M/S Air Liquide North India Pvt. Ltd vs Commnr. Of Central Excise, Jaipur -I

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 43 OF 2005

M/S. AIR LIQUIDE NORTH INDIA

PVT. LTD. .....APPELLANT.

VERSUS

COMMISSIONER, CENTRAL EXCISE,

JAIPUR-I .....RESPONDENT.

J U D G M E N T

ANIL R. DAVE, J.

1. This appeal has been filed against the Judgment and Order dated 31.8.2004

passed in Final Order No 595/2004-NB(C) by the Customs, Excise & Service Tax

Appellate Tribunal, New Delhi in Appeal No. E/247/2004-NB(C), whereby the

Tribunal has allowed the appeal filed by the Department and reversed the findings

of the Commissioner(Appeals).

2 2. The issue which falls for consideration in the present appeal is whether the

treatment given or the process undertaken by the appellant to Helium gas

purchased by it from the open market would amount to manufacture, rendering the

goods liable to duty under Chapter Note 10 of Chapter 28 of the Central Excise

Tariff Act, 1985 (hereinafter referred to as `the Act'). Chapter Note 10 of Chapter

28 of the Act, in relation to `manufacture', reads as under:

"10. In relation to products of this chapter, labelling or

relabelling of containers and repacking from bulk packs to retail

packs or adoption of any other treatment to render the product

marketable to the consumer shall amount to manufacture."

In order to answer the aforesaid issue which arises for our consideration, it would

be necessary to set out some facts giving rise to the present appeal. The appellant

is engaged in the manufacture of Oxygen, Nitrogen, Carbon-di-oxide and other

gases classifiable under Chapter 28 of the Act. The appellant had purchased

Helium gas during the period commencing from December, 1998 to 31st March,

2001, from the market in bulk and repacked the same into smaller cylinders after

giving different grades to it and then sold the same in the open market. The

appellant purchased the said gas for Rs.520/- per Cum. Various tests were

conducted on the gas so purchased and on the basis of the tests and some treatment

given, the gas was segregated into different grades having distinct properties and

sold at different rates to different customers.

3 3. The adjudicating authorities held that these processes undertaken by the

appellants amounted to manufacture and consequently confirmed the demand with

penalty. An appeal filed by the appellant before the Commissioner (Appeals) was

allowed. Thereafter, an appeal was filed by the Department before the Tribunal

and the Tribunal, by its impugned judgment held that the process undertaken or the

treatment given by the appellant amounted to "manufacture" in terms of Chapter

Note 10 of Chapter 28 of the Act. The aforesaid conclusion arrived at by the

Tribunal is under challenge in this appeal.

4. On behalf of the appellant it was vehemently argued that the appellant had

only conducted various tests like moisture test, etc. to determine quality and

quantity of Helium gas in the cylinders. It was further submitted that even after the

activity of testing, Helium gas remained as Helium gas only and there was no

change in the chemical or physical properties. No new product, other than Helium

gas came into existence and, therefore, it cannot be said that the appellant had

carried on any manufacturing activity.

5. It was further submitted that the gas, when purchased by the appellant, was

already marketable and, therefore, it cannot be said that the testing of the gas by

the appellant had rendered the product marketable. In the circumstances, the

process of testing cannot be said to be a manufacturing process, rendering the

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product marketable. It was also submitted that the crucial requirement for the

application of the last portion of Chapter Note 10 of Chapter 28 of the Act is that

by adoption of some treatment, the product should become marketable to the

consumer. According to the learned counsel, the product, i.e. Helium gas was

already in a marketable state when it was purchased by the appellant and,

therefore, it cannot be said that the appellant made it marketable. To substantiate

his claim, the learned counsel for the appellant relied on the cases of CCE v.

LUPIN LABORATORIES 2004 (166) A116 (SC) and LAKME LEVER LTD. v.

CCE 2001 (127) ELT 790 (T).

