2025 (7) TMI 1333 - AT - Central Excise

Activity amounting to manufacture or not - receiving hydrogen gas through a pipeline filling the same by compressing into cylinders which are supplied to various consumers - marketibility - HELD THAT - Multiple Benches of the Tribunal have decided the issue in favour of the appellants. It is found that in the appellant s own case 2016 (1) TMI 1055 - CESTAT NEW DELHI the Principal Bench of the Tribunal held In the case in hand as the buyer are not consumer as per Chapter Note 9 of Chapter 28 of CETA 1985. Further we also hold that the gas is already marketable in its original form and the activity undertaken by the appellant does not render the gas marketable which is already marketable. Therefore we hold that the activity undertaken by the appellant does not amount to manufacture. Consequently the appellant are not liable to pay duty. It is found that this Bench vide Final Order cited above relied on the decision of the Principal Bench. Though the Hon ble Apex Court has kept the issue open on merits there is no stay granted on the operation of the above order. Appeal allowed.

Summary

ISSUES:

Whether the activity of receiving hydrogen gas through pipeline, compressing it, removing moisture and oil filtration, and filling into cylinders amounts to "manufacture" under the Central Excise Tariff Act, 1985.Whether the activity undertaken by the appellant renders the product marketable to the consumer within the meaning of Chapter Note 9 to Chapter 28 of the Central Excise Tariff Act, 1985.Whether affixing trademark and selling compressed hydrogen gas cylinders to industrial users (manufacturers of vanaspati ghee) constitutes manufacture liable to central excise duty.Whether the Tribunal can take a different view on the issue when the Hon'ble Apex Court has kept the question of law open on merits but has not granted stay on operation of prior Tribunal orders.

RULINGS / HOLDINGS:

The activity of compressing hydrogen gas, including oil filtration and moisture removal, and filling it into cylinders does not amount to "manufacture" as per Chapter Note 9 of Chapter 28 of the Central Excise Tariff Act, 1985, because the gas is already marketable in its original form and the activity does not render it marketable to the consumer.The consumers in this case are industrial users (manufacturers of vanaspati ghee), who do not qualify as "consumers" under the relevant Chapter Note; therefore, the treatment does not amount to manufacture by rendering the product marketable to a consumer.Affixing trademarks and selling compressed hydrogen gas cylinders to manufacturers does not constitute manufacture liable to central excise duty.When the Hon'ble Apex Court keeps an issue open on merits without granting stay on operation of prior Tribunal orders, the Tribunal is bound by its earlier decisions and cannot take a different view on the same issue.

RATIONALE:

The Court applied the statutory framework under the Central Excise Tariff Act, 1985, particularly Chapter Note 9 of Chapter 28, which defines "manufacture" to include processes that render a product marketable to the consumer.Comparison was made with Chapter Note 5 of Chapter 27, where compression of natural gas is held to amount to manufacture, but Chapter Note 9 of Chapter 28 explicitly excludes such compression from being manufacturing activity if it does not render the product marketable to the consumer.Precedent decisions of multiple Benches of the Tribunal, including a Principal Bench ruling and the Shivam Industries case, were relied upon to distinguish industrial users from consumers and to hold that processes done for industrial users do not amount to manufacture.The Hon'ble Apex Court's decision to keep the question open on merits was interpreted as not permitting the Tribunal to deviate from its settled position; the Tribunal emphasized that the Apex Court's openness does not amount to a stay or reversal of existing Tribunal rulings.