Tribunal grants Cenvat credit for CNG storage cascades, crucial for manufacturing & transport

The Tribunal allowed the appeal, holding that the cascades used for storing and transporting Compressed Natural Gas (CNG) qualified as capital goods eligible for Cenvat credit under the Cenvat Credit Rules, 2004. The Tribunal found that CNG manufacturing was impossible without the cascades, which are crucial for both storing CNG and transporting it to daughter stations or retail outlets. Consequently, the impugned order denying Cenvat credit on cascades was set aside, granting the appellant the right to claim consequential benefits in accordance with the law.

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Issues:
Denial of Cenvat credit on Cascade/storage tank/cylinders for 'Compressed Natural Gas' due to non-usage in factory premises.

Analysis:
The appellant, a joint-venture between Gas Authority of India Ltd. (GAIL) and Indian Oil Corporation Ltd. (IOCL), manufactures and distributes Compressed Natural Gas (CNG). CNG is stored in cascades, which are systems of storage for compressed gas used for stabilizing and maintaining pressure while filling vehicles. The cascades are crucial for storing and transporting CNG. The appellant's Chief Manager confirmed the use of cascades in the factory for manufacturing and selling CNG, as well as for transportation to daughter stations owned by HPCL/IOCL. These cascades are specially designed for CNG storage and transportation, absorbing pressure changes during dispensing.

The appellant argued that cascades should be considered capital goods eligible for Cenvat credit as they are used for storage and transportation of CNG, essential for the manufacturing process. They contended that the show cause notice invoking extended limitation period was unjustified, as the Department was aware of their operations since registration and previous audits. The appellant emphasized that CNG production and sales are not possible without cascades, making them integral to the manufacturing process and eligible for Cenvat credit.

The Revenue relied on the impugned order denying Cenvat credit on cascades. However, the Tribunal found that CNG manufacturing was impossible without using the cascades, which function as storage tanks for CNG production and sale. The cascades are essential for both storing manufactured CNG and transporting it to daughter stations or retail outlets. Therefore, the Tribunal concluded that the cascades qualified as capital goods under Rule 2(a)(A)(vii) of the Cenvat Credit Rules, 2004. Consequently, the impugned order was set aside, and the appeal was allowed, entitling the appellant to consequential benefits as per the law.

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