M/S. Goyal Mg Gases Pvt. Ltd vs C.C.E & S.T. Chandigarh

[Arising out of Order-in-Appeal No. 59-60/CECHD-II/2011 dated 30.08.2011 by the Commissioner of Customs, Central Excise & Service Tax (Appeals), Chandigarh].

For approval and signature:

Honble Shri Ashok Jindal, Member (Judicial)

Hon'ble Shri B. Ravichandran, Member (Technical)

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether Their Lordships wish to see the fair copy of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

M/s. Goyal MG Gases Pvt. Ltd. .Appellants

Vs.

C.C.E & S.T. Chandigarh .Respondent

Appearance:

Shri B.L. Narsimhan, Advocate for the Appellant

Shri M.S. Negi, DR for the Respondent

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Hon'ble Shri B. Ravichandran, Member (Technical)

Date of Hearing: 11.08.2015

FINAL ORDER NO. 52666-52668/2015-EX(DB)

Per Ashok Jindal:

The appellant is in appeals against the impugned orders confirming the demand on duty by holding that activity undertaken by the appellant amounts to manufacture.

2. The facts of the case are that the appellant is engaged in marketing of Hydrogen gas cylinders. The appellant is receiving Hydrogen from M/s. Punjab Alkalies & Chemicals Pvt. Ltd. Naya Nangal through pipeline. The gas so received is filed in returnable gas cylinders with identification mark of the appellant and sold to various consumers who are manufacturer of Vanasapati Ghee. The filling process is done by the appellant with the aid of filter, dehydration and compressor. Revenue is of the view that activity undertaken by the appellant amounts to manufacture. Therefore, they are liable to pay duty on gas cylinders. Consequently, various periodical show cause notices were issued to the appellant which was adjudicated and duty was demanded along with interest and equivalent amount of penalty was also imposed. Aggrieved from the said orders, appellant is before us.

3. The Ld. Counsel for the appellant submits that the activity undertaken by the appellant does not amount to manufacture. Therefore, they are not liable to pay duty. As appellant has undertaken the activity of receiving the hydrogen gas through pipeline and thereafter filling in the gas cylinders. Therefore, the character and identity of the gas will not change and gas will remain the gas. He submits that their product falls under the Chapter 28 of the Central Excise Tariff Act 1985. In their own case for the earlier period reported in 1999 (107) ELT 364 (Tri) has observed that the appellant are receiving the hydrogen gas and they are filling hydrogen gas in cylinders after compressing the same and also observed that the compressed hydrogen gas and other hydrogen gas are the same. Therefore, it was held that no new commodity has come into existence by merely filling of hydrogen gas into the cylinders. In these circumstances, this Tribunal held that activity undertaken by the appellant does not amount to manufacture. He also submits that in their own case reported in 2009 (246) ELT 173 (Tri-Chennai) has again examined the issue and held that the activity of the appellant does not amount to manufacture. He also submits that this issue came up before this Tribunal in the case of Ammonia Supply Company Vs. CCE New Delhi-2013 (131) ELT 626 (Tri-Del) wherein this Tribunal held that filling of Ammonia gas from bulk tanker into small containers will not amount to manufacturing process. He also relied on the decision of Shivam Industries Vs. CCE Allahabad-2012 (281) ELT 598 (Tri-Del) and Lupin Laboratories Ltd. Vs. CCE Aurangabad-2002 (139) ELT 366 (Tri-Mum) which has been affirmed by the Honble Apex court reported in 2004 (166) ELT A116 (SC).

4. On the other hand, Ld. AR oppose the contention of the Ld. Counsel and submits that as per Sub chapter Note no.9 of chapter 28 Labeling or re-labeling of containers and packing from bulk pack to retail packs or adoption of any treatment to render the product marketable by the consumer shall amount to manufacture. As the appellant is engaged in the activity of filling the gas in smaller cylinders from the pipeline of making the gas marketable to their consumers, therefore, their activity shall amount to manufacture. To support his contention he relied on the decision of Johnson and Johnson Ltd. Vs. CCE Mumbai-2003 (156) ELT 134 (Tri-Mum), Air Liquide North India Pvt. Ltd. Vs. CCE Jaipur-2011 (271) ELT 321 (SC) and Abdos Trading Company Pvt. Ltd. Vs. CCE Kolkata-2013 (290) ELT 467 (Tri-CCU).

