Circular  No. 875/13/2008-CX dated 16.10.2008
Issue pertaining to CNG manufacturers

Representations were received from manufacturers of Compressed Natural Gas(CNG)as well as field formations requesting for single registration facility, and clarification on the availability of CENVAT credit, etc. These issues have been examined and the decisions taken in this regard are discussed below.

2.1 Single Registration: - The request to allow single registration to CNG manufacturers has been accepted. Accordingly, notification No. 43/2008-CE(NT) dated 06.10.2008 has been issued to amend the notification No. 35/2001-Central Excise(N.T) dated 26.06.2001, to provide for single registration to the manufacturers of Compressed Natural Gas (CNG) for all the manufacturing premises falling under the jurisdiction of one Chief Commissioner of Central Excise. The details of all such premises should be submitted along with the application for registration. Consequently, notification No. 44/2008-CE(NT) dated 06.10.2008 has also been issued to amend the notification No. 14/2002-Central Excise(N.T) dated the 8th March,2002, to extend the jurisdiction of the Commissioner of Central Excise under whose jurisdiction a CNG manufacturer obtains single registration, to that of the jurisdiction of the concerned Chief Commissioner of Central Excise. To illustrate, if there are four commissionerates (A,B,C & D) under the jurisdiction of a Chief Commissioner, and if the single registration for all manufacturing premises of a CNG manufacturer has been obtained under Commissionerates B, in that case the jurisdiction of commissionerates B shall also extend to all the units of the said manufacturer falling in commissionerates A, C and D for the purpose of anti-evasion, audit, return scrutiny, demand etc. It may, however, be noted that CNG manufacturers, after obtaining a single registration have to give prior intimation before starting any additional premises.

2.2. CNG manufacturers, whose premises fall under jurisdiction of more than one Chief Commissioner, will have to take separate registrations under the jurisdiction of each Chief Commissioner. Such registration can be taken in any of the Commissionerates within the jurisdiction of such Chief Commissioner. Therefore, it has been provided in the notification that CNG manufacturer, who is already registered under the earlier provisions, may apply for fresh registration or file amendment to the existing registration as the case may be, as per the new provisions, if required.

3. Availability of CENVAT credit: - In the case of CNG manufacturers, central excise registration is to be given only in respect of those premises, where CNG is actually manufactured i.e. where compressor is installed to convert natural gas into CNG. Registration is not to be given for premises where CNG is merely dispensed (commonly known as daughter stations) after being transported in mobile cascades. Accordingly, the CENVAT credit can be taken only on those inputs/ capital goods, which are used in registered premises, where actual manufacturing takes place, and not on capital goods goods/inputs at daughter station. The legal position holds good for the period prior to the amendment also.

4. Practice of measurement of CNG production:- It has been reported presently, the duty payable on CNG is calculated on the quantity of CNG dispensed/sold from the dispensers installed at the various CNG stations in a day, which is presumed to be the production of the CNG by the compressors for that day. It has also been noticed that in many cases the CNG stations (from where CNG is sold to vehicles) are owned by an entity, which is different from the owner of the compression facility. However, this practice is not in conformity with the legal provisions. Section 3 of the Central Excise Act, 1944 read with rule 4 of the Central Excise Rules, 2002, requires a manufacturer to pay duty on the quantity manufactured and removed from the factory. Therefore, the quantity sold to the buyer at daughter stations (whether belonging to same entity or other) cannot be taken as a basis for determining the duty payable, and the quantity of CNG manufactured/ cleared by a manufacturer at the registered premises itself should be the basis for calculating the quantum of duty payable on such clearances. Accordingly, it has been decided that whenever CNG is transported in the mobile cascades to the daughter stations, the quantity filled in the mobile cascades should be measured at the registered premise by installing suitable measuring device at the point of filling the mobile cascade. For the purpose of accountal of daily production, a single invoice at the end of the day for the total quantity filled in cascades may be prepared. However, when CNG is also dispensed at the registered premises itself (where CNG station is situated in the same premises where compression facility is situated) and where both the compression and CNG dispensing unit belong to the same legal entity, the quantity of CNG actually dispensed/sold from the dispensers can be considered for payment of excise duty.

5. It is, therefore, requested that the above provisions/ instructions may be brought to the notice of the CNG manufacturers as well as field formations. These issues may also be discussed with the representatives of CNG manufacturers. Wherever, additional measuring devises are required to be fitted in terms of para 4 above, CNG manufacturers may be given a lead time of 3 months to install such devises.

6. The field formations may be suitably informed.

7. Hindi version will follow.


(Rahul Nangare)
Under Secretary to the Government of India - India's Premier portal on Central Excise matters