2004 (97) ECC 696 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

New Delhi -- Bench-NB(C)

Shri V.K. Agrawal, Member (T) and Shri P.S. Bajaj, Member (J)

CCE, Jaipur

Versus

Air Liquide North India (P) Ltd.

Appeal No. E/247/2004-NB (C)

[Arising out of common Order-in-Appeal No. 578/SN/CE/JPR-I/2003 dated 22.10.2003 of the Commissioner of Central Excise (Appeals), Jaipur]

Final Order No. A/595/2004-NB-C, dt. 31.8.2004, Certified on 2.9.2004

Manufacture

Helium gas -- Assessee purchased Helium gas from the market in cylinders and after conducting moisture control test, quality control test and other tests resulting in segregation of Helium gas into different grades having distinct properties and different market value/price, cleared the same to different types of buyers -- Whether these activities of the respondents amounted to manufacture or not in terms of Chapter Note 10 to Chapter 28 of the CETA. -- (Yes) -- Section 2(f) of CEA.

Demand & Penalty (C. Excise)

Limitation -- Suppression of facts -- Assessee never disclosed the details of the activities being carried out by them in respect of purchased Helium gas cylinders from the market. No duty was ever paid. The plea of ignorance of law also cannot come to their rescue as they were already engaged in the manufacture of Oxygen, Nitrogen and other gases classifiable under Chapter 28 of the CETA. Therefore, the extended period of limitation has been rightly invoked against them -- Order of demand and penalty restored.

Revenue appeal accepted

PRESENT :

Shri D.N. Choudhary, SDR for the appellant.

Shri S.C. Kamra, Adv. for the respondent.

Cases Cited :

1. CCE, Jaipur v. Sabhyata Plastics Ltd., 2002 (145) ELT 166 (Tri-Del)................ [Para 10]

2. Chowgule and Company, 1993 (67) ELT 34 (SC)............................................... [Para 9]

3. Fenner (India) Ltd. v. CCE, Hyderabad, 2000 (67) ECC 738 (T)........................ [Para 10]

4. Fykas Engg. (P) Ltd. v. CCE, Bombay, 2000 (122) ELT 168 (Tri)..................... [Para 10]

5. Lakme Lever Limited v. CCE, Mumbai-III, 2001 (127) ELT 790 (Tri-Mum)............ [Para 3]

6. Suprajith Chemicals Pvt. Ltd. v. CCE, Bangalore-I, 2003 (156) ELT 712 (Tri-Bang) [Para 10]

7. W.G. Maurya Sheraton Hotel & Towers v. CCE, Delhi-I, 2002 (146) ELT 550 (Tri-Del) [Para 8]

Per : P.S. Bajaj

This appeal has been filed by the Revenue against the impugned Order-in-Appeal vide which the Commissioner (Appeals) reversed the Order-in-Original of the adjudicating authority, who confirmed the duty demand of Rs. 2,60,073 with equal amount of penalty on the respondents. The respondents are engaged in the manufacture of Oxygen, Nitrogen and Carbon-di-oxide and other gases classifiable under Chapter 28 of the CETA. In addition to the manufacture of these gases, they, during the period in dispute (1998-99 to 2000-2001), purchased Helium gas from the market in cylinders and after conducting moisture control test, composition test, quality control test and other tests resulting in segregation of Helium gas into different grades having distinct properties and different market value/price, cleared the same to different types of buyers. The issue which falls for our consideration is as to whether these activities of the respondents amounted to manufacture or not in terms of Chapter Note 10 to Chapter 28 of the CETA. The said note reads as under:

"In relation to products of this Chapter, labeling 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".

2. The adjudicating authority held that these activities of the respondents amounted to manufacture and consequently confirmed the duty demand with penalty against the respondents, detailed above. The Commissioner (Appeals) has taken the contrary view by holding that these activities did not amount to manufacture and reversed the Order-in-Original.

3. The Ld. Counsel has reiterated the correctness of the impugned order by contending that no labeling or relabelling had been done on the Helium gas cylinders purchased by the respondents from the market and no other treatment had been given to the said gas to render it marketable as the same was marketable even when they purchased it from the market. The counsel has placed reliance on the ratio of the law laid down in Lakme Lever Limited v. CCE, Mumbai-III, 2001 (127) ELT 790 (Tri-Mum). On the other hand, the Ld. SDR has argued that the various tests carried out by the respondents on the Helium gas resulted in the segregation and value addition making the gas most useful and marketable for various types of customers and that they even issued the certificate alongwith the gas cylinders to the customers under their own name which even amounted to relabelling of the gas cylinders. Therefore, the activities of the respondents amounted to manufacture as per the provisions of Chapter Note 10 of Chapter 28 of the CETA.

4. We have heard both the sides and gone through the record.

The perusal of the record shows that the respondents purchased Helium gas in cylinders under a generic description from a dealer, M/s. Ajay Air Products, New Delhi @ 520 per Cum. They thereafter in their own factory carried out various type of tests on the gas contained in those cylinders, by opening the cylinders. The test carried out by them were regarding pressure, moisture contents, physical and chemical composition to determine the constituents of the gas. They also did the purification of the gas. These facts were even admitted by Shri S.S. Mondol, Quality Control Officer and Harjeet Singh, Manager (Admn.)-Cum-authorised signatory of the respondents in their respective statements. On the basis of these tests, segregation of the gas cylinders into different grades having different/distinct properties and different market values, was made by the respondents. They also prepared certificates containing details of the analysis/test conducted and the composition, grade of Helium gas, in each cylinder and issued these certificates alongwith the cylinders to the customers.

