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.  

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