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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).
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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.
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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.
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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.
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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.
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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.
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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.
