Customs, Excise and Gold Tribunal - Delhi
M/S. Ammonia Supply Company vs Commissioner Of Central Excise, New ... on 30 May, 2001
Equivalent citations: 2001(77)ECC61, 2001(131)ELT626(TRI-DEL)
ORDER
K. Shreedharam
1. A nice question regarding the scope and ambit of Note 10 to Chapter 28 of the Central Excise Tariff arises for consideration in this appeal. For a proper understanding of this question a short resume of facts is necessary.
2. The appellants before us are engaged in the activity of distributing Anhydrous Ammonia and Ammonia in aqueous solution known as liquid Ammonia. They receive Ammonia in compressed form in tankers from the manufacturer of Ammonia on payment of Central Excise duty under Chapter sub-heading 2814.90 of the Central Excise Tariff. The said Ammonia is off-loaded from the tankers into cylinders of lesser capacity. The cylinders filled with the Ammonia are sold to various purchasers for meeting their requirements. The cylinders in which the Ammonia is sold are returnable by the customers for refillng. On the allegation that they were purchasing Ammonia in bulk and repacking the same in retail/marketable packs for sale to consumers which amounted to manufacture, show Cause Notice dt.14.8.97 was issued demanding duty of Rs. 7,24,454/-. This duty demand was in relation to the quantity of Ammonia cleared during the period from 1.3.97 to 24.4.97.
3.The demand made in the SCN was opposed by the appellants, inter alia, contending that the cylinders in which Ammonia was transferred from bulk tankers are returnable and refilling them is only a process of sale activity. No retail packing is involved in filling of Ammonia gas from the tankers to cylinders. it was also contended that no brand name was given to the cylinders by the assessee. After overruling all these contentions, the adjudicating authority namely the Assistant Commissioner issued Order-in-original No.133/98 dt.27.4.98 confirming the demand. As per that order, duty was demanded on the quantity of Ammonia sold by the appellants which was transferred from tankers to cylinders. The adjudicating authority in that order passed an observation that the assessee identified their cylinders by marking them with "ASCO" with paints.
4. Aggrieved by the order passed by the adjudicating authority, an appeal was referred to the lower appellate authority. In the appeal it was specifically averred that the cylinders into which the Ammonia was filled were not manufactured byu the appellants. Those cylinders were purchased from M/s.ASCO Industrial Corporation, Sonepat. M/s.ASCO industrial Corporation was permitted by the Department of Explosives, Govt. of India to manufacture cylinders according to their specifications and drawings. Those cylinders were having ISI marking to prove their worthiness. It was in such cylinders the Ammonia gas was being filled and so no manufacturing process took place. The Appellate Commissioner while disposing of the appeal by Order-in-Appeal No. 626/CE/DLH/2000 dated 20.6.2000 confirmed the order passed by the adjudication authority without dealing with andy of the contentions raised by the appellants. Hence this appeal.
5. Note 10 to Chapter 28 reads:-
"In relation to products of this Chapter, labelling or re-labelling 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."
From the above Chapter Note one can spell out the manufacturing process only if the activities mentioned therein are carried out. The activity mentioned therein when carried out are treated as manufacturing process. In such circumstances a legal fiction as to manufacturing process. In such circumstances a legal fiction as to manufacture is to be presumed. The fiction incorporate in the note should have a restricted meaning only. In other words, for a manufacturing process to come into existence, by invoking this fiction, ingredients contained therein must be strictly complied with. What are the ingredients that are to be satisfied to bring in a fiction of "manufacture" as per this Note? The first ingredient that is to be satisfied is labelling of container while repacking from bulk packs to retail packs. The second may be re-labelling of the container while repacking from bulk packs to retail packs. The third will be adoption of any other treatment to render the product marketable to the consumer. In the instant case, we can safely exclude the third option because the department has no case that the assessee adopted any treatment to render the product, Ammonia, marketable in the course of filling it into smaller container.
6. The department has nowhere alleged that the assessee in this case resorted to labelling or re-labelling the container while filling the Ammonia gas into smaller container. As per Note quoted above, labelling or relabelling of the container should take place at a time when the goods are packed from bulk packs to retail packs. The assessee was not getting Ammonia in bulk packs. They were getting it in tankers. Ammonia gas brought in tankers can never be termed as brought in bulk packs. so the assessee was not repacking the goods from bulk packs to retail packs. Accordingly the activity undertaken by the assessee in filling the smaller container from bulk container namely tankers can never fall within the fiction of manufacture as envisaged by Note 10 quoted above.
7. The department went into the question as to what type of packing can fall within the purview of the Note. Reference may be made to Circular No. 342/58/97-CX dt. 8.10.97. paragraph 3 of this circular gives Government of India's understanding of the work packing. It reads as :-
"Generally the expression "packing is considered as "package containing a pre-packed commodity" and the quantity of the product contained therein is also pre-determined. The packaging is also done without the purchaser being present. The packages also contain information such as name of the manufacturer, quantity, value and other details of the product."
None of the condition enumerated in the above quoted portion of the Circular is satisfied in the instant case. Learned Departmental Representative was trying very hard to make out the case of packing being carried out by the assessee. According to him the word "ASCO" written on the cylinders was the mark of the assessee. The cylinders were colour coated to identify the product as that of the assessee. He failed miserably in this attempt the trademark of the manufacturer of the cylinders M/s.ASCO Industrial Corporation was the one written on the cylinders. They had permission from the Explosive Authority to manufacturer such cylinders in compliance with the direction given by those authorities. They were having colour coated to the cylinders as they were to carry ammonia. These activities of the manufacturer of cylinders cannot be taken as activity undertaken by the assessee.
8. In Note 10, labelling,k relabelling of the container alongwith repacking etc. are taken to form manufacturing process. The word labelling has got specific connotation in excise law. This can be seen from Notification.No.8/98-CE dt.2.6.98 (General Exemption No.1) dealing with small scale exemption. The word labelling was used in that notification in the Explanation added to that notification. A reading of that Explanation shows that the labelling is sued as synonymous to symbol, monogram, signature including the words or writing for the purpose of indicating a connection between the goods and the manufacturer. No such mark or monogram or label or other marking is affixed by the assessee in the instant case on the container in which Ammonia gas is filled.
9. When the facts of this case are analysed in the light of the above understanding of note 10 to Chapter 28, we are clear in our mind that the activity undertaken by the assessee namely filling of Ammonia gas from bulk tankers into smaller containers will not amount to manufacturing process. Since the activity is not a manufacturing process, no duty liability under the Central Excise Act can be imposed on the assessee.
10. Before parting with the case, it is worthwhile to note that a similar demand on the appellant in relation to the Ammonia gas filled in smaller containers issued by the adjudicating authority, Jamshedpur has been dropped by the Commissioner(Appeals), patna vide Order-in Appeal No.67/JSR/CEX/Appeal/99 dt.25.5.99.
11. In view of what has been stated above, we allow this appeal and set aside the order impugned herein with consequential relief, if any.