THE ISSUE IS - Whether when it is clear that compressed natural gas in its compressed form has a distinct identity and character and use, which acquires the trait of 'manufacture', in such case deduction u/s 80IA cannot be denied. YES IS THE VERDICT.
Facts of the case:
The assessee is a PSU. It procures gas from GAIL Indian Limited and compresses it through the compressor for the manufacture of CNG, which is subsequently sold to the customers, as fuel for vehicles. The natural gas purchased by assessee from GAIL India Limited was either sold thorugh assessee company's own pipelines to factories and household etc. which sale was made as piped natural gas (PNG) sale. The assessee also manufactures CNG from the natural gas received by it from GAIL India Limited, which was sold from the vending station(s) as a fuel for running of vehicles. Assessee company is registered under the Central Excise Act as a 'manufacture of CNG.' In the certificate obtained from the Central Excise Authorities, it was clearly mentioned that assessee was a manufacturer of excisable goods. Further, the assessee company was regularly paying Excise Duty on the manufacturing of CNG. Assessee does not manufacture anything besides CNG from PNG. The ITAT after considering the submissions of the parties, held that compression of natural gas into compressed natural gas does not result in bringing into existence in a new product and the activity of compressing the natural into compressed natural gas would not amount to manufacture or production.
On appeal, the HC held that,
++ Natural gas which comes through pipelines in its natural form cannot be used for the same purposes as compressed natural gas that is to be used as automobile fuel. After undergoing the process of compression, natural gas acquires a new form by the name of compressed natural gas. On the face of it, it appears that compressed natural gas is a commodity having a distinct name, character and use and therefore, the test to determine whether 'manufacture' has taken place is satisfied. Without undergoing the process of compression natural gas in its original form cannot be used as fuel for the automobile industry. It is only upon undergoing the process of compression, it is converted into compressed natural gas which is a commodity, to be used as a fuel for the automobile industry. The Tribunal has failed to discuss this aspect of the matter completely and has ignored the material placed by the appellant on record whereby it has sought to show that the entire process by which natural gas is compressed and having been compressed acquires a new and changed name of compressed natural gas acquires a new use and a distinct commercial identity. We are satisfied that compressed natural gas in its compressed form has a distinct identity and character and use. It is settled law of SC as well as of this Court that when a commodity acquires a distinct name, use and commercial identity, it would acquire the trait of 'manufacture'. In view of above, the question is answered against the department.