GAIL Vs. CCE

JUDGEMENT

(1.) In this appeal filed by M/s. Gas Authority of India Limited, the issue involved is whether the inputs in respect of which Modvat/Cenvat Credit has been availed of have been used in the manufacture of Lean gas which is exempted from payment of Central Excise duty and consequently the Appellants are required to pay an amount equal to 8% of the price of Lean gas under Rule 57CC/Rule 57AD of the Central Excise Rules, 1944.

(2.) Shri V. Lakshmi Kumaran, Learned Advocate, submitted that the Appellants manufacture various final products including LPG; that the main raw material is natural gas or feed natural gas; that the feed gas is compressed and fed to the plant and treated in Gas Sweetening Unit (GSU) and Gas Processing Unit (GPU) for removal of impurities; that from the feed gas so treated, heavier hydro -carbons or components, namely, C2, C3, C4 and LPG are extracted for down stream manufacture of the final products; that after extraction of the heavier hydro -carbons or components, the feed gas is compressed back to Auriya compressor station; that such feed gas is known as exit natural gas or lean gas which is sold to consumers like M/s. Indo -Gulf; that the Joint Commissioner, who visited their plant on 1.12.2000, directed them to reverse Modvat Credit availed of on the inputs used in the GSU and GPU as Lean gas is exempted from payment of duty; that accordingly the appellants reversed the total Modvat Credit of Rs. 1.84 crores under intimation to the Joint Commissioner; that the Commissioner under the impugned Order has confirmed the demand of duty and imposed equal amount of penalty on the ground that they had availed Modvat Credit on the inputs used in GSU and GPU and that such inputs were used in the manufacture of both dutiable final products and exempted final product, namely, Lean gas. The learned Advocate, further, submitted that the issue involved stands decided by the Tribunal in their own case as reported in 2001 (47) RLT 740 (T); that it has been held by the Tribunal that since lean gas is a by -product, the provisions of Rule 57CC would not be applicable. He also mentioned that it has been held in the following decisions that the provisions of Rule 57CC would not apply to byproduct.

(3.) He also contended that as the Appellants have reversed the entire credit availed of on the inputs in compliance with the direction of the Joint Commissioner, invoking Rule 57C or Rule 57CC/Rule 57AD is incorrect; that the reversal of credit of the duty availed on the inputs would amount non -availment of credit and hence the provisions of Rule 57CC are not attracted.