Per Justice K. Shreedharan:

A nice question regarding the scope and ambit of Note 10 to Chapter 28 of the Central Excise Traiff 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 An hydrous 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 refilling. 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 preferred to the lower appellate authority. In the appeal it was specifically averred that the cylinders into which the Ammonia was filled were not manufactured by 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-AppealNo.626/CE/DLH/2000dated20.6.2000 confirmed the order passed by the adjudicating authority without dealing with any 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 area treated as 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 retai