GENERAL CIRCULAR NO.14/2001                                     DATED:04.06.2001


Sub : Dutiability of Natural Gas supplied through pipelines.

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                    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. 

(Issued from file C.No.IV/16/316/2001- CX.POL.)





Board's letter F.No.B.1/3/2001-TRU dated 21.5.2001

 Sub : As above.

           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. 

2.       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. 

3.       The field formations may be advised accordingly.  

              Yours faithfully,





Joint Secretary To The Government Of India