TMI Blog2023 (8) TMI 936X X X X Extracts X X X X X X X X Extracts X X X X ..... to Chapter 28 held that the activity does not amount to 'manufacture'. After appreciating the facts and following the decisions, it is opined that the department has failed to establish that the activities undertaken by the appellant amount to 'manufacture'. The appellant succeeds on merits of the case. Time Limitation - HELD THAT:- The SCN has been issued invoking extended period. There were decisions in favour of the appellant and their request to surrender the registration of manufacture was also accepted by the department. Further the issue is purely interpretational in nature. No positive act of suppression has been established against the appellant - there are no grounds for invoking the extended period. The issue on limitation is also answered in favour of appellant. The impugned order is set aside. The appeal is allowed. - HON BLE MS . SULEKHA BEEVI C.S. , MEMBER ( JUDICIAL ) And HON BLE MR. VASA SESHAGIRI RAO , MEMBER ( TECHNICAL ) Mr. Pawan K. Pahwa , Advocate For the Appellant Mr. R. Rajaraman , Assistant Commissioner ( A. R. ) For the Respondent ORDER ORDER : Per Ms. SULEKHA BEEVI , C.S Brief facts are that the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the liquid gases contained in bulk containers. Penalties were also proposed. After due process of law, the original authority, vide order impugned order herein, confirmed the demand of duty with interest and confiscated the goods with an option to redeem the same on payment of redemption fine. Equal penalty under Section11AC of the Act was imposed. Aggrieved by such order, the appellant is now before the Tribunal. 2. The Ld. Counsel Sri Pawan K. Pahwa appeared and argued for the appellant. The submissions are summarized as under: (a) The appellant receives duty paid Oxygen and Argon gases in cryogenic lorry tankers. The gas so received is filled in returnable gas cylinders bearing identification mark of the appellant and sold to the various industrial consumers. (b) The appellant was initially registered with the department as a manufacturer. As the appellant entertained the view that their activity did not amount to 'manufacture' and filed refund claim for refund of the duty paid by them (Rs. 3,04,261/-) for the period 21.02.2001 to 20.02.2002. The original authority then held that as per Chapter Note 10 to Chapter 28 of CETA, 1985, the activity of labelling or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aint on each returnable cylinder. -the appellant has undertaken process of converting the liquid Oxygen and Argon to gaseous form which amounts to 'manufacture' as under Chapter Note 9 of Chapter 28 of CETA, 1985. -the appellant procured Carbon dioxide and mixed it with Argon in the ratio 20 : 80 and sold the same to consumers in retail cylinders containing Argon-Carbon dioxide mixture gas. This activity comes within the meaning of 'adoption of any other treatment to render the product marketable to the consumer' as provided in Chapter Note 9 of Chapter 28 of CETA, 1985. (f) It is submitted that the adjudicating authority has proceeded to confirm the demand holding that the decisions passed in the appellant's own case applies to the period prior to amendment of the Chapter Note. That w.e.f. 01.03.2008 Chapter Note 9 as amended reads as 'or' and the word 'and' which was present in earlier Chapter Note 10 has been omitted and substituted by 'or'. That for this reason, the judgments prior to 01.3.2008 is not applicable. (g) The Ld. Counsel submitted that even as per changed chapter note scenario, the activities undertaken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drums, containers or packing, by whatever name they are called, are necessary to make fusel oil or styrene monomer marketable as such or can these goods be sold without the containers or drums or packing? In my opinion, the facts established that these could be. The fact that 90% of the goods in C.A. No. 4339 of 1986 were delivered in tankers belonging to the assessee and only 10% of the goods were in packed condition at the time of removal clearly establish that the goods were marketable without being packed or contained in drums or containers. These were in the storage tanks of the assessee and were as such marketable. In this connection, it is necessary to refer to the observations of this Court in Collector of Central Excise v. Indian Oxygen Ltd. (supra). In that case, as mentioned hereinbefore, the respondent Indian Oxygen Ltd. was manufacturer of dissolved acetylene gas and compressed oxygen gas, called therein 'the gases'. The respondent supplied these gases in cylinders at their factory gate. For taking delivery of these gases, some consumers/customers used to bring their own cylinders and take the delivery, while others used to have the delivery in the cylinders s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the term is used in the Central Excise Act. (i) In the SCN, the department has relied upon Note 9 of Chapter 28 of the Central Excise Tariff and alleged that the treatment adopted by the appellant, i.e. compressing the gas