Cenvat credit can be taken on inputs/capital goods, which are used in registered manufacturing or premises

CLR Editorial Note: The appellant has taken centralised registration for transmission and dispensation of CNG into the vehicles. There are several stations where CNG is being dispensed and some of them (these are called ‘daughter stations’) were using a method of connecting pipe or using mobile CNG dispensations, from the main or online station (‘mother station’) where natural gas was being coverted to CNG . In terms of a CBEC Circular dated 16.10.2008, the measuring devices to indicate the amount of natural gas converted should be on the compressor installed on the CNG online station.

It was found that there was no device fitted on the CNG daughter stations of the appellant, so as to ascertain how much natural gas is received and how much compressed gas has been manufactured. Based on this fact, the Revenue sought to cancel the centralised registration of the CNG dispensation stations and was appealed against by the appellant.  Also they argued that for availing CENVAT credit only the online stations (‘mother stations’) can be taken into consideration and not daughter stations where the product is just being dispensed and not manufactured.

After hearing the case, the Board clearly indicated that if the actual quantity of CNG dispensed or sold can be ascertained and if the premises belongs to the same legal entity, registrations can be granted. It was found that that the various premises at which the CNG is being dispensed, have been leased out to the appellant. Moreover, the metering devices have been affixed at these daughter stations for metering the exact quantity of CNG being dispensed. The mother stations can hence take credit for the CNG produced and moved out of the registered facility to these daughter stations.

Hence the Board dismissed the case in favour of the appellant and the registrations were not cancelled.

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2013-ITS-131-CESTAT-M/s. Adani Gas Limited -Vs- Commissioner of Central Excise Ahmedabad , Decision : 05.02.2013

CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
West Zonal Bench, Ahmedabad

Appeal No. : E/1119 of 2011

Arising out of : OIA No. 173/2011(Ahd-II)CE/PKJ/Commr(A)/Ahd
Dated 13.07.2011

Passed by : Commr. (Appeals) C.Excise. & Cus Ahmedabad

For approval and signature : Hon ble Mr. M.V. Ravindaran, Member (Judicial)

Appellant (s) : M/s. Adani Gas Limited

Represented by : Shri Hardik Modh, Advocate

Respondent (s) : Commissioner of Central Excise Ahmedabad

Represented by : Shri K.N. Joshi, A.R.

CORAM :

Hon ble Mr. M.V. Ravindaran, Member (Judicial)

Date of Hearing / Decision : 05.02.2013

ORDER No. _____________ /WZB/AHD/2013

Per : Mr. M.V. Ravindaran;

This appeal is directed against the Order in Appeal No. 173/2011(Ahd-II)CE/PKJ/Commr(A)/Ahd Dated 13.07.2011.

2. The facts of the case, in brief, are that the appellant has taken centralised registration for transmission and dispensation of CNG into the vehicles. The appellant purchases natural gas from M/s. Gujarat State Petroleum Corporation Limited at entry point, Hazira and gets delivery at exit point, City Station (CGS), Ahmedabad for distribution to various filling stations at Ahmedabad. The compressed CNG at high pressure, from the stationery Cascade is transmitted into the dispenser through pipeline from where the CNG is dispensed in the vehicles. CNG is also filled in Mobile cascades mounted on the vehicle, at the online mother station and transported to various daughter stations from where CNG is filled in various vehicles through dispenser. The capital goods are installed at the filing stations as under:-

Sr. No.	Location of installation of capital goods Description of capital goods	Status
1	Adani Energy Limited Sabarmati, Mehsana Highway, Acher, Sabarmati, Ahmedabad	Two compressors, two stationery cascades, three dispensers having six arms. Online station where manufacturing activity as mentioned above is taking place
2	Adani Energy Limited AMTS Sabarmati Depo, Mehasana Highway, Acher Sabarmati Ahmedabad	One Dispenser having two arms No manufacturing activity is taking place as no compressor is installed at the premises
3	Adani Energy Limited B/h. AMTS Bus Station, Paldi Cross Road, Paldi, Ahmedabad.	Two compressors, six dispensers having twelve arms and two stationery cascades Online station where manufacturing activity as mentioned above is taking place.
4	Adani Energy Limited AMTS Bus Station, Paldi Cross Road, Ahmedabad	One dispenser having two arms No manufacturing activity is taking place as no compressor is installed at the premises
5	Adani Energy Limited, Near Helmat Circle, Near AMTS Bus Depo, Memnagar, Ahmedabad	Two compressors, six dispensers having twelve arms and two stationery cascades Online station where manufacturing activity as mentioned above is taking place.
6	Adani Energy Limited AMTS Depo, Near Helmat Circle, Memnagar, Ahmedabad	One dispenser having two arms No manufacturing activity is taking place as no compressor is installed at the premises

