Appeal Nos. E/754/2008, E/1788-1790/2010 (Arising out of OIO-12-COMMR-2008, dt. 31.03.2008, and OIO-27-28/COMMR/HKJ/AHD-II/2010, dt. 27.08.2010, passed by Commissioner, C. Ex. & S. Tax, Ahmedabad-II). Case: Adani Gas P. Ltd. and Ors. Vs Commissioner, C. Ex. & S. Tax, Ahmedabad. CEGAT (Customs, Excise & Gold (Control) Appellate Tribunal) & CESTAT (Customs, Excise and Service Tax Appellate Tribunal)
| Case Number | Appeal Nos. E/754/2008, E/1788-1790/2010 (Arising out of OIO-12-COMMR-2008, dt. 31.03.2008, and OIO-27-28/COMMR/HKJ/AHD-II/2010, dt. 27.08.2010, passed by Commissioner, C. Ex. & S. Tax, Ahmedabad-II) |
| Counsel | For Appellant: Deven Parikh, Senior Advocate and Hardik Modh, Advocate and For Respondents: J. Nagori, A.R. |
| Judges | Dr. D.M. Misra, Member (J) and Ashok K. Arya, Member (T) |
| Issue | Central Excise Act, 1944 - Sections 11AC, 4; Customs Act, 1962 - Sections 2 (21), 2(21), 86, 87; Petroleum And Natural Gas Regulatory Board Act, 2006 - Section 2(1) |
| Judgement Date | January 30, 2017 |
| Court | CEGAT (Customs, Excise & Gold (Control) Appellate Tribunal) & CESTAT (Customs, Excise and Service Tax Appellate Tribunal) |
Order:
Dr. D.M. Misra, Member (J), (West Zonal Bench At Ahmedabad)
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These appeals are filed against the respective Orders-in-Original passed by Commissioner, C.Ex. & S. Tax, Ahmedabad-II. Since issues involved in these appeals are common, hence taken up together for disposal. However, for better understanding, the facts involved in each of these appeals are separately stated.
1.1 Appeal No. E/754/2008:
In brief, the facts of the case are that the Appellants are inter alia engaged in the activity of procuring natural gas from Gujarat State Petroleum Corporation Ltd. and manufacturing Compressed Natural Gas (CNG), classifiable under Chapter Sub-heading No. 7112900 of Central Excise Tariff Act, 1985, at their factory premises at Memco, Naroda, Ahmedabad. The Appellant's Memco factory premise was visited by the Central Excise officers on 23.08.2007. On scrutiny of records relating to availment of CENVAT Credit, it was allegedly noticed that besides availing CENVAT Credit on various capital goods, inputs, at their CNG station at Memco, the Appellant had also availed CENVAT Credit on capital goods, and inputs at their various distribution points, described as their daughter stations. After completion of necessary investigation, it was alleged that the capital goods and inputs viz. Compressors, Dispensers, Ball Valves, Spares, Cables, CNG Storage Cascades installed at their different CNG outlets i.e. daughter stations/distribution centers were not eligible to CENVAT Credit amounting to Rs. 3,15,78,544/- availed during the period Jan. 2007 to June 2007. The Appellants had paid back the said CENVAT Credit in cash against GAR7 challan on 24.09.2007 and 28.11.2007 under protest. Subsequently, a Show Cause Notice was issued to them on 24.12.2007 and adjudicated by the learned Commissioner on 31.03.2008, who confirmed recovery of CENVAT Credit and imposition of penalty under Rule 15(2) of CENVAT Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944.
1.2 Appeal No. E/1788-1790/2008:
In these Appeals also, the officers of the Central Excise Department visited the two other locations of the Appellant viz. Maninagar and Jamalpur on 17.09.2007. During the course of investigation, it was noticed by the officers that besides availing CENVAT Credit on various capital goods, inputs and input services at these locations, the Appellant had also availed CENVAT Credit of capital goods, input and input services in relation to various distribution points/daughter stations, wherefrom the CNG had been distributed by the Appellant to the consumers. On recording the statements and carrying out further investigation, it revealed that the Appellant had availed CENVAT Credit on capital goods/inputs w.e.f. January 2007 and also on input services. (Service Tax paid for transportation of goods through pipeline and also on input viz. Cascades (Stationary/Mobile.) Consequently, a Show Cause Notice was issued on 22.05.2008 for recovery of CENVAT Credit of Rs. 59,23,395/- on capital goods, Rs. 53,39,566/- on inputs, Rs. 77,03,649/- on input services, totaling to Rs. 1,89,66,610/- availed at both Jamalpur and Maninagar stations. The said Show Cause Notice was adjudicated by the Commissioner of Central Excise confirming the demand and imposition of equivalent penalty under Rule 15(2) of CENVAT Credit Rules, 2004 and personal penalty on other notice. Aggrieved by the said order, the Appellants preferred an appeal before the Tribunal, which resulted in remanding the case to the Adjudicating authority for deciding the case afresh after the decision of the Chief Commissioner on the pending application seeking centralized registration of all the distribution units by the Appellant.
