Essar Oil and Gas Exploration and Production Limited Vs ommissioner of CGST & CX (CESTAT Kolkata)
CESTAT Kolkata disposed of cross-appeals filed by Essar Oil and Gas Exploration and Production Limited and the Revenue concerning CENVAT credit and demands arising from the supply and transportation of Coal Bed Methane (CBM) gas.
The Appellant provided CBM gas services to clients and was registered under Service Tax. The Revenue had raised two demands. The first, amounting to Rs.11,12,41,507/-, alleged that CBM was a manufactured exempted product and that the Appellant had availed CENVAT credit on services used for transportation of gas through pipelines, attracting Rule 6(3A) of the CENVAT Credit Rules, 2004. The second demand of Rs.5,27,86,789/- concerned CENVAT credit allegedly availed on services used for laying pipelines for supply of CBM gas.
The Adjudicating Authority dropped the first demand, holding that Rule 6 had been misinterpreted in the Show Cause Notice. The Revenue challenged this finding. The Adjudicating Authority, however, disallowed the second demand, leading the Appellant to file an appeal.
Regarding the first demand, the Appellant submitted that it merely extracted CBM from wells and compressed it to a limited extent for transportation through pipelines, which did not amount to manufacture of CNG. A departmental verification report dated 20.03.2018 recorded that the Appellant supplied CBM mainly through pipelines for industrial use, did not supply it to IOCL, BPCL or HPCL for use as automobile fuel, and applied pressure of up to 225 PSI. The Department treated the proceedings concerning manufacture as concluded.
