CENVAT credit can be availed if statutory requirements are satisfied, without penalties, when operations are transparent.

Per: P.A. Augustian

These 4 (four) appeals are filed against Order-in-Original No. MLR-EXCUS-000-COM-MS-06-18-19 dated 30.10.2018 passed by the Commissioner of Central Excise & Central Tax, Mangaluru.

2. The issues in the present appeal are;

(i) whether the activity of mixing / blending of 'Propane' and 'Butane' undertaken by M/s. HPCL, on behalf of M/s. IOCL amounts to manufacture;

(ii) whether the Appellant is liable to pay Central excise duty as confirmed by the Adjudication authority, and;

(iii) whether the Appellant who had availed and utilized CENVAT credit during the course of investigation was an ineligible credit and confirmation of demand is tenable.

3. The brief facts are the Appellant M/s. Hindustan Petroleum Corporation Ltd., is engaged in warehousing and selling of 'Liquefied Petroleum Gas (LPG)' falling under Chapter 27 of the first schedule to the Central Excise Tarif Act, 1985. The Appellant has set up a warehousing facility at Bala Village in 2002 for import of 'propane' and 'butane' through New Mangalore Port. They entered into an 'Infrastructure Sharing and Safe Keeping Agreement' with other oil companies like M/s. BPCL, M/s. IOCL, etc., for providing the service of storage and warehousing storage of the imported goods for which the Appellant received renumeration. The Appellant duly discharged applicable service tax on the consideration received during the relevant period. In 2012, appellant installed static mixer in the port and 'propane' and 'butane' earlier transported via separate pipelines were sent to the process of blending within the port. The blended mix LPG was then transferred through a single pipeline from the New Mangalore port to appellant's facility. Until 2014, the LGP was sold exclusively for domestic consumption having 'nil' rate of duty. Thereafter in July 2014 due to urgent requirement for non-domestic LPG, appellant supplied LPG from its warehouse to non-domestic consumers and amended their registration certificate for manufacture of excisable goods from 26.11.2014. On verification of ER-1 returns, it is observed that appellant have manufactured and cleared LPG and they have also imported the said goods for non-domestic purpose. The countervailing duty (CVD) paid on import of 'propane' and 'butane' had been availed as CENVAT at the time of making duty payment. Further it is observed that they have paid duty by utilizing CENVAT credit and balance amount was paid through current account. Further it is observed that they were importing the Propane and Butane and were blended by using the static mixture installed in NMPT area (Port Area). Once blended, the resultant product which emerge is LPG. The LPG was pumped to other locations. They have also added Ethyl Mercaptan to the LPG so that the leakage from the cylinder could be detected. Thus, it is considered that they have manufactured LPG and cleared the same on payment of duty.

3. After issuing show cause notice and following the due process of law, respondent vide Order-in-Original Sl. No. MLR-EXCUS-000-COM- MS-017-16-17 dated 31.01.2017 held that; the LPG was manufactured without obtaining Central Excise registration; availment of CENVAT credit on imported 'Propane' and 'Butane' and input services as irregular and ordered recovery from the appellant. Further held that the LPG cleared by appellant by utilizing the above said credit amounted to clearance without payment of duty and demanded Central Excise duty with interest and imposed penalties. It is also alleged that M/s. HPCL manufactured LPG