Customs, Excise and Gold Tribunal - Tamil Nadu
Commissioner Of Central Excise, ... vs South India Carbonic Gas Industries ... on 13 September, 2001
Equivalent citations: 2002(79)ECC200
JUDGMENT
S.L. Peeran, Member (Judicial)
1. This is a revenue appeal against order-in-original No. 17/96 dated 17.9.96 upholding assessee's plea that insulation of tanks does not bring into existence new goods as they had received pressure vessel from M/s. Shantha Kamal Engineering Pvt. Ltd., Bangalore GP. No. 1 dated 14.5.95. The Board has reviewed this order and have taken up pleas in paras as folows:
4.0 upon examination, the Board is satisfied that the order passed by the Commissioner does not appear to be legal and proper for the following reasons:
4.1 The consultants have argued that the tanks in question were specially designed and fabricated for the purposes storage of liquified CO2: that the document: produced by them prove that they are fully manufacture pressure vessels for (SIC) of liquified CO2, at the time they were cleared from the factory of the manufacture after meeting requirements of the provisions of Central Excise Law and were in fully finished condition and therefore assessed to duty accordingly and cleared from the factory of manufactures but a perusal is documents namely xerox copies of invoice No. 78/14.5.91, delivery challan No. 741 dt. 14.5.91 and GPI No. 1 dt. 14.5.91 issued by M/s. Shantha Kamal, Engineering Industries Pvt. Ltd. for the 20 Ton M.S. tank, revealed that, in all the 3 documents, the description of the goods has been mentioned as Tank. Besides, the said Tank has been cleared after classifying the same under Chapter Heading 7309. Chapter Heading 73.09 covers "Reservoirs, tanks, vats and similar containers for any material (other than compressed or liquified gas) of iron or Steel, of a capacity exceeding 300 Litre, whether or not lined or heat insulated, but no fitted with mechanical or thermal equipment." Chapter heading No. 73.11 covers" containers for compressed or liquefied gas, of iron or steel". In this regard dictionary meaning of "to contain" and "container" are to be seen. 1. "to contain" means capable of holding something 2. "container" means designed to contain something. From the above it is clear that capability of containing a given product is the basic criterian for a container. In other words a container which is not capable of containing a product cannot be deemed to be the container for the product. Hence, as in the instant case, the container is not capable of holding the liquid CO2, the same cannot be called as a container for liquid CO2, to be classified under heading 73.11. Though the tanks in question have been specially designed and fabricated for storage of compressed liquid CO2 exclusively as contended by the consultant, the same could not be used as they were, for storage of liquefied CO2. The special design and fabrication have only helped to build a tank strong enough to store liquefied CO2 which has to be kept compressed a low temperature. For storage of liquid CO2, the tanks have required insulation wit PUF and FRP Sheets and fixation of regulatory valves, Safty valve, Hoses etc. But in the instant issue the assessee received naked M.S. tanks which were then fitted with valves, pressure indicators plus insulation of the same with puf and FRP Sheet (SIC), without which liquefied CO2 cannot be stored in the naked tanks. In as much as the tanks could not be used without insulating them with Puf and FRP Sheets, they cannot be held as "containers for compressed are liquified gas, of iron of Steel" and therefore merit classification under Chapter Heading 73.09 as has been rightly done by M/s. Shantha Kamal Engineering Industries Pvt. Ltd. The Consultant's contention, that before the tanks, namely "Pressure vessels for storage Transport of CO2 liquified gas" were actually cleared from the factory of the manufacturers i.e. (SIC) Engineering Industries Pvt. Ltd., they were in fully finished condition and assessed to duty accordingly is not supported by the facts on record. On the contrary, M/s. SIGGIL, Manali have supplied the Safety valve 'Mooroco' Ball valve 'Anco', Safety valve Manifold S.S., S.S.S. Pools and 'Anco' Ball valve Flanged with Handle Extension as per packing list Sl. No. 16, dated 30.07.91 read with Transfer of goods advice of M/s. SIGGIL Manali to M/s. SIGGIL, Tuticorin for the above said 20 Ton M.S. Tank which was thereafter insulated with PUF and FRP Sheets and despatched to their Bangalore Depot for the storage/transport of liquid CO2 which will amply testify to the point that the M.S. Tanks as received from the fabricator is only a naked M.S. Tank incapable containing liquied CO2 a low temperature, as it were. There is no evidence of any kind on record to show that the classification of the said tank under Heading 73.09 was disputed by M/s. Shantha Kamal Engineering Industries or that the classification was revised at any stage after clearance of the same from their factory.