5. Heard the parties. Considered the submissions.

6. In this case before going to frame the issue we are recording the activity undertaken by the appellant which is as under:

The appellant is receiving Hydrogen Gas through pipeline. They compress it and fill it into cylinders at required pressure with the help of compressor run with the aid of power and it is known as compressed hydrogen gas in cylinders. The compressors installed in the premises compresses the gas at different pressure and finally at the pressure 140kg/cm for filing into cylinders each compressor is oil lubricated. In order to avoid passage of oil into gas the compressors is in built system of oil filtration. The gas received by the appellant through pipeline has some amount of moisture and in order to remove the moisture from the gas the compressor has in built system of drying the moisture. The treatment employed by the appellant is oil filtration, removing moisture by gas by drying by the in-built system of compressing pressure gas into the cylinders. The allegation of the Revenue is that this activity renders the product marketable to the consumer. As the gas received by the appellant through pipeline is not usable or consumable. Therefore, the gas received in pipeline is not marketable to the consumer in the state in which it is received by the appellant. On examining the activity undertaken by the appellant, the issue before us is that whether the activity of the compressor, oil filtration and removing moisture in gas by drying renders the gas marketable to the consumer and consequently in terms of Chapter note 9 of Chapter 28 of the Central Excise Tariff Act 1985, the activity of the appellant amounts to manufacture or not.

7. To analyse the issue we have examined the Chapter Note 5 of the Chapter 27 of CETA 85 which is reproduced here as under:

In relation to natural gas falling under heading 2711, the process of compression of natural gas (even if it does not involve liquefaction), for the purpose of marketing it as Compressed Natural Gas, for use as a fuel of for any other purpose, shall amount to manufacture.

8. On examining the said Chapter note 5, in Chapter 27, we find that the process of compressor is also amounts to manufacture. Admittedly, in the case in hand as per Chapter note 9 of Chapter 28 of the CETA 1985 the activity of compressor does not amount to manufacture. Now the short issue before us whether the activity undertaken by the appellant rendered the product marketable to the consumer or not.

9. The main thrust of the Ld. AR is that the appellant is engaged in the activity of packing / repacking from bulk to smaller packs. In fact, that is not the case of the department as per the show cause notice. Therefore, the case laws relied upon by the Ld. AR are not relevant to the facts of this case.

10. We have also seen that in the case of Ammonia Supply Company (Supra), this Tribunal held that Ammonia gas from bulk packing to smaller container will not amount to manufacturing process. Admittedly, in this case the gas from pipeline into cylinders is a similar activity and same shall not amount to manufacturing process.

11. Now the only issue remain before us is whether the activity undertaken by the appellant renders the product marketable to the consumer or not. The said issue has been examined by this Tribunal in the case of Shivam Industries (Supra) wherein this Tribunal has observed in para 6 & 7 as under:

6. There is no dispute about the fact that the appellants purchased duty paid transformer oil in bulk and after filtration and heating used the same for filing the cavities of the transformers being repaired as liquid insulator. According to the department, this process would be covered by the definition of manufacture under Section 2(f)(ii) of Central Excise Act, 1944 readwith Chapter note 4 of Chapter 27 of the Central Excise Tariff.

7. Under Section 2(f)(ii) the manufacture includes any process which is specified in relation to any goods in section or Chapter notes of the 1st Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture. Chapter note 4 of the Chapter 27 states that in relation to lubricating oil and lubricating preparations of heading 2710, labeling or re-labelling of containers or 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 our views, the word consumer in the expression adoption of any other treatments to render the product marketable to consumer would not cover an industrial user or manufacturer who process the transformer oil / lubricants for his own industrial use. In this case, the appellant had subjected the transformer oil purchased by them to the process of filtration and heating to make it suitable for their own industrial use i.e. for repair of the transformers. The process undertaken by the appellant thus, does not amount to manufacture and as such the impugned orders are not sustainable. The same are set aside. The appeals are allowed.

12. We have seen that in the case of Shivam Industries (Supra) this Tribunal has observed that the adoption of any other treatment rendered the product marketable to the consumer. Admittedly, in this case the consumers are Vanaspati manufacturers who are industrial users or manufacturers. Therefore, the same will not term as consumer.

13. In fact, they are the processors of the goods. In the case in hand, as the buyer are not consumer as per Chapter note 9 of Chapter 28 of CETA 1985. Further, we also hold that the gas is already marketable in its original form and the activity undertaken by the appellant does not render the gas marketable which is already marketable. Therefore, we hold that the activity undertaken by the appellant does not amount to manufacture. Consequently, the appellant are not liable to pay duty.

14. In these terms, we set aside the impugned order and allow the appeals with consequential relief if any.

(Dictated and pronounced in the open court)

(B. Ravichandran) (Ashok Jindal) Member (Technical) Member (Judicial)

Bhanu

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