DGH Essentiality Certificate for Petroleum Operations Required Only for Importers, Not Domestic Manufacturers: CESTAT [Read Order]
CESTAT held that the DGH Essentiality Certificate requirement applies only to importers, not domestic manufacturers like Emerson Process Management
Petroleum Operations
Petroleum Operations
The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that the requirement of a Directorate General of Hydrocarbons (DGH) Essentiality Certificate applies only to importers and not to domestic manufacturers supplying goods under international competitive bidding.
Emerson Process Management Pvt. Ltd., the appellant, is a manufacturer of industrial valves and gaskets falling under Chapter 84 of the Central Excise Tariff Act, 1985. For the period between August 2013 and March 2014, the appellant supplied valves and accessories against international competitive bidding without payment of duty by availing exemption under Notification No. 12/2012-CE dated 17.03.2012, at Sl. No. 336 read with Condition No. 41.
The department issued a show cause notice alleging that the exemption was wrongly availed. It argued that the appellant was also required to comply with the conditions under the corresponding Customs Notification No. 12/2012-Cus., which mandated the production of a DGH certificate confirming that the goods were required for petroleum operations.
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The adjudicating authority confirmed a demand of Rs. 23,78,577 with interest and imposed a penalty of Rs. 5,000 under Rule 27 of the Central Excise Rules, 2012. The Commissioner (Appeals) upheld the order, and the appellant approached the CESTAT.
The appellant’s counsel argued that Condition No. 41 of Notification No. 12/2012-CE required only that goods, if imported, should be exempt from customs duty and additional customs duty. It did not impose any obligation on domestic manufacturers to obtain a DGH certificate.
The counsel relied on project authority certificates issued by ONGC and Cairn India showing that the goods were supplied under international competitive bidding for petroleum operations. Reliance was also placed on judicial precedents, including Kent Introl Pvt. Ltd. v. CCE, Nashik.
The revenue counsel argued that the exemption was conditional on compliance with the requirements of the customs notification and since the appellant failed to produce the DGH certificate, the duty demand was proper.
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The two-member bench comprising Ajayan T.V. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) observed that the project certificates clearly established that the goods were supplied under international competitive bidding for petroleum operations.
The tribunal pointed out that Condition No. 41 of the excise notification was satisfied once such goods were exempted under the relevant customs notification. The tribunal explained that additional conditions prescribed in the customs notification were meant only for importers and could not be extended to domestic manufacturers.
The tribunal set aside the order of the Commissioner (Appeals) and allowed the appeal with consequential relief.
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