The appellant has installed one pipeline from the compressor at the CNG stations namely Sabarmati, Paldi and Memnagar and attached to the dispenser where the CNG is dispensed and filled in the AMTS buses. It was found that there was no device fitted on the CNG online stations so as to ascertain how much natural gas is received and how much compressed gas has been manufactured. In terms of CBEC Circular No. 875/13/2008-CX dated 16.10.2008, the measuring device should be on the compressor installed on the online station. The appellant has set up the measuring device for disposal of CNG Gas at the Dispenser in respect of online station and mass flow meter in respect of online Mother stations. As per Rule 9 of the Central Excise Rules, 2002 read with above referred CBEC Circular dated 16.10.2008, in the case CNG manufacturer, Central Excise Registration is to be given only in respect of those premises where CNG is actually manufactured i.e., where compressor is installed to convert Natural Gas into Compressed Gas (CNG), Registration is not to be given for premises where CNG is merely dispensed. Accordingly, centralised registration for the CNG stations situated at AMTS Acher, Sabarmati, AMTS Paldi and AMTS Memnagar sought to be cancelled as no CNG is actually manufactured as no compressor is installed to convert Natural Gas into CNG.

3. Therefore, show cause notice dated 03.2.2012 was issued to the appellant proposing cancellation of registration certificate under Notification No. 35/2001-CE (NT) dated 26.06.2001 read with the provisions of Rule 9 of the Central Excise Rules, 2002. Penalty under Rule 27 of the Central Excise Rules, 2002 was also proposed to be imposed. Show cause notice was issued, culminated into cancellation of registration for the Sabarmati, Paldi and Memnagar stations and imposition of penalty of Rs. 5000/- upon the appellant under Rule 27 of Central Excise Rules, 2002 read with Rule 31 of the Central Excise Rules, 2002 for contravention of instructions under CBEC Circular No. 875/13/2008 dated 16.10.2008.

4. Aggrieved by such cancellation of the registration issued to the appellant, they preferred an appeal before the first appellate authority. The first appellate authority, after following the due process of law, concurred with the adjudicating authority and upheld the order in original.

5. Learned counsel would take me through the order in original, show cause notice and the facts of the case. He would also take me through the CBEC Circular No. 875/13/2008-CX dated 16.10.2008 and submit that the registration which has been denied to the appellant s units are not correct. It is his submission that these premises are leased out to the appellant and in these premises dispensing of CNG takes place through a pipeline where in meters are affixed to ascertain the quantity of CNG which has been dispensed. It is his submission that these pipelines are directly attached to the compressors where the registrations are being given. It is his submission that by interlinking the pipelines, the appellant has taken care of the contractual obligations entered with M/s. AMTS to dispense CNG to their buses independently from the normal commercial activity of giving the CNG to other vehicles. It is his submission that the Board Circular is misinterpreted by the lower authorities.

5. Learned departmental representative on the other hand would rely upon the very same Board Circular and submit that in order to check improper discharge of CNG, it is made compulsory that registration will be given only to those premises where compressors are installed. It is his submission that in this case, there is no compressor installed where dispensing of CNG takes place to AMTS Buses.

6. I have considered the submissions made at length by both sides and perused the record.

7. Undisputed facts are that the appellant has been given registration to three places. It is also undisputed that these registrations are given to them on the basis of there being compressors at these places and as per the circular dated 16.10.2008. On perusal of the show cause notice and records, I find that it is also undisputed that the place where compressors are installed, from that place a pipeline is extended for transferring/ transporting the CNG to the place from where they dispense CNG to the AMTS buses. This dispensation of CNG to AMTS buses is independent of the other commercial vehicles being dispensed, for a contractual obligation entered into by the appellant with AMTS. In order to fulfil such contractual obligations, they extended pipelines from the compressing station for transporting the CNG. The Revenue’s case is that the place where the CNG is dispensed to the AMTS buses does not have compressor and hence they cannot be granted registration certificate.

8. I find that there is no merits in the arguments raised by the lower authorities for cancelling the registration to the following premises AMTS Sabarmati Depo, Mehasana Highway, Acher Sabarmati, AMTS Bus Station, Paldi Cross Road, Paldi and AMTS Depo, Near Helmat Circle, Memnagar. I find that the Board Circular date 16.10.2008, in paragraph -3 specifically indicated as under:-
? 3. Availability of Cenvat credit :- In the case of CNG manufacturers, Central Excise registration is to be given only in respect of those premises, where CNG is actually manufactured i.e. where compressor is installed to convert natural gas into CNG. Registration is not to be given for premises where CNG is merely dispensed (commonly known as daughter stations) after being transported in mobile cascades. Accordingly, the Cenvat credit can be taken only on those inputs/capital goods, which are used in registered premises, where actual manufacturing takes place, and not on capital goods/inputs at daughter station. The legal position holds good for the period prior to the amendment also.

