2003 (7) TMI 626 - AT - Central Excise

Summary

Issues involved: Classification of Natural Gas Liquid (NGL) under Central Excise Tariff Act - Marketability of NGL - Applicability of Heading 27.10 or Heading No. 27.09/27.11.

Analysis:

1. Classification of NGL under Central Excise Tariff Act:
The primary issue in this case revolved around the classification of Natural Gas Liquid (NGL) under the Central Excise Tariff Act. The appellant argued that NGL is not marketable and should be classified under Heading 27.09 instead of Heading 27.10. The advocate highlighted that NGL emerges during the extraction of Liquefied Petroleum Gas (LPG) from natural gas and is not suitable for use as fuel in spark ignition engines. The advocate also referenced a previous case involving condensate, where it was classified as crude mineral oil under Heading 27.09. The tribunal ultimately ruled in favor of the appellant, following the decision in the Oil India case, and held that NGL is not classifiable under Heading 27.10.

2. Marketability of NGL:
The marketability of NGL was a crucial aspect of the case. The appellant contended that NGL is highly unstable and not marketable as it vaporizes and becomes part of lean gas before leaving the factory premises. The advocate emphasized that NGL does not meet the criteria for use as fuel in spark ignition engines, citing the low Octane number of NGL. Additionally, it was argued that the spiking back of NGL into the pipeline does not constitute removal of goods from the factory, thus challenging the imposition of duty. The tribunal considered these arguments but ultimately focused on the classification issue rather than the marketability aspect.

3. Applicability of Heading 27.10 or Heading No. 27.09/27.11:
The case also delved into the specific headings under which NGL should be classified. The appellant argued that NGL does not fall under Heading 27.10, which pertains to motor spirit, and should be classified under Heading 27.09. Reference was made to a Tariff Advice regarding condensate being classified as crude mineral oil under Heading 27.09. The tribunal, aligning with the decision in the Oil India case, concluded that NGL should indeed be classified under Heading 27.09, emphasizing the exclusion of crude from Heading 27.10.

In conclusion, the judgment by the Appellate Tribunal CESTAT, New Delhi, focused on the classification of Natural Gas Liquid (NGL) under the Central Excise Tariff Act. The tribunal ruled in favor of the appellant, determining that NGL is not classifiable under Heading 27.10 but should be classified under Heading 27.09. The decision was based on the marketability and characteristics of NGL, as well as the specific exclusions and classifications outlined in the Tariff. The tribunal's analysis addressed the key legal and factual arguments presented by both parties, ultimately resolving the issue of classification in favor of the appellant.