4.2 Inspite of the laboured plea of the noticee that IS 2825 dealing with 'unfired pressure vessel' lays down detailed specification of steel sheets etc, and, therefore, they cylinderical steel tank emerging at fabricator's premises (and received by them) conforming to IS specification referred to above, would itself become a pressure vessel classifiable under Central Excise Tariff heading 7311 and, accordingly, the further process of insulation and cladding wit FRP/aluminium sheets would not result in emergence of another product classifiable under Central Excise Tariff Heading 7311, these submissions appear to flow from more than one fallacy.
4.3 In the first place, a reference to IS 2825/ 69 indicates that it does not cover, or at least does not provide specifications for, an insulated pressure vessel. On the other hand, the Explanatory Notes to HSN, which should be more relevant to decide on scope of Central Excise Tariff Heading 7311, specifically provides that the said heading 7311, dealing with containers for compressed or liquified gas of iron or steel, covers containers of any capacity of which some are strong cylinders, tubes, bottles etc, tested at high pressure, while "other consist of an inner vessel or one or more outer shells, the intervening space being packed with insulating material, maintained under vacuum are arranged to contain liquified gases to be kept at atmospheric pressure or low pressure." Thus, HSN Explanatory Notes clearly recongnises two type of containers- One, being cylinderical M.S. Tank got fabricated and obtained by the noticee, and the other being the insulated and cladded tank brought into existence in the premises of the noticee's company. As held by various forums, the Chapter 73 of Central Excise Tariff being completely aligned with HSN, the Explanatory Notes to HSN can be referred to for understanding the scope of the concerned Central Excise tariff heading. The following case lows will support and strengthen the above view on the scope of HSN.
1. Polar Marmo Agglomerates Ltd., v. U.O.I. - 1994 (73) ELT 536 (RAJ)
2. Bharat Forge & Press Industries P. Ltd., v. Collector - 1990(45) ELT 525(SC)
3. Collector v. Wood Craft Products Ltd., 1995 (7) ELT 23(SC) Therefore, the insulated and cladded pressure vessel brought into existence at the noticee's premises is a clearly recognised and under-stood product, different from the plant M.S. tank received by them.m their factory.
4.4 It is also worth recording in this context, that the process of insulation does not merely add efficiency to the carbon steel tank to any minor degree, as apparently attempted to be presented by the noticee. Rule 13 and 14 of the Static and Mobile Pressure Vessels (unfired) Rules, 1981, extract of which has been filed by the noticee themselves, reads as under:
13. Design Pressure - The design pressure of a vessel shall not be less than -
(a) the vapour pressure of the gas in the vessel at 55 C, if the vessel is meant for the storage of liquifiable gases:
Provided that if the vessel is insulated, the vapour pressure of the gas in the vessel shall correspond to the maximum temperature that is likely to be attained by the gas in the vessel.
(b) the developed pressure of the gas in the vessel at 55C, if the vessel is meant for the storage of a permanent gas.
14. Design of vessels for gasses at low temperature - (1) Refrigerated vessels-
i) vessels used for storage of re-frigerated gases shall be designed in accordance with low temperature requirements under the Design Code referred to in Sub-rule (1) of Rule 12:
ii) the capacity of the refrigeration system shall be adequate to maintain the gas in the vessel at a temperature so that its vapour pressure does not exceed the design pressure of the vessels and shall also remain below the pressure-setting of the relief valve on the vessel.
