excise duty, as has been reiterated and explained, is a duty on the act of manufacture. Manufacture under the excise law, is the process or activity which brings into being articles which are known in the market as goods and to be goods these must be different, identifiable and distinct articles known to the market as such. It is then and then only that manufacture takes place attracting duty. In order to be goods, it was essential that as a result of the activity, goods must come into existence. For articles to be goods, these must be known in the market as such and these must be capable of being sold or being sold in the market as such. See the observations of this Court in Union of India v. Delhi Cloth and General Mills Ltd. [1977 (1) E.L.T. (J 199) : 1963 Supp. 1 SCR 586], South Bihar Sugar Mills Ltd., etc. v. Union of India and Ors. [1978 (2) E.L.T. (J 336) : 1968 (3) SCR 21] and Bhor Industries Ltd., Bombay v. Collector of Central Excise, Bombay [1989 (40) E.L.T. 280 (S.C.) 1989 (1) SCC 602]. In order, therefore, to be manufacture, there must be activity which brings transformation to the article in such a manner that different and distinct article comes i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luded in computing the assessable value. The respondent, however, disputed this. Analysing the scope of section 4 of the Act, it was held by this Court that supply of gas cylinders might be ancillary activity to the supply of gases but this was not ancillary or incidental to the manufacture of gases. The goods were manufactured without these cylinders. Therefore, the rental of the same though income of ancillary activity, was not the value incidental to the manufacture and could not be included in the assessable value. Similarly, in my opinion, drums even though these were ancillary or incidental to the supply of fusel oil and styrene monomer, these were not necessary to complete the manufacture of fusel oil or styrene monomer; the cost of such drums cannot, therefore, be included in the assessable value thereof. Furthermore, no cost was, in fact, incurred by the assessee. Drums had been supplied by the buyers." (h) The Ld. Counsel submitted that in the instant case, there is no conversion of gas received in tankers to such an extent where its identity, nature, use and character are changed into a completely new commodity. The process of compression or pumping is basically used f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identifiable by the customer at the time of returning empty cylinder for refilling and the cylinder of the appellant will not get mixed up with the cylinders of any other suppliers. The embossing of name on the cylinders has no relation with the marketability of the gas. The Oxygen gas or Argon gas filled in the cylinder is already a marketable product by itself. (l) The Ld. counsel submitted that in the case of Taxchem Vs. Commissioner of C.Ex Mumbai - 2003 (151) ELT 610 (Tri.-Mumbai) the issue as to labelling for the purpose of marketability was considered. The Tribunal held that mere putting of the name and address on the container of the goods of the consignee and consignor does not amount to labeling. Relevant paras of the Tribunal's decision read as under: "8. Mere putting of the name and address on the container of the goods of the consignee and consignor does not, in our opinion, amount to labelling as it is generally understood and therefore as to be denoted by the notes in question. If putting names and addresses on packages amounts to labelling, every person who writes a letter and puts upon the letter indicated the recipient of his own name and address has to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing would not arise. It thus follows that the product cannot be rendered marketable to a class of customers by the act of labelling or relabelling etc. It continues to be sold in the same class of customers as it would be prior to being labelled or repacked etc. The question of the product being rendered marketable consequent on such label therefore will not arise. Hence it would not be appropriate to say that the labelling or other forms of treatment specified in the notes must be such as to render the product marketable." (m) Further that in the present case, the gas procured by the appellant in tankers cannot be considered as bulk packs. This has been clarified by the Board vide Circular No.910/30/2009-CX : dt. 16.12.2009 and Circular No. 342/58/97-CX dt. 8.10.1997. (n) In the case of Swastik Corporation Vs. CCE Puducherry 2018 (359) ELT 233 (Tri.-Chennai), the Tribunal applied the circular as well as the decision in the case of CCE Vadodara Vs. Vadilal Gases Ltd. - 2017 (346) ELT 161 (SC) to hold that refilling of gas from containers into retail cylinders does not amount to 'deemed manufacture'. (o) The Tribunal in the appellant's own case, Goyal MG Gases Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant's own case in Goyal MG Gases Ltd. Vs. CCE reported in 2015 (325) ELT 768 (Tri.-Del.) considered the very same activity in question and held that it does not amount to 'manufacture'. Relevant para reads as under: "Since in this case gas cylinders supplied to Vanaspati manufacturers who are industrial users, impugned activity not amounting to 'manufacture' and would not be covered under Chapter Note 9 of Chapter 28" Similar view was adopted by CESTAT in another case of the appellant reported in 2018 (361) ELT 921 (Tri.