M/S. Air Liquide
North India Pvt. Ltd. Vs. Commissioner, Central Excise, Jaipur-I
J U D G M E N T
ANIL R. DAVE, J.
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
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:
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
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.
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.
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 4product
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).
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.
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 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.
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.
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".
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. 6It 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
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.
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
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.
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 8profit 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.
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.
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.
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.
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
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.
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.
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.
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.
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 1appellant 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
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.
(Dr. MUKUNDAKAM SHARMA)
(ANIL R. DAVE)
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