2010 (1) TMI 430 - AT - Service Tax

Stay clearing and forwarding agent - A detailed scrutiny was carried out and it was alleged that the applicant was engaged in forwarding natural gas to various bulk shippers comprising industries such as power fertilizer steel and chemical plants which require natural gas as fuel or feedstock for their operations. Thus covered under clearing and forwarding agent services. Held that transportation of natural gas through pipeline cannot be termed as C&F agent work.

Summary

Issues:
Stay application against imposition of Service tax, interest, and penalty under the category of Clearing & Forwarding Agent.

Detailed Analysis:

1. Imposition of Service Tax on Transport of Goods through Pipeline:
The case involved the imposition of Service tax, interest, and penalty on the applicant, a State Government undertaking, under the category of Clearing & Forwarding Agent. The applicant was engaged in providing taxable service falling under the category of "Transport of Goods through pipeline or other conduit service." The issue arose when it was alleged that the applicant was receiving natural gas from bulk shippers, warehousing it, and arranging dispatch without changing the title of the gas. The authorities demanded a significant amount of Service tax, interest, and penalties based on this activity.

2. Legal Arguments and Precedents:
The appellant argued that their case was similar to a previous decision involving M/s. Oil India Ltd., where it was held that taxation of transport through a pipeline before the enactment of the law was inconceivable. They also cited other cases to support their contention that the new taxable service introduced should not apply retroactively to activities not covered under pre-existing service categories. Additionally, the appellant contended that they did not fall under the category of clearing and forwarding agents.

3. Time Barred Demand and Audit Findings:
The appellant further argued that the demand was time-barred as the show cause notice was issued in 2008 for the period 2003-2005, while they had been regularly filing Service tax returns from 2005 onwards. They highlighted that an audit conducted in 2007 did not reveal any discrepancies, supporting their claim that the demand was unjustified.

4. Opposing Arguments and Clarifications:
The respondent relied on a different case precedent and a clarification on Service tax thresholds to support their position. However, the Tribunal found these arguments unconvincing and not applicable to the present case. After considering both sides, the Tribunal concluded that the service provided by the applicant in transporting natural gas through pipelines could not be classified as that of a Clearing and Forwarding Agent.

5. Tribunal's Decision and Order:
Based on the analysis of the facts and legal arguments presented, the Tribunal found that the applicant had a strong prima facie case in their favor. Consequently, the Tribunal granted a waiver of the predeposit of Service tax, interest, and penalties and stayed the demand during the pendency of the appeal. The stay petition was allowed accordingly, providing relief to the appellant in the matter of the disputed Service tax liability.

This detailed analysis of the judgment highlights the key legal issues, arguments presented, relevant precedents cited, and the final decision rendered by the Appellate Tribunal CESTAT, Ahmedabad in the case concerning the imposition of Service tax on the transportation of goods through pipelines.