-Chennai). (s) Another allegation is that the activity of mixing of Argon and Carbon dioxide Gases and filling the same into retail cylinders amounts to 'manufacture'. It is submitted that Carbon dioxide and Argon do not chemically react with each other on mixing and these inert gases remain separate even though kept in the same container. There is no lending or barrowing of any electron by either of the gases and the gases retain their individual properties. The individual gases retain their properties and are separately identifiable while in use. When the mixture of argon and carbon dioxide is used in welding, the argon gas creat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ays aware of the activity undertaken by the appellant. The department had accepted to surrender Central Excise registration. (v) In view of above, it is evident that the details of the activity carried out by the appellant was within the knowledge of the department and the appellant has been contesting the levy for last 3 decades. The issue has been decided in favour of the appellant by various courts including the Apex Court. It is further noteworthy that same issue had been subject matter of SCN in Hyderabad unit of the appellant which was after the amendment to Chapter Note 9 to Chapter 28 which. The issue was then decided in favour of the appellant by the adjudicating authority vide OIO No. 2/2010-11 dated 18.06.2010 and also by the Commissioner (Appeals) vide OIA No. 38/2010 (H-IV) (D) (CE) dated 30.11.2010. (w) The appellant has purchased duty paid gases which were sold to industrial users only. Given this, the appellant has to pay duty only on the value addition which too could be recovered from the buyers being the industrial users eligible for cenvat credit. On this factual position no intention to evade the payment of excise duty could be attributed to the appellant i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the extended period has therefore been correctly confirmed. Penalties imposed are also proper. The Ld. AR prayed that the appeal may be dismissed. 4. Heard both sides. 5. The issue to be considered is whether the activity carried out by the appellant is manufacture or not. 6. "Manufacture" is defined in section 2(f) of the Central Excise Act, 1944. "(f) 'manufacture' includes any process,-- (i) incidental or ancillary to the completion of a manufactured product; (ii) which is specified in relation to any goods in the Section or Chapter Notes of the First Schedule to CETA, 1985 (5 of 1986) as amounting to manufacture. (iii) which, in relation to the goods specified in Third Schedule..." From the above definition of 'manufacture' it can be seen that as per 2(f)(ii) the definition includes certain 'deemed manufacture' as envisaged in Sections and Chapter Notes of CETA, 1985. Chapter Note 9 to Chapter 28 (which has been already reproduced) thus gives situations when certain activities in relation to goods falling under Chapter 28 are deemed to be manufacture of goods so as to attract the levy of Central Excise duty. 7. At the cost of repetition, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs into smaller cylinders does not amount to "manufacture" within chapter note 10 of Chapter 28 of CETA 1985 and that the activity does not satisfy any of the ingredients of the legal fiction of 'manufacture' under chapter note 10 to Chapter 28. The Tribunal in para 6 of the said decision held that the assessee was not getting ammonia in bulk packs. They were getting in tankers. The ammonia gas brought in tankers can never be termed as brought in bulk packs. So the assessee was not repacking the goods from bulk packs to retail packs. Accordingly, the activity undertaken by the assessee in filling the smaller container from bulk container viz. tankers can never fall within the fiction of 'manufacture' as envisaged in Chapter Note 10 to Chapter 28. 9.2. Pursuant to this decision of the Tribunal, the Board vide Circular No. 910/30/2009-CX. dt. 16.12.2009 issued clarification that tankers cannot be termed as 'bulk packs' and therefore the activity of transferring goods from tankers into smaller drums cannot be said to be 'manufacture' under Note 10 to chapter 28. 9.3. The Board Circular No. 342/58/97-CX. dt. 08.10.1997 is also noteworthy in this regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said case the facts are such that the appellant (Goyal MG Gases Pvt. Ltd.) was engaged in procuring Hydrogen gas from their suppliers in pipelines and filled the gas into retail returnable cylinders to consumers who are manufacturers of Vanaspathi Ghee. The department was of the view that the activity of filling the gas into small cylinders with the aid of filter, dehydration and compressor amounted to 'manufacture' as per Note 9 to Chapter 28. The Tribunal followed the decision in the case of Ammonia Supply Company (supra) to hold that refilling from bulk to small cylinders will not amount to 'manufacture'. It was also held that the activities undertaken by the appellant does not render the product marketable to the consumer. It was observed that the gas is already marketable in its original form and the activity undertaken by appellant does not render the gas again marketable. Another view expressed by the Tribunal was that the "adoption of any other treatment to render the product marketable to consumer" would not cover an industrial consumer and applies only to the ultimate buyer. 9.6. Identical issue came up for consideration in the appellant's own cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bon dioxide with argon gas in retail cylinders to produce Argon-Carbon dioxide mixture gas is a process by which the gas mixture is rendered marketable and therefore chapter note is attracted which makes the activity 'manufacture'. The Ld. Counsel for appellant has explained that these two gases do not chemically react with each other to form a distinct new commodity. Both the gases retain their separate properties by which the mixture is useful in welding industry. These gases are already marketable and therefore it cannot be said that the process of mixing has made it marketable. 