In a major relief to the Gas Authority of India (GAIL), the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Delhi Bench ruled that the National Calamity Contingent Duty (NCCD) is not leviable on heavier hydrocarbons as it is not marketable.
The respondent, GAIL manufactures products falling under Chapter 27 of the First Schedule to the Central Excise Tariff Act, 19855, including Liquified Petroleum Gas and Naphtha from natural gas at its plants situated at Gandhar, Vaghodia, Lakwa, Vijaipur & Pata.
Investigations were initiated by the Department and periodical show-cause notices were issued to the units of the respondent.
The aforesaid six-show cause notices proposed demand of NCCD to the extent of Rs. 3,03,36,274/- on the mixture of heavier hydrocarbons. This product has been marked in bold and underlined in paragraph 3 of this order. This mixture is alleged by the Department to be NGL falling under Chapter Heading No. 2709 of the Tariff Act. The respondent, however, claims that it is gas condensate and not NGL, though the mixture does fall under Chapter Heading 2709. According to the respondent, this gas condensate is produced as an intermediate product at the time of extraction of LPG and is captively consumed in the manufacture of Mixed Fuel Oil/Naphtha. The show-cause notices also proposed imposition of penalty and recovery of interest on the ground that the respondent had contravened various provisions of law.
The Commissioner dropped the demands proposed in the aforesaid six-show cause notices by a common order.
Mr. O.P. Bisht, Authorised Representatives of the Department contended that The appellant had earlier filed Excise Appeal No. 55666/2014 regarding classification of the product manufactured by the respondent to assail the order dated 23.07.2014 passed by the Commissioner dropping the demands by holding that the product cleared by the respondent was Naphtha falling under Heading 2710 12 19 or 2710 12 90 of the Tariff Act and entitled to exemption under Notifications dated 01.03.2006 and 01.07.2009. This Excise Appeal was decided by the Tribunal by order dated 30.11.20187 holding that the classification of the product is NGL and not Naphtha. The respondent filed an appeal against this order of the Tribunal before the Supreme Court and by an order dated 14.02.2019, the Supreme Court stayed the operative part of the order of the Tribunal.
The two-member bench headed by President Justice Dilip Gupta and Technical Member, PV Subba Rao while upholding the commissioner’s order held that the product ‘heavier hydrocarbons’ described as ‘gas condensate’ is classifiable under Heading 2709 but NCCD would not be leviable because the product is not marketable
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