2015 (9) TMI 422 - HC - Service Tax

Waiver of pre-deposit - tribunal did not follow the order of similar bench to grant full waiver - HPCL was providing Business Auxiliary Services ( BAS ) to IGL with regard to the sale of CNG through the retail outlet of HPCL - CESTAT proceeded to analyse the individual clauses of the Agreement dated 31st October, 2007 between HPCL and IGL and came to prima facie, conclusion that there is no sale of natural gas or CNG to the appellant and sale of CNG the retail customers is by the IGL itself without an intermediary transfer of property in CNG in favour of the applicant . The corresponding prima facie, conclusion, therefore, was that the activity of BPCL in marketing without IGL would be exigible to service tax. Held that - If the Principal Bench of the CESTAT felt that the agreement between HPCL and IGL, identical to the agreement between HPCL and MGL, called for a different interpretation, and that therefore the decision of the Coordinate Bench of the same strength in BPCL v. CST, Mumbai required reconsideration, then the appropriate course for the Principal Bench, CESTAT to adopt would be to refer the matter to a larger Bench of the CESTAT. In any event, at the stage of considering an application for stay, the CESTAT, Principal Bench ought to have proceeded on the basis that in light of the final judgment in BPCL v. CST, Mumbai (2014 (7) TMI 159 - CESTAT MUMBAI) being favour of HPCL, it had a prima facie case. CESTAT was not justified in declining to grant an unconditional stay in favour of the Appellant, without requiring the making of any pre-deposit. - stay granted - decided in favor of assessee.

Summary

Issues:
1. Appeal against order for waiver of pre-deposit and stay of proceedings by CESTAT.
2. Service tax demand on HPCL for providing Business Auxiliary Services to IGL.
3. Reliance on judgments in BPCL v. CST, Mumbai and IOCL v. CST, Delhi.
4. Analysis of agreements between HPCL-IGL and HPCL-MGL.
5. CESTAT's refusal to grant unconditional stay to HPCL.

Analysis:
1. The appeal by HPCL challenged the CESTAT's order for pre-deposit and stay following a service tax demand confirmation by the CCE, based on an agreement with IGL for CNG distribution.
2. CCE held HPCL liable for service tax under Section 65 (105) (zzb) read with Section 65 (19) of the Finance Act, 1994 for providing Business Auxiliary Services to IGL in CNG sales.
3. HPCL relied on BPCL v. CST, Mumbai and IOCL v. CST, Delhi judgments to support its plea for complete waiver of pre-deposit, citing similar agreements absolving them of service tax liability.
4. CESTAT analyzed the HPCL-IGL agreement, concluding no sale of CNG by HPCL to customers, leading to a prima facie case for service tax exemption.
5. CESTAT's refusal to grant unconditional stay was based on lack of detailed examination of agreements in BPCL v. CST, Mumbai and IOCL v. CST, Delhi, prompting a 50% pre-deposit requirement.
6. The High Court set aside CESTAT's order, citing the similarity between HPCL-IGL and HPCL-MGL agreements and the need for reconsideration by a larger bench if interpretation discrepancies exist.
7. The Supreme Court's pending consideration of the BPCL v. CST, Mumbai judgment further supported the High Court's decision to grant HPCL an unconditional stay without pre-deposit during the appeal.

This detailed analysis covers the legal nuances and key points of the judgment, providing a comprehensive understanding of the issues involved and the reasoning behind the High Court's decision.