11.1. In the appellant's own case, this point was held in favour of appellant by the Tribunal. The department filed appeal before the Hon'ble Apex Court and vide judgment reported in CCE Vs. Goyal Gases (P) Ltd. and Others 2000 (119) ELT 5 (SC), the Hon'ble Apex Court affirmed the order passed by Tribunal and dismissed the appeal filed by department. 11.2. This third limb of the chapter note along with the other two limbs which have already been discussed were addressed by the Hon'ble Apex Court in the case of Vadilal Gases Ltd. The Hon'ble Apex court approved the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en, M/s. VCL also make mixtures of gases i.e., Argon with Carbon Dioxide, Argon with Oxygen, Argon with Nitrogen, Nitrogen with Carbon Dioxide, Nitrogen with Oxygen, etc., in which gases are mixed in a fixed proportion and the same are also packed in retail cylinders of 6 or 7 cubic metres capacity. After packing of the Nitrogen, Argon, and gas mixtures in retail cylinders, the same are affixed with a label mentioning the name of the product, purity grade, the level of impurities, batch no. and cylinder no. The labels also bear the name of the marketing company - M/s. Vadilal Chemicals Ltd. (M/s. VCL), a sister company, as well as the monogram of Vadilal group. The labels being affixed on the cylinders." 7. Insofar as the first limb of Note 10 of Chapter 28 of the Tariff Act is concerned, even if we proceed on the basis that labelling or relabelling had taken place after transfer of the gases from the bulk containers/tankers to smaller cylinders, Note 10 of Chapter 28 of the Tariff Act mandates that the additional requirement that has to be satisfied so as to attract the deeming provision contained therein is that repacking from bulk packs to retail packs have also taken place. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y undertaken by the assessee, as found by the learned Commissioner himself, and as extracted above, the assessee apart from packing pure Argon and Nitrogen in smaller cylinders is also engaged in the activity of mixing of inert gases (like argon, nitrogen, helium, etc.) with other gases like oxygen, nitrogen, carbon dioxide and making available such combination to the consumers in smaller cylinders. Whether such mixing of the gases in question amount to manufacture has been gone into by the learned Tribunal in Goyal Gases (P) Ltd. v. CCE, Meerut - 2000 (115) E.L.T. 467 (Tribunal). Paragraph 11 of the report in Goyal Gases (P) Ltd. (supra) being relevant may be extracted below:- "Appellants M/s. Goyal Gases (P) Ltd. have stated that they had been initially supplying various gases like liquid Nitrogen, liquid Argon, Hydrogen, Helium, etc. separately but subsequently, on demand from customers they had started supply of such gases in one cylinder as this was considered more economical to the customer as also convenient and time saving. The mixing of oxygen was with inert gases viz., crypton, helium, neon, etc. which did not chemically react with each other. Since the mixture was with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carries the matter no further." 14. While it may be correct that in Goyal Gases (P) Ltd. (supra), the scope and effect of Note 10 of Chapter 28 of the Tariff Act was not specifically under consideration, nonetheless, the conclusion of the learned Tribunal, affirmed by this Court, to the effect that the mixture of an inert gas with oxygen, nitrogen, etc., does not result in creation of a new commodity, marketable as such, would be relevant insofar as the second limb of Note 10 of Chapter 28 of the Tariff Act is concerned. The finding in Goyal Gases (P) Ltd. (supra) that notwithstanding the mixing, the gases retained their individual properties even after being filled up in the same cylinder would clearly demonstrate that a new marketable product does not come into existence by the process of mixing. In this regard, the fact that the two items constituting the mixture are also separately marketable would be relevant in determining the applicability of the second part of Note 10 of Chapter 28 of the Tariff Act to the present case. 15. If that be so, we do not see as to how on the findings recorded by the learned Commissioner with regard to the "manufacturing process" and the data ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omers of the appellant would not have been purchasing helium from the appellant at a price 40% to 60% above the price at which the appellant was purchasing." 17. In the light of the above, we do not see how the decision of this Court in Air Liquide North India Private Limited (supra) can assist the revenue in bringing home the point urged before us in the appeals under consideration. 18. For the reasons aforementioned, the appeals have to fail and the order of the learned Tribunal has to be affirmed, which we hereby do. Accordingly, the appeals are dismissed. The order of the Appellate Tribunal having been affirmed, we do not consider it necessary to decide any of the other issues decided by the learned adjudicating authority, as indicated by us." 12. The above decision applies to the entire issue under consideration before us. Though squarely applicable to the facts of this case, we think that it is necessary not to leave unattended another allegation raised in the SCN. It is alleged that the conversion of liquid form to gaseous form would fall within the ambit of 'adoption of any other treatment to render the product marketable'. The question again is whether a new m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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