into cylinders, renders the product marketable to the consumer. Therefore, the same amounts to 'manufacture' and liable to central excise duty. For better appreciation, it would be important to refer Note 9 of Chapter 28 of the CETA, 1985 relied upon by the Department. Note 9 of Chapter 28 of the CETA, 1985 is reproduced below for ready reference: Chapter 28, Note 9 In relation to products of this Chapter, labelling or relabelling of containers or repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to manufacture . (j) On perusal of aforesaid chapter note, it can be understood that the chapter note 9 contains two parts: a) labelling or relabelling of containers or repacking from bulk packs to retail packs or the adoption of any other treatment b) to render the product marketable to the consumer. (k) It is submitted that all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of interpretation these deeming provisions must be construed strictly, all the words contained in their given normal meaning. By doing so, we are unable to find that the appellant had labelled the products in question. 9. We must note in passing our inability to accept labelling of the product, unless it renders it marketable would not be manufacture within the meaning of that note. There is no warrant in this proposition on a plain reading of the note. Among the activities specified in the note, labelling, relabelling, repacking from bulk pack etc. may not confer on the products under consideration any attribute of marketability that it did not possess. The position perhaps would be different in the case of goods such as cosmetics, pharmaceutical products etc. falling under Chapter 30 or 33. The intention behind the notes in these chapters appears to be to render liable to duty those processes which result in the product being sold to the consumer mentioned. Thus putting cosmetics into an attractive jar meant for retail use and placing on it a label containing a brand name enhanced the value of the cosmetics in measurement. In fact in many of these products, it is the contain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;manufacture'. The Ld. Counsel submitted that gas is procured in liquid form merely for ease of transportation and to reduce transit losses, as bulk quantity can be transported in liquid form only. Further, no equipment or machinery is used for conversion of liquid form to gaseous form. It gets converted to gaseous form by natural process while passing through the pipes. Thus, no process is being undertaken by the appellant. It is submitted that the gas is also marketable in its' liquid form. The marketability test is to be seen from the perspective of retail consumers and not industrial users. In this connection, it is submitted that gases as received by the appellant is marketable as such. Converting the gas from liquid form to gas does not change its chemical properties. (q) In the appellant's own case reported in 2015 (325) ELT 768 (Tri.-Del.), the Tribunal has held that when gas is already marketable in original form, the activity of assessee cannot be said to render the product marketable again and held that the activity undertaken by the appellant does not amount to 'manufacture'. (r) Without prejudice to the above, it is submitted that the sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he desired ratio. The mixing of gases has not resulted in a new and different product with distinct uses and marketability. The mixing of Carbon dioxide with inert gases does not bring about any chemical reaction between the gases. There is no change in the chemical composition. The Commissioner has erroneously observed that such mixture of gases is a distinct new commodity and different from the single gas. (t) It is pertinent to mention here that the Tribunal in appellant's own case has held that the activity of mixing of gases undertaken by them does not amount to 'manufacture'. The same is reported in 2000 (115) ELT 467 (Tribunal). The said decision of Tribunal has been affirmed by the Hon'ble Supreme Court in the appellant's own case reported in 2000 (119) ELT 5 (SC). Further, on similar facts in the case of CCE Vs. Vadilal Gases Ltd. [ 2017 (346) ELT 161 (SC)], the Hon'ble supreme Court has categorically held that mixing of gases and making them available to consumers in smaller cylinders, did not make the gases marketable as they did not chemically mix/react with each other, and retained their character, without any new commodity being created. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... man appeared and argued for the department. 3.1. Para 9 and para 11 of the show cause notice was adverted to by the Ld. A.R. to submit that the appellant has undertaken the activity of transferring the liquid gases from the bulk containers to smaller containers and are thus doing repacking of goods into retail cylinders. In the process of repacking, the liquid Oxygen/Argon is pumped through pipeline attached to the bulk containers and through the system of vapourizer coil attached to the pipelines these liquid gases are converted into the gaseous form. The gases are then refilled/repacked into returnable cylinders. The cylinders are embossed with the name of the appellant, name of the gas, the capacity of the cylinder and other details with regard to refilling the cylinders. All such activities fall under Chapter Note 9 to Chapter 28. 