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TMI Blog2018 (12) TMI 1168X X X X Extracts X X X X X X X X Extracts X X X X ..... a by-product where the manufacturing of the aforesaid condensate was never intended, thus this question of classification and payment of cess in the form of duty of excise is not leviable although the Adjudicating Authority has referred to Section 2 (f) and 2 (d) of Central Excise Act to claim of imposition of oil cess on the condensate as a manufactured product. Time limitation - Held that:- In this case the Show Cause Notice is issued under the provisions of Section 11A(1) of the Act thus the demand is time barred as no extended period of limitation has been invoked in the Show Cause Notice dated 25.3.2015. The Show Cause Notice invoked the provisions of Section 11 A(1) of Central Excise Act, 1944 read with Section 15 of Oil Industries Development Act - the demand is time barred. The oil cess is not leviable on the condensate and under OIDA either on merits or also on limitation - appeal allowed - decided in favor of appellant. X X X X Extracts X X X X X X X X Extracts X X X X ..... ct as has been claimed in the Show Cause Notice and Order-in-Original. 5. In the impugned order the Adjudicating Authority has held that the "Condensate" is crude oil which is erroneous and incorrect in view of the following chemical characteristic of the two products; Characteristic Condensate Crude Oil API Gravity Above 40(47.66) Below40(30.9) Specific Gravity at 60/60° F 0.78 0.8358 Density @ 15° C 0.78 0.87 Kinematic Viscocity @ 20° C 1.21 15.2 Sulfur, by wt% 0.00817 1.83 Flash Point, C More than 11 38 Water Content, ppm 66.15 16.6 Ash Content, wt% 0.06 0.4340 Wax Content by wt% NIL 23.6 6. Therefore, it was argued that the Condensate and crude oil are the two different products. Further the crude oil is defined under Section 2(e) of the OIDA Act as under; "2(e) "Crude Oil" means petroleum in its natural state before it is refined or otherwise treated but from which water and foreign substances have been extracted." As per the said definition, crude oil means unrefined or untreated petroleum in its natural state from which only water and foreign substances (impurities) have been extracted. Thus, the appellant submits that the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examined in the Ministry in consultation with Directorate General of Hydrocarbons. It has been observed that the condensate produced from SGL field is not the wellhead/casing head condensate but produced during subsequent cooling and separation process. Thus, the Royalty paid by ONGC @ 10 % as per notification dated 16.12.2004 is in line with the technical findings. Yours Faithfully (Rakesh Mishra) Under Secretary to the Govt. of India 9. It was submitted that the Ld. Commissioner came has also erred in relying on the definition of M/s Oil India Ltd. vs. CCE, Shillong, 2002(148) ELT 802 (Tri-Del). The decision of the Tribunal in this case has been regarding the classification of the condensate under Central Excise Tariff. The Tribunal was not deciding the question as to whether the condensate would be treated as crude oil for the purpose of Section 15 of the OIDA Act. The present case revolves around the interpretation of Section 15 read with the Schedule OIDA of 1974. 9.1. The Commissioner has further erred in relying upon the case Oil India Ltd. vs. CCE, Dibrugarh, [(06) LCX-0016] to the extent that of perusal of Para 7 of the decision of Hon'ble Tribunal, it has been categ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Natural Gas Rules, 1954, which read under Rule 3 (ac) as under, "Condensate" means those low vapour pressure hydrocarbons obtained from natural gas through condensation of extraction which are in the form of liquid at normal surface temperature and pressure condition". The crude oil is different under the above Act Section 3 (b) which says "crude oil means petroleum in its natural states in the viscous or sold in the form of refined or other oil treating or water foreign substance has been extracted". 15. We have to see and decide the fact as to whether the "condensate" of which Revenue has imposed duty under OIDA Act and other Acts also falls within the definition of crude oil as held in the impugned order. Ld. Adjudicating Authority has referred to the various case laws and definition adopted by DG Hydrocarbons and OIDA for the terms "condensate" and also characteristic of "condensate" and crude oil extract the definition of crude oil as per the various Acts in question which is relevant to decide the issue. These are; "13.8. The term "Crude oil" is defined under Section 2(e) of 1974 Act as under:- "2(e) "crude oil" means petroleum in its natural state before it is refined o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Flash Point, °C More than 11 38 7. Water Content, ppm 66.15 16.6 8. Ash Content, wt% 0.06 0.4340 9. Wax content by wt % NIL 23.6 The abovementioned characteristic would clearly indicate and establish our stand that the product in question is "condensate" and demolishes the allegation made in the Show Cause Notice that the said product is "crude oil". 16. In view of above it is evident that under the OIDA Act there are only two entries on which crude oil cess is imposed these are:- (a) crude oil (b) natural gas. It has been accepted by the Ld. Adjudicating Authority that there is no specific mention of "condensate" in the said schedule under OIDA on which the oil cess is imposable but he has relied upon the definition under Section 3 (ac) which says that "condensate" are those low pressure vapour hydrocarbons obtained from natural gas through condensation or extraction which are in the form of liquid at normal surface and pressure condition. It is also pertinent to mention that "condensate" so obtained from natural gas processing plant is obtained while processing the natural gas as a by-product and not formed at the stage of production or separation of well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10, Bajaj Auto Ltd. vs. Commissioner of Central Excise, Aurangabad-2015 (322) ELT 0419 (SC). We find that the appellant has clearly given the distinction between the chemical characteristic of crude oil and that of "condensate" in their reply which is referred above. In view of different and physical and chemical parameters of two products, it was necessary on the part of the Department to get the expert opinion so as to find the exact chemical nature of "condensate" and as to whether the same could qualify to called as crude oil. We find that no such attempt has been made by the Revenue to obtain the test report to that effect. It has been held in case of CCE vs. Calcutta Steel Industries [1989(20) ECR-303(SC)] where the chemical nature of the product is required to be tested for the classification is required to be derived on the basis of test report as per the procedure set under Excise Act. In this case, it is on record that sample has been drawn but test report was not made available to the appellant, which is violation of principal of natural justice. Having not done so, the Adjudicating Authority has wrongly arrived at the conclusion that "condensate" is nothing but crude oi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hemdabad vs. Ellis Bridge Gymkhana- 1997 (9) SCC 24. We find appellant has made the plea of limitation in this case as the Show Cause Notices has been issued by the Department on 25/3/2015 and the same was received by the appellant on 15/5/2015. The ER-1 returns for the month March, 2015, ER has been filed on 10/4/2014, thus the demand which is for the period March, 2014 to October, 2014, is time barred as no extended the period has been invoked in the Show Cause Notices. In this case the Show Cause Notice is issued under the provisions of Section 11A(1) of the Act thus the demand is time barred as no extended period of limitation has been invoked in the Show Cause Notice dated 25.3.2015. The Show Cause Notice invoked the provisions of Section 11 A(1) of Central Excise Act, 1944 read with Section 15 of Oil Industries Development Act. Therefore, we also conclude the demand is also time barred for this we place reliance on the decision of Hon'ble Tribunal in the case of Magara Industries Pvt. ltd. vs. Commissioner of Customs New Delhi 2006 (202) ELT 244 (Tri-LB). We, therefore, hold that the oil cess is not leviable on the "condensate" and under OIDA either on merits or also on limit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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