6. The learned counsel for the appellant brought to our attention a decision of

this Court rendered in the case of BOC (I) Ltd. v. CCE 2003 (160) ELT 864 to

substantiate his claim that the issuance of certificate along with the cylinder at the

time of sale does not amount to re-labelling. He also contended that as there was

no suppression of facts of any sort on the part of the appellant, extended period of

limitation could not have been invoked in the present case.

7. Per contra, the learned counsel for the respondent submitted that the testing

of Helium gas comes under the category of "treatment" as mentioned in Chapter

Note 10 of Chapter 28 of the Act and that the Tribunal has clearly given a finding

to that effect. He also submitted that issuance of a separate certificate along with

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cylinder at the time of sale containing all the details regarding moisture,

purification, etc. amounted to re-labelling of the gas cylinders. He also submitted

that the revenue authorities were fully justified in invoking the extended period of

limitation as there had been willful suppression of facts on the part of the appellant

with an intent to evade payment of duty.

8. We have heard the learned counsel for the parties and perused the records. In

view of Chapter Note 10 to Chapter 28 of the Act, the manufacturing activity

would mean either;

(a) Labelling or re-labelling of containers and repacking from bulk packs to

retail packs; OR

(b) An adoption of any other treatment to render the product marketable to

the consumer.

9. Thus, either an activity of labelling or relabelling of containers and

repacking from bulk packs to retail packs OR adoption of any treatment so as to

render the product marketable to the consumer would amount to "manufacture".

10. It is not in dispute that the appellant had purchased Helium gas from the

open market and that its quality control officer had conducted various tests and

issued analysis report/quality test report stating the results of the tests carried out.

6 It is also not in dispute that the appellant issued certificates of quality at the time

of sale on the basis of tests carried out by it to the effect that the gas supplied by it

confirmed a level of purity and specifications in conformation with the orders of

the customers. Another undisputed fact is that the appellant had purchased Helium

gas under a generic description but after the tests and analysis, it was sold to

different customers based on their specific requirements at profit margin ranging

from 40% to 60% in different cylinders.

11. It is pertinent to note that when the appellant was asked about the process

which was being carried out on Helium gas before selling it to its customers, the

representative of the appellant had refused to give any detail with regard to the

process because, according to him, that process was a trade secret and he would

not like to reveal the same. Thus, the respondent or his subordinate authorities

were not informed as to what was being done by the appellant to Helium gas

purchased or what treatment was given to the said gas before selling the same to

different customers at different rates with different certifications in different

containers/cylinders. It is also pertinent to note that the gas which was purchased

at the rate of about Rs.520/- per Cum. was sold by the appellant at three different

rates namely Rs.700/-, Rs.826/- and Rs.1000/- per Cum. and thereby the appellant

used to get 40% to 60% profit.

7 12. From the above undisputed facts, it is clear that the gas cylinders were not

sold as such but they were sold only after certain tests or processes as specified by

the customers of the appellant. It is also clear that only after the analysis and tests,

it could be ascertained as to whom the gas was to be supplied and at what rate. The

various tests resulted into categorization of the gas into different grades namely,

Helium label 4, high purity Helium and Helium of technical grade. Helium label 4

was sold at higher rate as it matched superior standards.

13. In the instant case, Helium gas was having different marketability, which it

did not possess earlier and hence the gas sold by the appellant was a distinct

commercial commodity in the trade, rendering it liable to duty under Chapter Note

10 of Chapter 28 of the Act. If the product/commodity, after some process is

undertaken or treatment is given, assumes a distinct marketability, different than

its original marketability, then it can be said that such process undertaken or

treatment given to confer such distinct marketability would amount to

"manufacture" in terms of Chapter note 10 to Chapter 28 of the Act.

