2016 (5) TMI 87 - AT - Service Tax

Demand of Service tax - Transport of gas through pipeline - Section 65(105)(zzz) of the Finance Act 1994 - Supply of chlorine through pipeline - Held that - the appellants have rightly calculated the cost of transportation through pipeline in their assessable value of chlorine for central excise purpose as the place of delivery is pre determined as delivery point of pipeline at the recipient s end. The appellants are selling chlorine and upon delivery of chlorine through pipeline at the buyers end, the transaction is concluded. The pipeline is laid and owned by the appellants. The said pipeline is used for transport and sale of chlorine to M/s. Gwalior Chemical Industries Limited. So, it is found that there is no services provider and service recipient with reference to transport of goods through pipeline for charging service tax. The transport of chlorine through pipeline is done by the appellant in their own account and the delivery on sale is made to the buyer. The transportation charges are included as a consideration for sale and to discharge central excise duty. Therefore, no justifiable legal basis found to sustain any service tax liability on the appellants. - Decided in favour of appellant

Summary

Issues:
- Service tax liability for transport of chlorine through pipeline under section 65(105)(zzz) of the Finance Act, 1994.

Analysis:
The judgment involved two appeals concerning service tax demand for transporting chlorine through a pipeline. The appellants, engaged in manufacturing excisable products including liquid chlorine, had an agreement with another company for chlorine supply. The Department claimed service tax liability under the category of "transport of gas through pipeline." The Commissioner (A) upheld the service tax demand, leading to the present appeals.

The appellant argued that since the transportation cost was included in the assessable value for central excise duty, no additional service tax should apply for transporting chlorine through the pipeline. On the other hand, the Department contended that the valuation for central excise purposes did not determine service tax liability, emphasizing that the appellant provided transportation services for chlorine through the pipeline.

Upon examination, the Tribunal found that the appellant's agreement with the recipient specified the supply terms, including the charges for pipeline usage. The appellant owned and laid the pipeline, selling and delivering chlorine to the recipient through it. The transaction concluded upon delivery at the recipient's end, with transportation charges included in the assessable value for central excise duty. The Tribunal concluded that there was no distinct service provider and recipient for the transport of goods through the pipeline, as the appellant operated the transportation in their own account.

Ultimately, the Tribunal allowed both appeals, setting aside the impugned order. The judgment clarified that the transportation charges were part of the consideration for sale and central excise duty discharge, finding no legal basis for imposing service tax liability on the appellants in this transaction.