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TMI Blog2019 (7) TMI 900X X X X Extracts X X X X X X X X Extracts X X X X ..... emoval of Carbon Di-oxide (CO²). (4) TEG Dehydration unit for removal of moisture. (b) Stage - 1 : WELLHEAD TO MANIFOLD : The raw natural gas is supplied to the processing plant manifold from various gas wells licensed to us via 4" line pipe. In this pipeline, control valves are installed to control the flow and pressure of natural gas, each well line has two control valves. One valve is inline and another one is in standby to control the flow and pressure as per desire. The pipeline also consists of strainers to remove any dust or sand coming with the gas. Manifold is like junction having many inlets and two outlets header, one is Production Header and another is Test Header. Well for testing is taken into Test Header and rest Wells are taken into Production Header. (c) Stage - 2: MANIFORLD TO HIGH PRESSURE SEPARATORS : Gas from production header goes to 3-phase high-pressure separator for separating gas and water including processes generated condensate and water that comes in gaseous form from the wells. In this High-Pressure Separator (HPS) separation occurs on gravitation basis. The water separated at this stage is drained into water pit and the separated cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter removal of CO2 from natural gas, the CO2 free gas goes to dehydration unit for removing the moisture from natural gas as the customer demands fully dry gas. Here in dehydration unit Tri Ethylene Glycol (TEG) is taken into use to absorb the moisture from the gas. Here also in dehydration unit absorber, Flash Tank, cartridge filter, Carbon filter, reboiler, Surge Tank and Heat Exchangers are installed. In the absorber, TEG injected to pump from top to bottom and gas inlet from bottom to top and in this process a reaction occurs between them, in this duration TEG absorb moisture from natural gas and fully dry gas goes to metering skid. Before metering of gas the water dewpoint, hydrocarbon dew point and H2S analysers are installed to check the quality of the natural gas. (g) Stage - 5 : TEG DEHYDRATION UNIT TO METERING SKID : From TEG Dehydration Unit the filtered natural gas goes to the metering skid and supply to the pipeline. In the metering skid, there are two streams to measure the flow of gas. One is in-line and another is in standby. Each stream has an Ultrasonic Flow meter (USM) and can measure the volume of gas supply to customers. In metering gas, chromatography sys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was duly reflected in the ER-1 returns filed by the appellant and same was cleared with the "nil" rate of duty as per the central excise tariff rate. The department entertained a view that "condensate" is nothing but crude oil and therefore a show cause notice dated 20 June 2013 came to be issued to the appellant wherein it has been contended that the activity as undertaken by the appellant would amount to manufacture of condensate i.e. "crude oil" and thereby attracting duty of excise namely oil cess and NCCD. The show cause notice came to be adjudicating by order-in-original No. 10/15-CE (demand) dated February 2015. Similarly another show cause notice was also decided vide the order-in-original No. 11/15/2013-CE (Demand) dated 30 May 2013. The appellant have preferred an appeal against both the orders, as mentioned above, before Commissioner (Appeals) who has upheld the adjudication order of the lower authority vide his order dated 26 August 2018. The appellant are before us against the above-mentioned impugned order-in-appeal dated 29 June 2018. 4. We have also heard the learned Departmental Representative of the Revenue. 5. After hearing both the sides, we feel that the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Learned 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 or otherwise treated but from which water and foreign substances have been extracted." As per the said definition, crude oil unrefined or untreated petroleum in its natural state from which only water and foreign substances (impurities) have been extracted. 13.10. The product with which they are concerned in the present case is "condensate" which is generated in the Natural Gas Processing Plant at surface after the gas so received from the earth's surface is passed through pressure control valves and Gas Coolers. Though the term "condensate" is not defined under 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atural gas. It has been accepted by the Learned 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 wellhead. These "condensate" generally emerge from the gas, while processing the gas wellhead surface production facilities away from the oil head. It has been inferred in the adjudicating order that the crude oil includes condensate, even though the same has not been specifically mentioned under the OIDA Act. Depending on the rule 3 (ac) of the Petroleum and Natural Gas Rules, 1951, which defines the "condensate" as mentions (supra), similarly the Adjudicating Authority has relied upon the decision in the case of Oil India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rude 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 oil. It is also seen from the impugned order that the Adjudicating Authority has relied upon the definition given by the Director DG hydrocarbon treating the condensate as crude oil. The Adjudicating Authority paid great emphasis on the Report of the Director of DG hydro carbons which is Apex Body under the Ministry of Petroleum & Natural Gas has treated the "condensate" as crude oil for the payment of Royalty equally applicable in case of levy of oil cess on the "condensate". We are afraid that this conclusion by the Adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X
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