3.2. On perusal of the sale invoices issued by the appellant, it was seen that they have sold the retail cylinders containing Argon and Carbon dioxide mixture to the consumers. Appellant has thus adopted a treatment so as to mix the two gases making it marketable to the consumers. In para 30 31 of the OIO, the adjudicating authority has correc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 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. 8. According to the department, the above activities fall under 'deemed manufacture' as under Chapter Note 9 to Chapter 28 of CETA 1985. We proceed to examine the same. 9. Liquid Oxygen and Liquid Argon is converted into gaseous form of Oxygen and Argon. The appellant procures liquid oxygen and liquid argon in bulk, from supplier's in cryogenic lorry tankers and these are transferred into bulk containers located in their factory premises. The liquid oxygen and argon are then refilled into retail cylinders. In this process of refilling the liquid oxygen/argon is pumped though pipeline attached to the bulk containers and through a vapourizer coil attached to the pipeline, convert them into oxygen gas and argon gas. The gases are thus refilled into returnable retail cylinders of 7 cubic meter capacity in the case of O2 gas and 7.15 cubic meter capacity in the case of argon gas. The cylinders are permanently labelled with paint mentioning the name Goyal and denoting Oxy in the case of O2 cyl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether receiving of liquid chemicals in bulk in containers and offloading the same at the dealers premises or godown into available empty vessel and consequent delivery of these material in the very same condition to customers against orders can be held to be an act of repacking operations as envisaged in the said chapter note or not. 3. Whether an operation amounts to repacking or not, is a question to be decided on facts. However, activity such as simply transferring the material from one container to another container may not be categorised under the scope of this description. The goods are packed either for wholesale or for retail sale. Generally the expression Packing is considered as package containing a prepacked commodity and the quantity of product contained therein is also pre-determined. The packaging is also generally done without the purchaser being present. The packages also contain information such as name of the manufacturer, quantity, value and other details of the product. 4. In view of the above, the question whether or not duty is liable to be paid depends upon the facts of individual case and the decision has to be taken taking into account all relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in the appellant's own case as discussed above. This decision of the Tribunal in the case of Ammonia Supply Company has been approved by the Hon'ble Supreme Court in the case of CCE Vadodara Vs. Vadilal Gases Ltd. - 2017 (346) ELT 161 (SC). In fact, the Hon'ble Apex Court in the case of Vadilal Gases Ltd. has addressed the issue under consideration before us on all points. 10. Before adverting to the said decision in the case of Vadilal Gases (supra), it would be beneficial to address the second limb of chapter note, i.e., whether the alleged activity of labeling done by the appellant amounts to 'manufacture'. According to the department, the activity of mentioning the appellant's name, the name of gas, capacity of cylinder, etc. amounts to labeling so as to render the product marketable and therefore one limb of Note 9 to Chapter 28 is attracted which makes the activity 'manufacture'. It has to be borne in mind that mere labeling is not sufficient. The labeling should render the product marketable to the consumer. The purpose of embossing the name of the appellant is to make the cylinders easily identifiable as these are returnable cylinders. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 008. The discussions cover all the angles of the chapter note. The relevant paras read as under: 4. Note 10 of Chapter 28 of the Tariff Act is in the following terms: In relation to products of this Chapter, labelling or re-labelling of containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to 'manufacture'. 5. Reading the aforesaid Note 10 of Chapter 28 of the Tariff Act would go to show that the deeming provision contained therein with regard to what would also amount to manufacture is in two parts. The first is where labelling or re-labelling of containers and repacking from bulk packs to retail packs is undertaken and secondly where the adoption of any other treatment is undertaken to render the product marketable to the consumer. Whether either of the two situations are attracted to the present case, is the moot question that would require an answer from the Court. 