2008 (9) TMI 95 - AT - Service Tax

Transportation of gas through pipeline is an activity which has been newly brought under the Service Tax net after 15.6.05. - case of the Department to bring the appellants under the Service Tax net for the pervious period is not convincing - bringing the appellant s transportation activity under the category of Business Auxiliary service for the period prior to 15.6.05 is not warranted under the law in force at the material time - Hence demand & penalty are not sustainable

Summary

Issues:
1. Incorrect submission by the Department regarding service tax payment.
2. Classification of services rendered by the appellant.
3. Liability of service tax on transportation of gas through pipeline.
4. Nature of activities undertaken by the appellant.
5. Applicability of Service Tax net before and after 15.6.2005.
6. Justification for demand of duty and penalty imposition.

Analysis:
1. The Department acknowledged an incorrect submission during the stay application hearing, clarifying that the service tax demand was solely for the supply of gas to larger customers, not smaller ones.

2. The appellant's advocate confirmed that the demand pertained to supplies made to larger customers, which was a crucial point in the case.

3. The case revolved around the liability of service tax on the transportation of gas through a pipeline for the period before 15.6.2005, when such activities were specifically included under the Service Tax net.

4. The appellant's role was limited to the transportation of gas, with incidental activities like checking flow meters to ensure safe transportation, while the actual sale and negotiation of gas were handled directly between M/s. IOCL and the recipients.

5. The Tribunal noted that the nature of the transportation activity remained consistent before and after 15.6.2005, and the services provided did not align with the category of Business Auxiliary Services for the period preceding the specific inclusion of gas transportation under the Service Tax net.

6. Ultimately, the Tribunal found that the demand for duty and penalty imposition was not justified under the applicable law at the material time. Consequently, the impugned order was set aside, and the appeal was allowed.

This detailed analysis of the judgment highlights the key issues addressed by the Tribunal, the arguments presented by both sides, and the legal reasoning behind the decision to overturn the initial order.