2017 (12) TMI 20 - AT - Service Tax

Business Auxiliary Service - gas has been sold by IGL to IOCL on principal to principal basis - Held that - identical issue decided in the case of BHARAT PETROLEUM CORPN. LTD AND HINDUSTAN PETROLEUM CORPN. LTD Versus COMMISSIONER OF SERVICE TAX 2014 (7) TMI 159 - CESTAT MUMBAI , where it was held that service tax cannot be demanded under the category of Business Auxiliary Service as the gas has been sold by IGL to IOCL on principal to principal basis. The demands against the appellants are not sustainable under the category of Business Auxiliary Service for the amount received by the appellant as commission as all the transactions have been done between the appellant and IGL on principal to principal basis - appeal allowed - decided in favor of appellant.

Summary

Issues:
Service tax liability under the category of "Business Auxiliary Service" for commission received by the appellant.

Analysis:
The appeals arose from the confirmation of service tax demands against the appellants under the category of "Business Auxiliary Service." The appellants, a Public Sector Undertaking, purchased Compressed Natural Gas (CNG) from another entity and sold it to their dealers after compression. The gas was supplied to vehicles through pipelines and compressed at the retail outlets. The agreements between the appellants and the supplier outlined the terms for setting up retail outlets and selling CNG. The appellants were alleged to be commission agents for the sale of gas, thus liable for service tax under the Finance Act, 1994.

The appellant contended that a similar issue was decided in a previous case where service tax was not applicable as the transactions were on a principal-to-principal basis. The Revenue argued that since invoices were raised post-sale and the appellants received commission, they were providing services and thus liable for service tax. After hearing both sides, the Tribunal referred to a previous case where it was held that transactions between the parties were on a principal-to-principal basis, and no service was provided by the appellants to the supplier.

The agreement between the parties explicitly stated that the relationship was on a principal-to-principal basis, absolving the supplier of liability for the acts of the appellant. Relying on the previous decision and the agreement terms, the Tribunal held that the demands against the appellants were not sustainable under the category of "Business Auxiliary Service" as the transactions were conducted on a principal-to-principal basis. Consequently, the impugned orders were set aside, and the appeals were allowed with any consequential relief.

In conclusion, the judgment clarified that the appellants were not liable for service tax under the "Business Auxiliary Service" category due to the principal-to-principal nature of their transactions with the supplier, as established by the agreement terms and previous case law.