2018 (7) TMI 1198 - AT - Central Excise

CENVAT Credit - Cascade/storage tank/cylinders for Compressed Natural Gas - denial on the ground that they have not been used in the factory premises of the appellant - Held that - The manufacture of CNG is not possible without the use of the cascades in question which acts as the storage tank for the CNG upon its manufacture - these cascades are in the nature of storage tanks for the manufacture and sale of CNG - they qualify as capital goods under Rule 2(a)(A)(vii) of the CCR 2004 - appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of Cenvat credit on Cascade/storage tank/cylinders for 'Compressed Natural Gas' due to non-usage in factory premises.

Analysis:
The appellant, a joint-venture between Gas Authority of India Ltd. (GAIL) and Indian Oil Corporation Ltd. (IOCL), manufactures and distributes Compressed Natural Gas (CNG). CNG is stored in cascades, which are systems of storage for compressed gas used for stabilizing and maintaining pressure while filling vehicles. The cascades are crucial for storing and transporting CNG. The appellant's Chief Manager confirmed the use of cascades in the factory for manufacturing and selling CNG, as well as for transportation to daughter stations owned by HPCL/IOCL. These cascades are specially designed for CNG storage and transportation, absorbing pressure changes during dispensing.

The appellant argued that cascades should be considered capital goods eligible for Cenvat credit as they are used for storage and transportation of CNG, essential for the manufacturing process. They contended that the show cause notice invoking extended limitation period was unjustified, as the Department was aware of their operations since registration and previous audits. The appellant emphasized that CNG production and sales are not possible without cascades, making them integral to the manufacturing process and eligible for Cenvat credit.

The Revenue relied on the impugned order denying Cenvat credit on cascades. However, the Tribunal found that CNG manufacturing was impossible without using the cascades, which function as storage tanks for CNG production and sale. The cascades are essential for both storing manufactured CNG and transporting it to daughter stations or retail outlets. Therefore, the Tribunal concluded that the cascades qualified as capital goods under Rule 2(a)(A)(vii) of the Cenvat Credit Rules, 2004. Consequently, the impugned order was set aside, and the appeal was allowed, entitling the appellant to consequential benefits as per the law.