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2025 (3) TMI 578 - AT - Service TaxLevy of service tax - transportation charges collected by the respondent-assessee for the transport of natural gas through their pipeline to M/s GAIL Trombay - HELD THAT - The transaction of supply of natural gas by the respondent-assessee is a simple transaction of sale of goods . Further in the post negative list regime though all services are included in the Service Tax net other than those specified in the negative list as stated above the charge of service tax under Section 66B ibid remains the same i.e. tax is levied on services provided or agreed to be provided by one person to another and collected in such manner as prescribed. As there is no change in the pattern of sale and the transaction in the present case remained as sale of natural gas by respondents-assessee to GAIL there is no element of service in the transaction of sale by the respondents-assessee even in the post-negative list regime. In the Finance Act 2012 w.e.f. 01.07.2012 inter-alia a definition was provided for the phrase service under interpretation clause in Section 65B ibid. The said definition further provides that Service does not include any activity that constitutes only a transfer in title of (i) goods or (ii) immovable property by way of sale gift or in any other manner. Further Guidance Note issued by the Ministry of Finance in explaining the provisions of negative list regime of service tax states about the various ingredients and aspects of the definition of service - In careful reading of the definition/explanation given to interpret the term service it is found that the phrase provided by one person to another signifies that services provided by a person to self are outside the ambit of taxable service. In the case of Oil India Ltd. 2008 (3) TMI 235 - CESTAT KOLKATA the facts of the case related to the provision of service fully in connection with transport as a clearing and forwarding agent directly or indirectly for movement of goods from one place to other and it was held by the Tribunal that transport of crude oil through pipeline having been brought to tax specifically w.e.f. 16.06.05 taxation thereof on the clearing and forwarding agency service relating to transportation through pipelines prior to enactment of law is inconceivable. As the services dealt therein are different from the present case the above decision of Tribunal is not relevant for the case in hand. Conclusion - The transportation charges collected by the respondent-assessee are part of the sale transaction and not subject to service tax. The appeal filed by the appellants-department is dismissed by upholding the impugned order.
ISSUES PRESENTED and CONSIDERED
The core legal issue considered in this judgment is whether the transportation charges collected by the respondent-assessee for the transport of natural gas through their pipeline to M/s GAIL Trombay are subject to service tax under the Finance Act, 1994. Specifically, the tribunal examined whether these charges constitute a separate taxable service or are part of a sale transaction exempt from service tax. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The legal framework involves the interpretation of "taxable service" under Section 65(105)(zzz) of the Finance Act, 1994, which pertains to the service of transporting goods through pipelines. The tribunal also considered the definition of "service" under Section 65B of the Finance Act, 2012, which excludes activities constituting a transfer of title in goods. Precedents cited include:
Court's Interpretation and Reasoning The tribunal interpreted that the transportation charges are part of the sale transaction of natural gas and not a separate service. The tribunal reasoned that the ownership of the gas remains with the respondent until the delivery point, and the transportation is incidental to the sale, not a distinct service. The tribunal emphasized that service tax is applicable only when there is a service provided by one person to another, which was not the case here as the transportation was for the respondent's own goods. Key Evidence and Findings The tribunal examined the "ONGC-GAIL Gas Supply Agreement" which stipulated that delivery occurs at the delivery point, where the title and risk transfer from the seller to the buyer. The agreement clarified that the transportation charges are part of the sale price, thus supporting the respondent's claim that these charges are not for a separate service. Application of Law to Facts The tribunal applied the legal definitions and precedents to the facts, concluding that the transportation of natural gas by the respondent is part of the sale transaction. The tribunal found that the transportation charges are included in the sale price, making them subject to VAT, not service tax. Treatment of Competing Arguments The appellants argued that the transportation charges should be taxed separately as a service. The tribunal rejected this, finding that the charges are part of the sale transaction. The tribunal cited precedents where similar cases were judged as sale transactions, not services. Conclusions The tribunal concluded that the transportation charges are part of the sale of natural gas and not subject to service tax. The tribunal upheld the adjudicating authority's decision to drop the service tax demands. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning "The transaction of supply of natural gas by the respondent-assessee is a simple transaction of 'sale of goods'... there is no element of service in the transaction of sale by the respondents-assessee." "Since, as the assessee have only supplied the goods, No Service is provided by the Assessee to GAIL in the present case. As such no Service Tax is demandable or payable by the Assessee." Core Principles Established The tribunal established that transportation charges included in the sale price of goods are not subject to service tax when the transportation is incidental to the sale and there is no separate service provider-recipient relationship. Final Determinations on Each Issue The tribunal determined that the transportation charges collected by the respondent-assessee are part of the sale transaction and not subject to service tax. The appeal by the appellants-department was dismissed, and the impugned order was upheld.
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