The Hindu Business Line : The chase of deep-sea diving needs in high sea oil exploration

NO HORSE gets anywhere until he is harnessed. No stream or gas drives anything until it is confined. No Niagara is ever turned into light and power until it is tunnelled. No life ever grows great until it is focussed, dedicated, disciplined. Well, these are no words of mine but of Harry Emerson Fosdick, so let me not tarry in getting focussed on the case on hand, the one involving Goyal M.G. Gases P Ltd that kept the Mumbai tribunal busy recently.

"God made man to go by motives, and he will not go without them, any more than a boat without steam or a balloon without gas," says Henry Ward Beecher, and that applies to the taxman only too well. His motive, as you know, is to get more taxes, but in the case of Goyal, it meant denying the company the benefit of a notification.

The notification in question conferred tax benefit on raw materials cleared for manufacture of goods to be delivered for the purpose of offshore oil exploration or exploitation. And Goyal availed itself of the benefit because it had imported helium refrigerated liquid (HRL) and mixed 2 per cent oxygen to manufacture diving helium gas (DHG). Goyal supplied this to ONGC for offshore exploration or exploitation.

Tax officials came up to Goyal and said, "What you're doing is no manufacture!" Goyal said, "Look! This is how we operate" and laid bare the whole manufacturing process. "HRL is brought in a very special vacuum insulated ISO Container which is designed specially to store HRL at a very low temperature of 4.2K. This is done by vacuumising and shielding of jackets with liquid nitrogen. The liquid, as stated, is at a very low temperature. This liquid is passed through a heater called vaporiser where atmospheric heat is circulated in heat exchange with incoming HRL (at 4.2K) as a result of which it converts into helium gas."

Catch some breath to read on: "This helium gas is then passed through a high pressure compressor where the pressure of the helium gas is raised in stages by the compressor from 0 kg cm{+2} to 150 Kg/cm{+2}. As the pressure is increased in each stage the temperature of gas also increases to 200 degree centigrade and then it is cooled down to 15-20 degree centigrade by after cooler system using water. The healed water is cooled down by cooling tower/water-chilling plant. The helium gas coming out from the final stage is passed through an oil removal unit."

That unit consists of four chambers, you'd learn. These are helium gas cooling chamber, alumina filter and finally in activated charcoal filter. "The helium gas is cooled down to temperature of 5 degree centigrade and passed through these filters, thereby removing moisture, oil and other impurities. The helium gas is analysed at this point for impurity content by direct online mounted analyser and gas chromatograph for detecting impurities like CO, CO{-2}, CH{-4}, N{-2}, O{-2}, H{-2}O etc."

The helium gas is then passed to a buffer vessel or to a manifold ramp for cylinder filling through valve panel/storage vessels/quads/pellets.

After this, 2 per cent by volume oxygen is mixed in helium gas cylinders, and analysers check these. In the next stage, HRL is filled, through a vacuum insulated transfer tube, into small containers called `dewars' ranging from 50 lt to 1000 lt capacity.

Isn't this manufacture, asked the company, but the taxman said `no'. "Mixing of gas does not constitute manufacture," said the officials, arguing that no distinct product came in existence. What did the tribunal have to say on this?

It heard both sides and said, that the word `manufacture' in the Customs notification is to be understood in a broader sense and not related to definition under the Central Excise Act. Nor would the definition under the Standards of Weights and Measures Act constrain the meaning of manufacture for the purpose of notification in dispute.

"There is evidence produced before us that helium gas/liquid in various concentration of purity and a mixture with other gases is used in laboratory and scientific, cryogenic, lighting, electronics, nuclear reactors, aerospace purposes, especially also as medical and/or breathing gases," acknowledged the tribunal.

It also took note of `detailed technical specification' for such medical/breathing use in Encyclopedia of Chemical Technology by Kirk-Othmer. "We therefore find that 2 per cent oxygen helium mixture in this case would be considered as a new commercial product with a different end use than pure helium liquid or oxygen gas," ruled the tribunal member S. S. Sekhon, identifying the specific end use as "deep sea diving needs in high sea oil explorations".

The plea of the Revenue, that there is no chemical reaction taking place between helium and oxygen in this case does not help the case of Revenue, he said, because "the presence of a chemical reaction need not be the only task to meet the test for a `new commercial product' to be emerging".

A mechanical mixture would and could result in a new identified commercial product also, he pointed out.

A wag asks if taxmen are taught deep-sea diving. Are they?

Tailpiece

Overheard in the land of wizards:

Magician: "Is there a service tax on my shows?"

Witch: "But my worry is about the airstrip levy for landing my broom!"

Detaxification@TheHindu.co.in

D. Murali

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