5. We also find that the grade of the Helium gas was recorded by the respondents in their invoices such as Helium: Lasal-4, etc. They sold the gas cylinders at a higher price on account of the above referred analysis and tests carried out by them. They did not sell the Helium gas as such in the same manner in which they purchased it from the market.

6. The facts that the Helium gas cylinders as purchased by the respondents were marketable, as they purchased it from the market, but they carried out the above referred detailed tests and analysis and segregated the gas cylinders into different grades on the basis of those tests and the extent of purification done by them of the gas contained therein and thereafter sold the same to different customers as per their requirements. Therefore, it can be safely concluded that through the various tests, detailed above, the respondents rendered the Helium gas marketable to various types of consumers. The issuance of a separate certificate alongwith each cylinder at the time of the sale to a consumer, containing all the details regarding the moisture, purification, quality, also amounted to re-labelling of the gas cylinders. For relabelling purposes, it is not essential that label should be refixed on the article, it would be enough if the same is issued alongwith the item to the consumer.

7. Therefore, in the light of above discussion, the activities of the respondents carried out in respect of the plain gas cylinders detailed above amounted to manufacture in terms of Chapter Note-10 of Chapter 28 of the CETA, referred to above.

8. The ratio of the law laid down in Lakme Lever Ltd. (supra), referred by the Counsel, is not attracted to the facts of the present case. In that case, the assessee's depot repacked the already marketable retail packs, into retail size and for that, it was observed that these activities did not amount to manufacture in terms of Chapter Note-4 of Chapter 33, but such is not the position in the present case. In W.G. Maurya Sheraton Hotel & Towers v. CCE, Delhi-I, 2002 (146) ELT 550 (Tri-Del), referred to by the Ld. SDR, it was observed that the process of conversion of bulk chocolates and chocolate bars into small pieces amounted to manufacture under Chapter Note 3 to Chapter 18 of the CETA is irrespective of the fact that the chocolate bars before such process, were already marketable. In the instant case also, although the Helium gas cylinders as purchased by the respondents from the market were marketable, but by carrying out their above detailed activities/analysis, tests, they brought new commercially different type/grades of the Helium gas which they sold to various types of customers as per their requirements. The gas purchased by them in cylinders from the market was not sold by them, as such, to different types of consumers, rather they sold only after segregating the gas cylinders in different grades in respect of purity, moisture contents and other properties. These tests could not be carried out by the respondents without giving some treatment to the gas.

9. The respondents have even refused to disclose the cause for which they had carried out the tests, detailed if they were not producing commercially different types of Helium gas cylinders. Their representative, Shri Harjeet Singh avoided to answer this query when put to him at the time of recording his statement by taking as shelter behind the plea of so called trade secret. In Chowgule and Company, 1993 (67) ELT 34 (SC), the Apex Court has observed that whatever may be the operation, it is the effect that is material. These observations can be read with advantage in this case, keeping in view, the refusal on the part of the representative of the respondents to disclose, the details, and the nature and purposes of the tests detailed above carried out by the respondents on the Helium gas cylinders purchased from the market, for selling to their different types of buyers.

10. Apart from this, if the plea of the respondents that since the gas cylinders purchased by them from the market were already marketable and as such, any type of tests carried out by them to enhance their market value did not amount to manufacture, is accepted, it would certainly render the provisions of Chapter Note 10 of Chapter 28 of the CETA nugatory. Their activities of carrying out various tests and thereby segregating the gas into different grades, having distinct properties and different market price, amounted to manufacture in terms of the above-said Chapter Note of the Chapter 28 of the CETA. The Tribunal in Suprajith Chemicals Pvt. Ltd. v. CCE, Bangalore-I, 2003 (156) ELT 712 (Tri-Bang) has observed that whether a new commercially different type of article emerged consequent to an activity by an assessee, it would amount to manufacture. The ratio of law laid down in that case squarely covers the present case. The ratio of law laid down in (i) Fenner (India) Ltd. v. CCE, Hyderabad, 2000 (67) ECC 738 (T) : 1999 (35) RLT 861 (CEGAT), (ii) Fykas Engg. (P) Ltd. v. CCE, Bombay, 2000 (122) ELT 168 (Tri) and (iii) CCE, Jaipur v. Sabhyata Plastics Ltd., 2002 (145) ELT 166 (Tri-Del) referred by the counsel is not attracted to the present case in the light of the facts and circumstances, detailed above.

11. The Ld. Counsel has also raised the issue of limitation by contending that the demand is time barred as the demand period ranges from 1998-99 to 2000-2001 whereas the show cause notice was served on the respondents on 5.7.2002. But this contention of the Ld. Counsel cannot be accepted as there was suppression of facts by the respondents from the department. They never disclosed the details of the activities being carried out by them in respect of purchased Helium gas cylinders from the market. No duty was ever paid by them since December 1998 when the first clearance of the Helium gas was made by them from their factory premises. The plea of ignorance of law also cannot come to their rescue as they were already engaged in the manufacture of Oxygen, Nitrogen and other gases classifiable under Chapter 28 of the CETA. They very well knew that their activities resulted in the manufacture of new/different grades of Helium gas but still did not disclose the facts to the department. Therefore, the extended period of limitation has been rightly invoked against them.

12. In the light of discussion made above, the impugned order of the Commissioner (Appeals) cannot be sustained and the same is set aside. The Order-in-Original of the adjudicating authority confirming the duty demand with equal amount of penalty and interest thereon, as detailed therein, is restored and confirmed. The appeal of the Revenue accordingly stands accepted.

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