2014 (7) TMI 159 - AT - Service Tax

Business Auxiliary service or not - Buy and sell of Compressed Natural Gas (CNG) - whether the appellant are providing Business Auxiliary Service as per section 65(19) read with section 65(105)(zzb) of the Finance Act, 1994 or not? - Held that - As per the said provisions, the service provider provides service to his client for marketing or promotion of the goods to third party. In these cases, appellants themselves are buying goods from M/s MGL. Therefore, the question of rendering the service to the client for marketing of the goods does not arise. We further find that MGL is discharging VAT/ST liability while selling the CNG to appellants. Although the RSP is fixed but it does not mean that the profit margin shall be constituted as commission for rendering the service. On examination, it is found that all the transactions shown by the appellants are done on principal to principal basis. Moreover, the appellants are selling these CNG on payment of VAT/ST to the buyers. There is no commission component that have been received by the appellants from M/s MGL. The decision in the case of Bhagyanagar Gas Ltd. (2012 (9) TMI 860 - CESTAT BANGALORE) wherein this Tribunal held that mere mention in the agreement the trade margin as commission on which VAT/ST has been paid would not evidence the fact of rendering service is application in the present case. The contention of the ld. AR that the private parties are paying service tax under the category of Business Auxiliary Service on the same activity, therefore, the appellants are required to pay service tax is not acceptable as in the case of private parties, the invoices on the customers were raised by M/s MGL directly and the private parties are receiving commission and there is no transaction on principal to principal basis. - Decided in favour of assessees.

Summary

Issues:
Appeal against demands of service tax under Business Auxiliary Service category.

Analysis:
The appellants, public sector undertakings engaged in marketing petroleum products, purchased Compressed Natural Gas (CNG) from Mahanagar Gas Limited (MGL) and sold it to their dealers after compression at retail outlets. The revenue alleged that services provided by the appellants to MGL constituted Business Auxiliary Services. Aggrieved by the service tax demands, the appellants appealed.

The main contention was whether the appellants provided Business Auxiliary Services as defined under the Finance Act, 1994. The appellants argued that the transactions were sales, not services, as they bought CNG from MGL and sold it to dealers on a principal-to-principal basis after paying VAT/ST. They emphasized that no marketing or promotion of goods to a third party was involved.

The Revenue argued that the activities undertaken by the appellants, such as providing space, utilities, and operating equipment, facilitated MGL in selling its goods, thus constituting marketing or promotion services. They contended that since private parties selling CNG were paying service tax on profit margins, the appellants should also be liable.

After considering the submissions, the Tribunal found that the appellants did not provide Business Auxiliary Services. The transactions were on a principal-to-principal basis, with no commission component received from MGL. The Tribunal highlighted that the appellants paid VAT/ST on sales and did not receive any commission. Referring to a relevant case law, the Tribunal emphasized that the mere mention of trade margin as commission in agreements, on which VAT/ST was paid, did not imply service provision. The argument that private parties paying service tax meant the appellants should also pay was rejected, as the private parties' transactions were not on a principal-to-principal basis.

Consequently, the Tribunal set aside the impugned orders, allowing the appeals with any consequential relief.

Judgment Summary:
The Tribunal ruled in favor of the appellants, holding that they did not provide Business Auxiliary Services as alleged by the Revenue. The transactions were sales on a principal-to-principal basis, and no commission was received. The Tribunal emphasized the absence of service provision and set aside the service tax demands, allowing the appeals.