Manufacture under Central Excise requires a statutory deeming provision or a process making goods marketable to consumers.

Compression of hydrogen gas received through pipeline, followed by filtration, dehydration and filling into returnable cylinders, was examined under Central Excise law as a possible manufacture process. The analysis noted that Chapter Note 5 to Chapter 27 deems compression of natural gas for marketing as compressed natural gas to be manufacture, but Chapter Note 9 to Chapter 28 contains no comparable deeming fiction for the gas in question. It was also found that the gas was already marketable in its original form and the buyers were industrial users. On that basis, the process did not amount to manufacture and the duty demand was held unsustainable.

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Issues: Whether compressing hydrogen gas received through pipeline and filling it into returnable cylinders with filtration and dehydration amounts to manufacture under the Central Excise law.

Analysis: The activity undertaken by the assessee consisted of compression, oil filtration, removal of moisture and filling gas into cylinders. The Tribunal noted that Chapter Note 5 of Chapter 27 of the Central Excise Tariff Act, 1985 specifically treats compression of natural gas for marketing as compressed natural gas as manufacture, but the relevant Chapter Note 9 of Chapter 28 did not create a similar deeming fiction for the present goods. It further held that the gas was already marketable in its original form and that the buyers were industrial users, not consumers in the sense relevant to a deeming provision for treatment rendering goods marketable. The reasoning applied the principle that a process is manufacture only when the statutory note so provides or when it brings about a product marketable to a consumer within the meaning of the tariff note.

Conclusion: The activity does not amount to manufacture, and the duty demand was not sustainable.

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