6. The learned Commissioner in the adjudication order dated 8-12-2006 has elaborately dealt with the process deployed in the unit of the assessee after receipt of liquefied Nitrogen a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ministry of Finance (Department of Revenue) in the following way:- In this context clarification have been sought regarding the scope of the expression re-labelling of containers and repacking from bulk packs . Doubts have been raised as to whether receiving of liquid chemicals in bulk in containers and offloading the same at the dealers premises or godown into available empty vessel and consequent delivery of these material in the very same condition to customers against orders can be held to be an act of repacking operations as envisaged in the said chapter note or not. Whether an operation amounts to repacking or not, is a question to be decided on facts. However, activity such as simply transferring the material from one container to another container may not be categorised under the scope of this description. The goods are packed either for wholesale or for retail sale. Generally the expression Packing is considered as package containing a prepacked commodity and the quantity of product contained therein is also predetermined. The packing is also generally done without the purchaser being present. The packages also contain information such as name of the manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le in use. For example, when the mixture of argon and nitrogen is used in the manufacture of electric lamp, the argon gas performs the function of making the illumination. The Nitrogen gas gives long life to the filament of the bulb. Similarly, when the mixture of argon and carbondioxide is used in welding, the argon gas creates an inert atmosphere while the carbon dioxide gas stops oxidization of the material. Thus the individual gases retained their individual properties even when filled in the same cylinder. With the advent of modern techniques and the facility of filling two or more gases in one cylinder, the customers found them more economical to handle the gases and it saved labour. Further it was not necessary for the customer to mix these gases individually in a desired ratio, since such an exercise was more risky and needs expert technical handling. The question is whether in such circumstances the mixture of two or more gases in one cylinder amounted to manufacture in terms of Section 2(f) of the Central Excise Act ... ..... 13. The decision of the Tribunal in Goyal Gases (P) Ltd. (supra) to the effect that such activity (mixing of gases) did not amount to manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced by the appellant-Revenue on the decision of this Court in Air Liquide North India Private Limited v. Commissioner of Central Excise (2011) 15 SCC 264 : 2011 (271) E.L.T. 321 (S.C.) does not assist the Revenue in any manner. In the said case, neither the adjudicating authority nor this Court had the benefit of the details of the manufacturing process inasmuch as the same was kept away from the Court by the assessee by contending the same to be a trade-secret . In these circumstances, this Court in coming to its conclusion that the process deployed amounted to manufacture within the meaning of Note 10 of Chapter 28 of the Tariff Act relied on certain other features of the case, details of which have been set out in Para 16 of the judgment, which may be noticed below: The only conclusion from the above is that the tests and the process conducted by the appellant would amount to treatment' in terms of Chapter Note 10 of Chapter 28 of the Tariff Act of the Act. The fact that the gas was not sold as such is further established from the fact that the gas, after the tests and treatment, was sold at a profit of 40% to 60%, if it was really being sold as such, then the cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inality. In OIA No. 38/2010 the activities undertaken by the appellant are enumerated as under: (i) Obtain gases bulk, in liquid state through lorry tankers (ii) Transfer the same from lorry tankers into storage tankers fitted to the ground inside the premises (iii) Convert the gases from liquid state to gaseous in an apparatus called Atmospheric Vaporizer (steel coil of pre-designed standard) and passes such gases through copper pipes to filing manifold. (iv) Fill the gases into cylinders of different capacity after measuring pressure gauge. (v) Labeling the cylinders in their name (as Goyal) and (vi) Marketing such labeled cylinders in retail market. 13. The activities alleged are same in the present show cause notice also. After appreciating the facts and following the decisions discussed above, we are of the considered opinion that the department has failed to establish that the activities undertaken by the appellant amount to 'manufacture'. The appellant succeeds on merits of the case. 14. The Ld. Counsel has argued on the ground of limitation also. The SCN has been issued invoking extended period. There were decisions in favour o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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