: Dutiability of Natural Gas supplied
- - - - - - -
Copy of Board's letter F.No.B.1/3/2001-TRU dated 21.5.2001 on the
above subject is communicated for information and necessary action.
from file C.No.IV/16/316/2001- CX.POL.)
letter F.No.B.1/3/2001-TRU dated 21.5.2001
I am directed to say that, as you aware, excise duty was imposed
on Compressed Natural Gas (CNG) @ 8% (50% of CENVAT rate of 16%) w.e.f. 1st March, 2001. In this context, it has been reported that Natural Gas coming
out of Oil Wells is compressed at the compressor stations only to boost
up the flow of gas in the pipeline.
The pressure of the natural gas at this stage is much less than
the pressure, which is applied to convert natural gas into Compressed
Natural Gas for sale. The
pressure of the gas when it is compressed as CNG is around 200-250
Kg/Cm2 as against a low pressure of the order of 50-90 Kg/Cm2 only,
which is required for the flow and movement of the natural goas through
the pope line. Doubts have
been raised whether the natural gas, which is subjected to lower
pressure only for movement of the gas through the pipeline, is also to
be subjected to excise duty as Compressed Natural Gas.
It may be clarified that the excise duty applies to Compressed
Natural Gas only. Exemption
from excise duty has been provided to natural gas.
As such, it is only when natural gas is converted into Compressed
natural Gas, which is the product marketed and sold for automobile fuel
that the duty liability arises. Natural
gas that is subjected to compression of a lower pressure for the
movement of Natural Gas through the pipeline remains Natural Gas and is
not chargeable to excise duty at this stage.
The field formations may be advised accordingly.
Joint Secretary To The Government Of India