1.3 In the meantime, another Show Cause Notice was issued to their Memco Unit on 04.05.2009, on the basis of Audit objection, alleging wrong availment of CENVAT Credit of Rs. 45,24,039/- on various input services during the period August 2006 to May, 2007.
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In the remand proceeding, both the aforesaid Show Cause Notices have been decided, resulting into confirmation of demands of Rs. 1,89,66,610/- and Rs. 45,24,039/- and penalty of equivalent amounts under Rule 15(2) of CENVAT Credit Rules, 2004 read with Rule 25 of Central Excise Rules, 2002, also directing confiscation of capital goods and inputs with an option to redeem the same on payment of fine of Rs. 1.00 crore. Besides, Rs. 20.00 lakhs penalty was also imposed on them under Rule 25 and personal penalty of Rs. 5.00 lakhs on Shri Dharmesh A. Parekh, second Appellant under Rule 26 of the Central Excise Rules, 2002. Hence, the present appeals.
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The learned senior advocate Shri Deven Parikh for the Appellant explaining the activities undertaken by the appellant submitted that the Appellant received natural gas at their City Gate Station (CGS) at Virat Nagar, Ahmedabad through transmission pipelines network of M/s. GSPL. The natural gas received is distributed on continuous basis for sale as Piped Natural gas (PNG) to industrial, commercial and domestic consumers. The natural gas received is also distributed to CNG stations for conversion into compressed natural gas to be filled into the vehicles. The natural gas received from CGS is compressed with the help of compressors at 240 to 250 Bars kg/cm sq. The said compressed CNG later sold/dispensed through dispenser at the CNG stations/outlets. The dispensers at the CNG stations/outlets are directly connected through tubing of the compressors/cascades. Simultaneously, the compressed CNG in online/mother CNG station is filled into mobile cascades at a pressure of 240-250 bars/kg cm.sq and transported to daughter stations/outlets for retail sale.
3.1 It is his contention that that even though the Appellant has applied for centralized registration on 11.10.2005, but due to the pendency of such application, they received separate Central Excise registration for their premises at Memco, Jamalpur and Maninagar. Further, he has submitted that during the period in question, the appellant had their business operation of distribution of CNG through 14 online stations, 6 daughter stations and 6 daughter booster stations situated at various locations in Ahmedabad. He has further submitted that the Appellant had paid CENVAT Credit on input, capital goods and input services in relation to the aforesaid places. The inputs/capital goods involved in the process at various locations are viz. compressors, dispensers, stationary cascades and mobile cascades. Besides inputs and capital goods, they have also availed CENVAT Credit on various input services viz. Man Power Service, GTA Professional Service, Construction Service, Erection, Commissioning & Installation Service, Repair & Maintenance Service, Architecture Service, Security Service etc received by them.
3.2 Assailing the impugned order where under CENVAT Credit has been denied to them on the inputs, capital goods and input services availed at various daughter stations, the learned Advocate submitted that even though such daughter stations were situated away from the place where compression of natural gas take place, however, since the compressed natural gas were dispensed at these daughter stations, therefore, the place of removal of such CNG be considered to be shifted to the daughter stations and accordingly, the CENVAT Credit on inputs/capital goods which were though not received at the registered premises, but used in or in relation to the manufacture and clearance of final product upto the place of removal, be eligible to CENVAT Credit.
3.3 Elaborating his arguments, he has submitted that although the process of compression is a mere change in the physical form of natural gas and does not amount to manufacture within the common meaning of the word manufacture, but by way of a legal fiction and artificial definition inserted in Chapter Note 5 of Chapters 26 & 27 of Central Excise Tariff Act, compression of natural gas is deemed to be a process of manufacture. It is his contention that compression means reducing the volume of the gas by compressing the quantity under pressure. The moment the pressure is removed, the natural gas returns to its expanded form and increase in volume. Thus, CNG must constantly be kept under pressure i.e. compressed, for it to be commercially marketable. Wherever, there is no online transportation facility of the gas and the same has to be transported by road from mother station to daughter station, it is important to ensure sufficient level of pressure to keep the natural gas compressed. The moment the pressure is reduced, in which case below 100 bars, the gas cannot be dispensed into the vehicles and thereby becomes non-marketable at the daughter stations. To ensure that the pressure at daughter stations is maintained, at most of the daughter stations, boosters have been installed. Since all vehicle owners cannot come to mother stations, for injecting CNG into their vehicles, hence the place of removal of CNG also to be considered as daughter station from where the same is sold/injected to the vehicle owners/users. He has vehemently argued that the activity of compression continues and integrated one, and the natural gas must remain compressed under pressure at all times for it to be marketable from the place of removal.
3.4 The learned Advocate Shri Deven Parikh further submitted that the definition of compressed natural gas prescribed under Section 2(1) of Petroleum Natural Gas Regulatory Board, 2006, reveals that if the pressure of CNG falls below 200 bars, it does not remain compressed natural gas. Recompressed booster stations are not connected with steel pipeline network. It has compressor for making CNG out of natural gas as well. By the very nature of the product, the pressure in cascade reduces, therefore, the gases cannot be sold as CNG as per the said statutory definition. It is his contention that the reason for gas becoming natural gas again is quite...
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