TMI Blog2019 (7) TMI 900X X X X Extracts X X X X X X X X Extracts X X X X ..... nder OIDA either on merits or also on limitation. Appeal allowed - decided in favor of appellant. - Excise Appeal No. 53309, 53315 of 2018 - Final Order No. 50791/2019 - Dated:- 25-1-2019 - Shri Justice Dilip Gupta, President And Shri C.L. Mahar, Member (Technical) Shri Jitin Singhal, Advocate for the appellant. Shri H.C. Saini, Authorized Representative (DR) for the Respondent. C.L. MAHAR :- The brief facts of the matter are that the appellant is engaged in production of natural gas from oil blocks situated in Indus Basin of Rajasthan. During the process of production of natural gas from beneath earth surface the appellant undertakes following activities as given below :- Natural Gas Processing : (a) Appellant s gas processing plant has designed capacity to handle 65 mmscfd of raw natural gas consisting impurities like moisture, CO etc. Following processes are carried out in our gas processing plant :- (1) High-Pressure Separators for Gas and Water Separation (2) Filter Separators for dust and solid particles removal (3) Amine Plant (MDEA based) for removal of Carbon Di-oxide (CO ). (4) TEG Dehydration unit for removal of moistu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bottom of the absorber is called Rich Amine. The Rich Amine goes for regeneration through amine Flash Tank. In Flash Tank, high volatile components are flashed out. From there the Rich Amine goes to the heat exchanger for exchanging of amine heat from lean to rich, then amine goes to regenerator. Here in regenerator, CO2 strip out from amine and then CO2 free amine goes to reboiler. Here in reboiler, amine heating process is carried out. For the heaitn gof amine, Therminol oil is taken into use. Thermic fluid heater (TFH) is used for heating of Therminol. Thereafter, Therminol Oil transfer his heat to amine in amine reboiler. After heating of amine at 125˚C, rich amine becomes lean amine that is called clean amine. Now clean amine is transferred to amine storage tank through heat exchanger to normalize the amine temperature and from storage tank amine is pumped into amine absorber through amine pump. Amine filtration unit is used to filter the amine from hydrocarbons and other components. This circulation goes on continuously. (f) Stage 4 : AMINE PLANT TO TEG DEHYDRATION UNIT : After removal of CO2 from natural gas, the CO2 free gas goes to dehydration unit for rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vessel is removed from an outlet and the remaining condensate is transferred. The separated condensate which still contains water is thereupon further transferred from High Pressure Separators to Low Pressure Separator where any leftover gas (minuscule content) and water gets separated at low pressure and at higher retention time. The condensate which still contains water is then removed and stored in condensate storage tanks. The natural gas which comes out from high pressure separator is filtered through a separator from removal of any dust particles/solid impurities (if any). The gas is further transferred to filter separator to amine plant for removing of CO in the gas. After amine plant the gas pass through dehydration unit for removing of moisture as customer demand dry gas. The gas is then delivered through metering skid. 3. The appellant have been classifying the said Condensate under the Central Excise Tariff sub-Heading 27090000 of the 1st Schedule to the Central Excise Tariff Act, 1985 and during the period August 2012 the appellant had cleared about 70.5 MTs of the condensate which was duly reflected in the ER-1 returns filed by the appellant and same was cleared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 have also seen the definition of Condensate under the Petroleum and 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 with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 40(47.66) Below 40(30.9) 2. Specific Gravity at 60/60 C 0.78 0.8358 3. Density at 15 C 0.78 0.87 4. Kinematic Viscosity at 20 C 1.21 15.2 5. Sulfur, by wt% 0.00817 1.83 6. Flash Point, C More than 11 38 7. Water Content, ppm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusion 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 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 same would have been specifically mentioned in the OIDA Act. It is evident that condensate is obtained and received from natural gas processing plant as 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. We find that this conclusion of Adjudicating Authority is erroneous and unaccepta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 are independent and for different purpose. Under OIDA Act some of the provisions of the Central Excise Act have been made applicable only with reference to collection of the cess on the product mention therein. The judicial interpretation under one Act is not relevant for the other Act has been held by Chotabhai Jhethabhai Patel Co. vs. Union of India- AIR 1952 Nagpur 139. The tax cannot be imposed by way of implication or presumption as has been done by the Adjudicating Authority in this case. The charging section has to be construed strictly. If a person is not been within the ambit of chargin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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