CENVAT credit on downstream compressors denied where recompression of an already manufactured product created no new manufacture.

CENVAT credit was denied on cascades and compressors installed at Daughter Booster Stations because the compressed natural gas had already been manufactured at the Mother Station, and the downstream equipment was used only to transport and recompress an existing marketable product without resulting in a new manufacture. Chapter Note 5 to Chapter 27 was held inapplicable since the relevant compression occurred at the Mother Station, not the Daughter Booster Stations. The limitation defence also failed because filing returns and obtaining centralized registration did not amount to full disclosure of the specific credit availed, so the extended period remained available. The denial of credit and the demand were sustained.

---

---

Issues: (i) Whether CENVAT credit was admissible on cascades and compressors installed at Daughter Booster Stations for recompression and dispensing of compressed natural gas. (ii) Whether the demand for denial of credit was barred by limitation.

Issue (i): Whether CENVAT credit was admissible on cascades and compressors installed at Daughter Booster Stations for recompression and dispensing of compressed natural gas.

Analysis: The compressed natural gas was already manufactured at the Mother Station and transported in cascades to the Daughter Booster Stations. The cascades served only as transport equipment for an already manufactured and marketable product. Recompression at the Daughter Booster Stations did not bring into existence any new product distinct from the existing compressed natural gas. Chapter Note 5 to Chapter 27 was held inapplicable because the manufacturing compression contemplated there took place at the Mother Station, not at the Daughter Booster Stations. The cited precedents on capital goods and input services were found distinguishable on facts.

Conclusion: CENVAT credit on cascades and compressors installed at the Daughter Booster Stations was not admissible, against the assessee.

Issue (ii): Whether the demand for denial of credit was barred by limitation.

Analysis: Filing of returns and grant of centralized registration did not amount to disclosure of the specific credit taken on cascades and compressors at the Daughter Booster Stations. The department was not shown to have had full knowledge of the relevant credit availment, and the extended period was therefore held available.

Conclusion: The demand was not barred by limitation, against the assessee.

Final Conclusion: The appeal failed in its entirety, and the denial of CENVAT credit and the related demand were sustained.

Ratio Decidendi: CENVAT credit is not available on equipment used merely to transport or recompress an already manufactured and marketable product at a downstream location where no new manufacture emerges, and limitation is not defeated unless the relevant facts are fully disclosed to the department.

---