14. The only conclusion from the above is that the tests and "process" conducted

by the appellant would amount to "treatment" in terms of Chapter Note 10 of

Chapter 28 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

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profit of 40% to 60%. If it was really being sold as such, then the customers of the

appellants could have purchased the same from the appellant's suppliers. When

this question was put to the officer of the appellant, he could not offer any cogent

answer but merely stated that it was the customers' preference. Further, he did not

give proper answer as to how the profit margin was so high. The appellant had

supplied the gas not as such and under the grade and style of the original

manufacturer but under its own grade and standard. Further, while selling the gas,

different cylinders were given separate certificates with regard to the pressure,

moisture, purification and quality of the gas. This explains the high price at which

the appellant was selling the gas.

15. Therefore, in our opinion, the Tribunal has rightly observed that if no

treatment was given to the gas purchased by the appellant, customers of the

appellant would not have been purchasing Helium from the appellant at a price

40% to 60% above the price at which the appellant was purchasing.

16. As stated hereinabove, it is clear that the appellant was purchasing Helium at

the rate of Rs.520/- per Cum. and was selling the same after adding 40% to 60%

profit. Further, the gas was segregated in different cylinders with different

properties and, therefore, the rate at which the gas was purchased by the appellant

and the rate at which it was sold to its customers was substantially different.

9 17. In the circumstances, it cannot be said that no treatment was given to the

gas purchased by the appellant. For the said reasons, it cannot be said that the

appellant was not carrying out any manufacturing activity within the meaning of

Chapter Note 10 of Chapter 28 of the Act.

18. It is also pertinent to elucidate on the phrase "marketable to the consumer".

The word "consumer" in this clause refers to the person who purchases the product

for his consumption, as distinct from a purchaser who trades in it. The

marketability of the product to "the purchaser trading in it" is distinguishable from

the marketability of the product to "the purchaser purchasing the same for final

consumption" as in the latter case, the person purchases the product for his own

consumption and in that case, he expects the product to be suitable for his own

purpose and the consumer might purchase a product having marketability, which

it did not possess earlier.

19. Therefore, the phrase "marketable to the consumer" would naturally mean

the marketability of the product to "the person who purchases the product for his

own consumption". Hence, the argument of the appellant that as the product was

already marketable, the provisions of Chapter Note 10 of Chapter 28 of the Act

would not be attracted, will have to be rejected.

1 20. For the aforetasted reasons, we agree with the Tribunal in holding that the

appellant is liable to pay excise duty for the reason that it has manufactured

Helium within the meaning of the term `manufacture' as explained in terms of

Chapter Note 10 of Chapter 28 of the Act.

21. So far as the issue with regard to relabelling is concerned, we are in

agreement with the view expressed by the Tribunal that relabelling would not

mean mere fixing of another label. When the appellant was selling different

cylinders with different marking or different certificates to its different customers,

we can say that the appellant was virtually giving different marks or different

labels to different cylinders having different quality and quantity of gas.

22. It can be very well said that the Helium purchased by the appellant was in a

marketable state but it is equally true that by giving different treatment and

purifying the gas, the appellant was manufacturing a commercially different type

of gas or a new type of commodity which would suit a particular purpose. Thus,

the treatment given by the appellant to the gas sold by it would make a different

commercial product and, therefore, it can surely be said that the appellant was

engaged in a manufacturing activity.

23. So far as the issue with regard to limitation is concerned, we are in

agreement with the findings arrived at by the Tribunal to the effect that the

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appellant did not disclose details about the activities or treatment given to the gas

by the appellant. No duty was ever paid by the appellant on the Helium sold by it

after giving some treatment so as to make it a different commercial product. We,

therefore, do not see any reason to interfere with the finding with regard to

limitation also.

24. For the reasons stated hereinabove, we are in agreement with the order

passed by the Tribunal and dismiss the appeal but without any order as to costs.

................................................J.

(Dr. MUKUNDAKAM SHARMA)

....................................................J.

(ANIL R. DAVE)

New Delhi

August 30, 2011.