2008 (4) TMI 167 - AT - Service Tax

Transporting goods through pipeline appellant doesn t have relationship of principal-agent with ONGC but appellant have relationship on a principal-to-principal basis with ONGC for whom appellant is storing goods hence appellants do not fall within the ambit of C&F Agencies Service - port fee which is a reimbursable expense cannot also be subjected to any service tax as it is not a receipt in relation to any taxable service rendered by the appellants demand not justified

Summary

Issues Involved:
1. Classification of services provided by the appellant.
2. Applicability of service tax under "clearing and forwarding agents service."
3. Inclusion of "Port fee" in taxable value.
4. Invocation of the extended period of limitation for issuing Show Cause Notices.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Appellant:
The appellant, M/s. Cairn Energy, is engaged in the exploration and development of petroleum resources and operates facilities for the storage and transportation of crude oil. The core service involves receiving crude oil from M/s. ONGC, storing it, and subsequently transferring it through pipelines to ocean tankers. The appellant contends that their services should be classified under "transportation of goods through pipeline service," for which they have been paying service tax since 1-5-2006.

2. Applicability of Service Tax under "Clearing and Forwarding Agents Service":
The Revenue issued Show Cause Notices alleging that the appellant's services fall under "clearing and forwarding agents service." The appellant argued that their role is limited to storage and transportation of crude oil, without engaging in clearing or forwarding operations. They referenced several Trade Notices and Circulars, including Trade Notice 59/1999, Board's Clarification dated 24-4-2002, and Circular No. 39/2/2002, which clarify that storage services do not constitute clearing and forwarding operations. The Tribunal concluded that the appellant's services do not meet the criteria for "clearing and forwarding agents service," as they do not engage in activities such as receiving dispatch orders, arranging transport, or preparing invoices on behalf of the principal.

3. Inclusion of "Port Fee" in Taxable Value:
The Show Cause Notice included the value of "Port fee" in the computation of taxable value. The appellant argued that even if their services were taxable under "clearing and forwarding agents service," only service charges, not reimbursements like "Port fee," should be taxed. The Tribunal agreed, citing case laws such as Keralam Enterprises v. CCE, and Jayalaxmi Enterprises v. CCE, which support the exclusion of reimbursable expenses from the taxable value.

4. Invocation of the Extended Period of Limitation:
The first Show Cause Notice was issued on 25-9-2001, and a subsequent notice was issued on 26-2-2004, invoking the extended period of limitation. The appellant contended that the extended period should not apply, as the department was already aware of their activities from the first notice. The Tribunal agreed, referencing case laws like Nizam Sugar Factory v. CCE and Larsen & Toubro Ltd. v. CCE, which state that once the department is aware of the facts, the extended period cannot be invoked in subsequent notices.

Conclusion:
The Tribunal found that the appellant's services do not fall under "clearing and forwarding agents service" and that the inclusion of "Port fee" in the taxable value was incorrect. Additionally, the invocation of the extended period of limitation in the second Show Cause Notice was unjustified. Consequently, the impugned orders were set aside, and the appeals were allowed with consequential relief.