TMI Blog2018 (12) TMI 1168X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - Appeal No. E/50763, 51056/2015 & E/51801/2016 (DB) - Final Order No:53447-53449/2018 - Dated:- 20-12-2018 - Mr. Anil Choudhary, Member (Judicial) And Mr. Bijay Kumar, Member (Technical) Shri Rupesh Kumar, DR for the appellant Shri R.K. Mishra, Advocate for the respondent ORDER Per Bijay Kumar 1. The present appeal is filed against the Order-in-Original No JAI-EXCUS-002- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Commissioner has erred in relying in the definition of condensate as provided by the Ministry of Petroleum and Natural Gas dated 29.11.2017, issued order F.No. Expt-13012(12)/368/2017-EXPL-PNG on the definition of condensate as per classification, which in the concluding part categorically states that the provisions of this contract shall apply on such condensate as if they were crude oil. This classification is for treating condensate as of crude oil for the purpose of payment of Royalty. This cannot replace the definition of condensate with crude oil under OIDA Act. The letter referred above is reproduced as under; F.No. Expl-13012(12)/368/2017-EXPL-PNG Government of India Ministry of Petroleum Natural Gas To, The Secretary Mines and Petroleum Department Government of Rajasthan Secretariat, Main Building, Jaipur, Rajasthan Subject:- Issue of non-payment of demand of actual royalty on condensate Produced from SGL Field (IV Block RJ-ON-6) of ONGC Focus Energry. Sir, I am directed to refer to Government of Rajasthan s D.o. Letter No. F.18(4) Mines/Gr-1/2010 dated 09.01.2017 and 22.06.2017 on the subject and to say that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e demanded in this case. The reliance was placed by the Hon ble Tribunal s decision in case of Karial India ltd. vs CCE Jaipur, 2015 (315) ELT 612 Gujarat High Court in the case of sahakari khand udyog 2008 (232) ELT 61(Tri), wherein it is held that there is no question of charging of interest under Section 15 of the OIDA Act. 12. On the other hand Ld. AR reiterated the findings of impugned order. 13. We have heard parties and perused the appeal records. 14. The issue involved in this case is regarding the levy of oil cess under OIDA Act on the Condensate which emerges out of the processing of natural gas. The oil cess in terms of Section 15 of OIDA, is required to be collected as duty of excise as per the rate the specified item in the schedule. As per the Act the provision of Central Excise and Salt Act, 1944 and Rules made there under, including those relating to refunds and exemption from duty, cess, as far as may be, applied in relation to levy and collection of duty of excise leviable under this Section and for this the provision of that Act shall have affect as if that Act provided for the levy of duty of Excise on all items specified in the schedule. We h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conditions; Thus, the terms condensate refers to those low vapour pressure hydrocarbons in the form of liquid at the normal surface temperature and pressure conditions, obtained from natural gas through condensation of extraction. It is pertinent to mention that the condensation so received in the Natural Gas Processing Plant is first and foremost received while processing the Natural Gas in the Gas Processing Plant. It is vehemently submitted that no condensation is formed at the stage of production or separation at the wellhead. The condensation is generated from the gas while processing the gas at surface production facilities (away from wellhead) due to change in pressure and temperature thus amounting to condensation of natural gas. 13.14. detailed comparison of the characteristic of condensate with crude oil would reveal that the condensate could not be termed as crude oil for the purpose of the Act of 1974. The table comparison condensate and crude oil are detailed as follows:- S. No Characteristic Condensate Crude Oil 1. API Gravity Above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity has relied upon the decision in the case of Oil India vs. CCE Shillong referred (supra) along with the judgment of Hon ble Adjudicating Authority on M/s Oil India vs. Dibrugarh 2012 (296) ELT 4. In these judgments the Hon ble High Courts and Supreme Court have confirmed the classification of condensate under CITH heading 2790 00 00 but with reference to their classification for Central Excise Tariff. In these judgments the applicability of the oil cess under OIDA Act on the condensate was not the question before the courts. Ld. Adjudicating Authority has erred in coming to the conclusion that condensate is crude oil and as such consequently the appellants are liable to pay oil cess. We find that Section 15 of OIDA Act imposes oil cess only on two products namely crude oil or natural gas as referred above. The term petroleum product is very very wide and within its ambit covers all the hydrocarbons. If the conclusion of Revenue, is accepted it will create lot of anomaly and imposition of oil cess even on other product namely, gasoline, asphalt, etc. Had there been any intention of the legislature to tax condensate arising out of the processing of the natural gas, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f oil cess on the condensate . We are afraid that this conclusion by the Adjudicating Authority is not correct. We have seen the letter issued by the DG Hydrocarbons to the ONGC, and letter is with reference to the charging of Royalty on the condensate treating them as crude oil. It is seen from the letter dated 29.11.2017 the copy of which is marked to the DG Hydrocarbon stating that the condensate produced from SGL field is not wellhead, casing head, crude state but during the subsequent cooling and separation process, thus Royalty paid by the ONGC at the time of 10 per cent as per the Notification dated 16/12/2004, is in line with the technical finding. This clarification nowhere mention that the condensate is to be given the same treatment under OIDA Act, which is an independent Act passed by the legislature for the development of oil industry. Accordingly, we are of the opinion that the reliance placed on this letter for purpose of levy of oil cess under the OIDA Act is erroneous. We also find that to much of reliance has been placed on the classification of condensate as a petroleum product under the Central Excise Act is not relevant under the OIDA Act as the two Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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