2017 (1) TMI 1311 - SC - Central Excise

Tribunal rules on 'manufacture' under Central Excise Tariff Act

The Tribunal held that the process employed by the assessee did not amount to 'manufacture' under Note 10 of Chapter 28 of the Central Excise Tariff Act, ... Deemed Manufacture - activity of filing gases from tanker to individual cylinders, mixing more than one gases in specified proportion - labelling or relabelling - Scope of Note 10 of Chapter 28 of the Central Excise Tariff Act, 1985 - Held that: - reliance placed in the case of Ammonia Supply Company vs. CCE, New Delhi [2001 (5) TMI 81 - CEGAT, COURT NO. III, NEW DELHI] wherein the Tribunal has taken the view that Ammonia coming in tankers cannot be treated to have come in bulk packs. From the manufacturing activity undertaken by the assessee, as found by the learned Commissioner himself, and as extracted above, the assessee apart from packing pure Argon and Nitrogen in smaller cylinders is also engaged in the activity of mixing of inert gases (like argon, nitrogen, helium etc.) with other gases like oxygen, nitrogen, carbon dioxide and making available such combination to the consumers in smaller cylinders - Whether such mixing of the gases in question amount to manufacture has been gone into by the learned Tribunal in Goyal Gases (P) Ltd. vs. CCE, Meerut [1999 (7) TMI 243 - CEGAT, NEW DELHI] and it was held that the filling of mixture of the said gases in cylinder does not amount to manufacture for purposes of Section 2(f) of the Central Excise Act, the consequential questions relating to excisability, duty demand and penalty do not require separate consideration. Appeal dismissed - decided against appellant. Issues Involved:1. Whether the process deployed by the assessee amounts to 'manufacture' under Note 10 of Chapter 28 of the Central Excise Tariff Act, 1985.2. The applicability of the extended period of limitation under the proviso to Section 11A of the Central Excises and Salt Act, 1944.3. Whether the sales/transfers were to related persons and not made at arm's length.Issue-wise Detailed Analysis:1. Whether the process deployed by the assessee amounts to 'manufacture' under Note 10 of Chapter 28 of the Central Excise Tariff Act, 1985:The core issue revolves around the interpretation of Note 10 of Chapter 28 of the Central Excise Tariff Act, 1985, which states: 'In relation to products of this Chapter, labelling or relabelling 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'.' The Tribunal found that the process used by the assessee did not amount to manufacture. The Commissioner’s order detailed the process, which involved re-gassifying liquefied Nitrogen and Argon, cleaning cylinders, filling them, and affixing labels. However, the Tribunal, referencing the decision in Ammonia Supply Company vs. CCE, New Delhi, concluded that transferring gases from bulk containers to smaller cylinders does not constitute repacking from bulk to retail packs. This interpretation was supported by a Circular from the Ministry of Finance dated 08.10.1997. The Tribunal's decision in Ammonia Supply Company was not challenged by the Department, thus attaining finality.2. The applicability of the extended period of limitation under the proviso to Section 11A of the Central Excises and Salt Act, 1944:The Tribunal did not address this issue due to its finding that the process did not amount to manufacture. Consequently, the extended period of limitation under the proviso to Section 11A was not considered necessary for adjudication.3. Whether the sales/transfers were to related persons and not made at arm's length:This issue was also not examined by the Tribunal because the primary finding negated the need to delve into the nature of the transactions.Additional Considerations:The Tribunal also considered whether the mixing of gases amounted to manufacture. The decision in Goyal Gases (P) Ltd. vs. CCE, Meerut, which was affirmed by the Supreme Court, held that mixing inert gases with other gases did not create a new marketable product. The gases retained their individual properties, and thus, no new commodity was produced. This was relevant to the second limb of Note 10 of Chapter 28, which involves any other treatment to render the product marketable.The appellant-Revenue’s reliance on the decision in Air Liquide North India Private Limited vs. Commissioner of Central Excise was found unhelpful. In that case, the manufacturing process details were not disclosed, and the decision was based on different facts, including a significant profit margin and the sale of gas under the appellant's grade and standard.Conclusion:The appeals were dismissed, affirming the Tribunal's order that the process did not amount to manufacture under Note 10 of Chapter 28 of the Tariff Act. Consequently, other issues decided by the adjudicating authority were deemed unnecessary to address.