Manufacture test for oxygen filling into cylinders failed before 1-3-1997, leaving the excise demand unsustainable.

Filling duty-paid gaseous oxygen received through a pipeline into cylinders did not amount to manufacture for the period before 1-3-1997, because the ordinary test of manufacture requires emergence of a new and distinct commodity and no such transformation occurred. Chapter Note 10 in Chapter 28, which treats labelling, repacking and similar treatment as manufacture, operated only from 1-3-1997 and did not govern the earlier period. On the facts, the oxygen remained the same commodity after filling into cylinders, so no manufacturing process was found and the duty demand for the prior period was unsustainable.

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Issues: Whether filling duty-paid gaseous oxygen received through pipeline into cylinders amounted to manufacture for the purpose of central excise duty for the period prior to 1-3-1997.

Analysis: The activity in question was examined against the settled test of manufacture, namely whether a new and distinct commodity emerged. The amendment inserting Chapter Note 10 in Chapter 28 of the Central Excise Tariff Act, 1985, with effect from 1-3-1997, made labelling, repacking and similar treatment amounting to manufacture only from that date, leaving the earlier period to be decided on the ordinary test of manufacture. On the facts, filling oxygen from pipeline into cylinders did not bring about any transformation or produce a different product; the oxygen remained the same commodity. As no manufacturing process was found to have taken place, duty could not be levied on the appellant for the prior period.

Conclusion: Filling oxygen into cylinders did not amount to manufacture before 1-3-1997, and the duty demand was unsustainable.

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