(2) insulated vessels,--
i) the shell of the vessel and its manhole nozzle shall be insulated with a material approved by the Chief Controller. The entire insulation shall be covered with a metal jacket of a thickness nor less than 3 mm. nominal and flashed around all openings so as to be weather-tight:
ii) the insulation shall be of sufficient thickness so that the thermal conductance at 15C (expressed in calories or Sq.cm. per hour per degree centigrade temperature differential) does not exceed the limit prescribed by the Chief Controller."
4.5 As may be seen from the above, Rule 13 provides for different design pressures of a plain vessel and an insulated vessel, Similarly, Rule 14 provides for distinct and different designs of vessels for gases at low temperature in respect of uninsulated and insulated vessels. This also goes to reiterate the recognised distinction between the two varieties of vessels viz., the one got fabricated and received by the noticee, and the one brought in to existence by them in their own premises through the process of insulation and cladding.
4.6 The noticee Company has filed copy of purchase order placed on M/s. Shantha Kamal Engineering Industries Ltd., the invoice raised by M/s. Shantha Kamal Engineering Industries Ltd., for the same, purchase order placed by the noticee on M/s. Esskay Engineering Services, Bangalore for design detailing, liasoning with third party agency for the approval of the drawing etc., Even as per the statement of cost of pressure vessel submitted by the noticee, while the cost of pressure vessel procured by them from M/s. Shantha Kamal Engineering Industries Ltd., is only Rs. 3.50 lakhs, the cost of material for insulation, valves, piping miscellaneous material etc., work out to more than 100% of value addition. These facts clearly bring out the extent addition of materials (cost wise) added by the noticee to a cylinderical steel tank received by them and the ultimate value addition made to it when it is transformed into insulated and cladded pressure vessel.
2. Ld. DR points out that there is a clear submission from the above noted facts that it was only a bare tank received by respondent as admitted by M/s. Shantha Kamal Engineering Industries, Bangalore. They had classified it under chapter heading 7309 which covers reservoirs, tanks, and similar tanks for any other material and this compressed or liquified gas of iron and steel and a capacity of 300 lts whether or not lined or heat insulated but not fitted with mechanical or thermal equipment. He also submits that the pressure vessels cleared out by the respondents are a different product as compressed or liquified gas is required to be retained in the tank which is insulated by the respondent. Therefore, there is a separate chapter heading 7311 covering "container for compressing or liquified gas of iron and steel." The Board has also examined the plea that the supplier M/s. Shantha Kamal Engineering Industries having manufactured tanks in terms of IS 2825 dealing wit "unfired pressure vessels". However, revenue have raised several grounds including drawing support from explanatory notes to HSN to argue that the emerging item is a different product having different specification, name, characteristics, use and known differently in the trade. Therefore, LD. DR submits that this item is excisable in terms of the pleas already noted in paragraphs from the Board's order. Several judgments have also been noted and hence he seeks confirmation of demand as arised in the SCN on the clearance made by the respondents.
3. On the other hand Ld. Counsel submits that the supplier of the tank was a person who was covered by SSI notification. The classification did not matter to him whether it was 7308 or whether the tank to be classified under heading 7311. It is his contention that in terms of the evidence produced by them which was also handed over to the Court that they had received a fabricated tank manufactured as per their specification for storage of compressed or liquified gas. Therefore, their process of mere insulation will not change the characteristics of the tank and which was nothing but a pressure vessel. Therefore, the Commissioner having relied on the evidence and cited judgments has upheld their plea that there is no process of manufacture carried out by them and proceedings are required to be dropped keeping in the ratio laid down by the Apex Court in the Lathia Industrial Suppliers Company v. CCE as reported in 1987 (27) ELT 751 (SC). He also relies on the judgment of this Bench rendered in Sri Ram Rubber Lining v. CCE, Pune as reported in 1998 (98) ELT 418 wherein it was held that re-rubberising and re-lining of old or new tanks to increase their life does not amount to processing of manufacture.