It can be seen from the above reproduced portion of the Board Circular, the Board has directed the lower authorities not to give registration certificate to the premises where CNG is merely dispensed, after being transported in Mobile cascades. In the case in hand, it is undisputed that CNG is not transported in mobile cascades for dispensing to the AMTS buses. In the absence of any such finding, in my view, the action of the lower authorities in cancelling the registration certificate of the premises at AMTS, Acher Sabarmati, AMTS, Paldi and AMTS, Memnagar seems to be not in consonance with the Board Circular dated 16.10.2008.

9. Yet another angle to this is, in paragraph -4 of this very same circular, the Board clarifies as under :-
?4.Practice of measurement of CNG production :- It has been reported presently, the duty payable on CNG is calculated on the quantity of CNG dispensed/sold from the dispensers installed at the various CNG stations in a day, which is presumed to be the production of the CNG by the compressors for that day. It has also been noticed that in many cases the CNG stations (from where CNG is sold to vehicles) are owned by an entity, which is different from the owner of the compression facility. However, this practice is not in conformity with the legal provisions. Section 3 of the Central Excise Act, 1944 read with rule 4 of the Central Excise Rules, 2002, requires a manufacturer to pay duty on the quantity manufactured and removed from the factory. Therefore, the quantity sold to the buyer at daughter stations (whether belonging to same entity or other) cannot be taken as a basis for determining the duty payable, and the quantity of CNG manufactured/cleared by a manufacturer at the registered premises itself should be the basis for calculating the quantum of duty payable on such clearances. Accordingly, it has been decided that whenever CNG is transported in the mobile cascades to the daughter stations, the quantity filled in the mobile cascades should be measured at the registered premise by installing suitable measuring device at the point of filling the mobile cascade. For the purpose of accountal of daily production, a single invoice at the end of the day for the total quantity filled in cascades may be prepared. However, when CNG is also dispensed at the registered premises itself (where CNG station is situated in the same premises where compression facility is situated) and where both the compression and CNG dispensing unit belong to the same legal entity, the quantity of CNG actually dispensed/sold from the dispensers can be considered for payment of excise duty.
It can be seen from the above reproduced portion of the Board Circular, that the Board has clearly indicated that if the actual quantity of CNG dispensed or sold is ascertained and if the premises belonged to the same legal entity, registration can be granted. I find that there is no dispute that the CNG dispensed to AMTS buses at AMTS, Acher Sabarmati, AMTS, Paldi and AMTS, Memnagar are the premises which have been leased out to the appellant. It is also undisputed that metering devises are affixed at these places for metering the exact quantity of CNG that has been dispensed to the AMTS Buses. If that be so, the action of the lower authorities in cancelling the registration certificate of these places, AMTS, Acher Sabarmati, AMTS, Paldi and AMTS, Memnagar, seems to erroneous and is not sustainable.

10. Accordingly, in view of the forgoing, orders of both the lower authorities are set-aside and appeal is allowed.

Sr. No.	Location of installation of capital goods Description of capital goods	Status
1	Adani Energy Limited Sabarmati, Mehsana Highway, Acher, Sabarmati, Ahmedabad	Two compressors, two stationery cascades, three dispensers having six arms. Online station where manufacturing activity as mentioned above is taking place
2	Adani Energy Limited AMTS Sabarmati Depo, Mehasana Highway, Acher Sabarmati Ahmedabad	One Dispenser having two arms No manufacturing activity is taking place as no compressor is installed at the premises
3	Adani Energy Limited B/h. AMTS Bus Station, Paldi Cross Road, Paldi, Ahmedabad.	Two compressors, six dispensers having twelve arms and two stationery cascades Online station where manufacturing activity as mentioned above is taking place.
4	Adani Energy Limited AMTS Bus Station, Paldi Cross Road, Ahmedabad	One dispenser having two arms No manufacturing activity is taking place as no compressor is installed at the premises
5	Adani Energy Limited, Near Helmat Circle, Near AMTS Bus Depo, Memnagar, Ahmedabad	Two compressors, six dispensers having twelve arms and two stationery cascades Online station where manufacturing activity as mentioned above is taking place.
6	Adani Energy Limited AMTS Depo, Near Helmat Circle, Memnagar, Ahmedabad	One dispenser having two arms No manufacturing activity is taking place as no compressor is installed at the premises