Mere filling of anhydrous ammonia into cylinders and conversion into aqueous solution were not manufacture for excise purposes.

Mere filling of duty-paid anhydrous ammonia into small cylinders or HDPE jars, without relabelling, was not treated as packing, repacking or manufacture under Chapter Note 10 to Chapter 28. The Tribunal relied on earlier tariff rulings and held that the activity did not attract excise duty on that basis. Conversion of anhydrous ammonia into liquid ammonia or aqueous solution was also held not to amount to manufacture under Section 2(f) of the Central Excise Act, following the Board circular stating that no further duty is payable on duty-paid anhydrous ammonia. The impugned order was set aside and the appeals were allowed.

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Issues: (i) whether filling anhydrous ammonia into small cylinders or HDPE jars amounts to manufacture, packing or repacking so as to attract Chapter Note 10 to Chapter 28; and (ii) whether the conversion of anhydrous ammonia into liquid ammonia or aqueous solution amounts to manufacture and attracts excise duty.

Issue (i): whether filling anhydrous ammonia into small cylinders or HDPE jars amounts to manufacture, packing or repacking so as to attract Chapter Note 10 to Chapter 28.

Analysis: Chapter Note 10 to Chapter 28 applies where repacking is accompanied by relabelling. The assessee had consistently stated that no labelling or relabelling was done while transferring ammonia from bulk containers into small cylinders, and that position was not controverted in the adjudication order or the show cause notice. The filling activity was also covered by earlier Tribunal decisions holding that mere filling of cylinders does not amount to packing or repacking in the sense contemplated by the tariff note.

Conclusion: The activity did not amount to manufacture, packing or repacking under Chapter Note 10 to Chapter 28, and the issue was decided in favour of the assessee.

Issue (ii): whether the conversion of anhydrous ammonia into liquid ammonia or aqueous solution amounts to manufacture and attracts excise duty.

Analysis: The relevant Board circular stated that conversion of anhydrous ammonia into ammonia aqueous solution does not amount to manufacture within Section 2(f) of the Central Excise Act, 1944, and that no further duty is payable if the anhydrous ammonia is duty paid. The small quantity of liquid ammonia produced by the assessee was squarely covered by that circular.

Conclusion: The conversion did not amount to manufacture and no further excise duty was payable on the liquid ammonia, and the issue was decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeals were allowed, with the connected cross-objection disposed of.

Ratio Decidendi: Mere filling of bulk ammonia into cylinders, without relabelling, does not constitute repacking amounting to manufacture, and conversion of duty-paid anhydrous ammonia into liquid ammonia is not manufacture for excise purposes.

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