2018 (7) TMI 1671 - AT - Service Tax

Liability of Service tax - GTA Services - Freight paid towards transportation of effluents out of operational area to ETP - Held that - This issue is squarely covered by the decision of Tribunal in the case of Gujarat State Fertilizers & Chemicals Ltd. Vs CCE Vadodara 2014 (7) TMI 893 - CESTAT AHMEDABAD , where it was held that As the relevant facilities/services of transportation provided by appellant are not for the goods as defined in Section 2(7) of the Sale of Goods Act, 1930, the same cannot be considered as a service provided for transportation of goods as per Section 65(105)(zzz) of the Finance Act, 1994 read with Section 2(7) of Sale of Goods Act, 1930 - the transportation of effluents cannot be treated as transportation of goods and hence there cannot be any service tax liability under Goods Transport Agency as defined in Section 65 (150b) of the Finance Act, 1994 - tax liability and penalty set aside. Liability of Service Tax - freight paid towards transportation of crude oil and condensate within the operational area - transportation services received for transport of various goods out of operational area - Held that - As the appellants have conceded the tax liabilities of ₹ 79,90,126/- in respect of freight paid for transportation of crude oil condensate as also the tax liability of ₹ 67,935/- in respect of outward transportation, no interference is made in respect of these demands confirmed by the adjudicating authority in these matters - tax liability sustained. Appeal allowed in part.

Summary

Issues:
1. Service tax liability on freight paid for transportation of crude oil and condensate within the operational area.
2. Freight paid for transportation of effluents out of the operational area to the Effluent Treatment Plant (ETP).
3. Alleged short paid amount of service tax for transportation services received for the transport of various goods out of the operational area.

Analysis:

Issue 1:
The appellants, a Public Sector Undertaking engaged in oil and gas exploration activities, were involved in a dispute regarding service tax liability on freight paid for transporting crude oil and condensate within the operational area. The show cause notice proposed recovery of amounts along with interest and penalties under various provisions of law. The original authority confirmed these proposals and imposed penalties. The appellants conceded the tax liabilities related to this issue, and the Tribunal sustained these demands.

Issue 2:
Regarding the freight paid for the transportation of effluents out of the operational area, the appellants argued that this activity should not attract service tax under Goods Transport Agency (GTA) service as effluents do not fall under the definition of 'goods.' The appellants relied on case laws and definitions to support their argument. The Tribunal, following precedent and interpretations, held that transportation of effluents cannot be considered transportation of 'goods' under the Finance Act, 1994. Therefore, the tax liability and penalties related to this issue were set aside.

Issue 3:
The alleged short paid amount of service tax for transportation services of various goods out of the operational area was also contested. The appellants argued that there should be no penalty liability for this issue as they believed in good faith that the activities were not taxable. The Tribunal acknowledged the appellants' bonafide belief and noted that the tax liabilities had been paid before the issue of the show cause notice. Consequently, the penalties related to this issue were set aside.

In conclusion, the Tribunal allowed the appeal in favor of the appellants, sustaining some tax liabilities while setting aside others based on the arguments presented and legal interpretations applied during the proceedings.