4. Ld.DR distinguishes both the judgments on the ground that in the case of Lathia Industrial Suppliers and that of Sriram Rubber Lining (supra) the tank remained tank despite re-rubberising and re-lining while in the present case the nature of the tank was different and it has acquired different specification, characteristics and its nature of use was totally different and has separate tariff heading.
5. Ld. Counsel points out that subsequently the supplier had re-classified their said tanks under 73.11 as there was a mistaken classification. Therefore, they had received the pressure vessels which was cleared as pressure vessel only. He submits that the Commissioner had accepted this fact.
6. On a careful consideration of the submissions and on perusal of the ground which are extracted from the Boards review order, it is seen that all these facts and grounds have not been dealt with by the Commissioner in his order. The evidence and material produced by the Respondents before the Commissioner, which is produced before us also is required to have been examined at length. Such an examination would reveal as to whether a separate identifiable and marketable goods have arisen or not. This is a question of fact which requires examination. On the Board ground made out made and on its perusal, we notice that the Ld. Commissioner has been carried away with an impression that what has come into existence is the same tank and that the supplier had supplied them only a pressure vessel. The Respondents have produced evidence which the Ld. Commissioner has not looked into clearly. Therefore we are of the considered opinion that the matter has to go back to the Commissioner shall take all the evidence which has been produced by the Respondents and shall also give an opportunity of hearing to the Respondents to show as to whether they had received pressure vessel and whether the process of re-rubberising or re-lining has changed the characteristics of the supplied tank into a new product. He shall apply the ratio of the Apex Court judgment on this issue and pass a considered detailed order. Thus the appeal is allowed by remand.
Jeet Ram Kait, Member (Technical)
7. While agreeing with Ld. Brother for remanding the case back, the contention of the Department that the assessee received nakes MS tank which were then fitted with valves, pressure indicators plus insulation of the same wit PUF and FRP sheet cladding, without which liquified CO2 cannot be stored in the naked tanks. In as much as the tanks could not be used without insulating them with PUF and FRP sheets, they cannot be held as containers for compressed liquified gas, of iron and steel and therefore merit classification under chapter heading 73.09 as has been rightly done by M/s. Shantha Kamal Engineering Industries Pvt. Ltd. The Department has therefore submitted that the consultant's contention that before the tanks, namely pressure vessels for storage/transport of CO2 liquified gas were actually cleared from the factory of the manufacturers i.e. Spundish Engineering, Maharashtra and M/s. Shantha Kamal Engineering Industries Pvt. Ltd., they were in fully finished condition and assessed to duty accordingly is not supported by the facts on record. On the contrary, M/s. SIGGIL, Manali have supplied the safety "Mooroco" Ball valve "Amco, safety valve manifold S.S. S.S.S. Pools and "Anco" Ball valve flanged with the handle extension as per packing list Sl. No. 16 dated 30.7.1991 read with Transfer of goods advice of M/s. SIGGIL Manali to M/s. SIGGIL, Tuticorin for the above said 20 Ton M.S. Tank which was thereafter insulated with PUF and FRP sheets and despatched to their Bangalore Depot for the storage/transport of liquid CO2 which will amply testify to the point that the M.S. tanks as received from the fabricator is only a naked M.S. tank incapable of containing CO2 at low temperature, as it were. The Department in their ground of appeal have submitted that there is no evidence of any kind on record to show that the classification of the said tank under Heading 7309 was disputed by M/s. Shantha Kamal Engineering Industries or that the classification was revised at any stage after clearance of the same from their factory.
8. All these facts are required to be examined afresh by the original authority and showed take into consideration the evidence produced by the Respondent at the time of personal hearing. With the above observation, I am in agreement wit Ld. Brother that the case may be remanded for de novo consideration by the original authority.
9. Ordered accordingly.
(Order dictated and pronounced in the open court)