2019 (7) TMI 487 - AT - Central Excise

Imposition of the oil cess and National Calamity Contingent Duty (NCCD), education cess (EC), secondary and higher secondary education cess (SHE) - condensate which emerges out during the process of processing of the natural gas in the appellant‟s natural gas processing plant - HELD THAT - This issue has previously been decided by this Tribunal in the appellant‟s own case M/S FOCUS ENERGY LTD. OTHERS VERSUS C.C.E. JAIPUR 2018 (12) TMI 1168 - CESTAT NEW DELHI where it was held that The oil cess is not leviable on the condensate and under OIDA. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Classification of "Condensate" under Central Excise Tariff.
2. Imposition of Oil Cess and National Calamity Contingent Duty (NCCD) on "Condensate."
3. Applicability of Education Cess (EC), Secondary and Higher Secondary Education Cess (SHE) on "Condensate."
4. Whether "Condensate" is considered "Crude Oil."
5. Limitation period for issuing Show Cause Notice.

Issue-wise Detailed Analysis:

1. Classification of "Condensate" under Central Excise Tariff:
The appellant classified "Condensate" under Central Excise Tariff sub-Heading 27090000, claiming it as a form of natural gas and clearing it at a "nil" rate of duty. The department contended that "Condensate" is crude oil, thus attracting excise duty, oil cess, and NCCD. The Tribunal referred to the appellant's own case where it was held that "Condensate" is not crude oil and does not fall under the classification attracting oil cess.

2. Imposition of Oil Cess and National Calamity Contingent Duty (NCCD) on "Condensate":
The Tribunal examined whether oil cess under the Oil Industry Development Act (OIDA) and other duties were applicable to "Condensate." It was concluded that oil cess is imposed only on crude oil and natural gas as per the OIDA Act. The Tribunal found that "Condensate" is a by-product of natural gas processing and not crude oil, thus oil cess and NCCD are not leviable on "Condensate."

3. Applicability of Education Cess (EC), Secondary and Higher Secondary Education Cess (SHE) on "Condensate":
The appellant argued that since "Condensate" is classified under a nil-rated duty heading, other duties such as EC, SHE, and NCCD are not applicable. The Tribunal upheld this view, noting that the classification of "Condensate" under a nil-rated duty heading exempts it from these additional duties.

4. Whether "Condensate" is considered "Crude Oil":
The Tribunal examined definitions and characteristics of "Condensate" and "Crude Oil." It referred to the Petroleum and Natural Gas Rules, 1954, which define "Condensate" as low vapor pressure hydrocarbons obtained from natural gas, and noted that "Condensate" and crude oil have distinct characteristics. The Tribunal concluded that "Condensate" does not meet the definition of crude oil under relevant Acts and rules, thus it should not be classified as crude oil.

5. Limitation period for issuing Show Cause Notice:
The Tribunal addressed the issue of limitation, noting that the Show Cause Notice was issued beyond the permissible period without invoking the extended period. The appellant filed ER-1 returns on time, and the demand for the period March 2014 to October 2014 was deemed time-barred. The Tribunal relied on precedents to conclude that the demand was time-barred and thus not enforceable.

Conclusion:
The Tribunal set aside the order-in-appeal, holding that oil cess, NCCD, EC, and SHE are not leviable on "Condensate." It reaffirmed that "Condensate" is not crude oil and the demand was time-barred. The appeal was allowed, and the operative part of the order was pronounced in open court.

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