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TMI Blog2025 (3) TMI 578X X X X Extracts X X X X X X X X Extracts X X X X ..... been filed by the appellants-department for change in the name and address of the appellant in the cause title. We find that the change in name and address of the appellant had occurred due to the reconstitution of the territorial jurisdiction, and accordingly the same is allowed and the revised name and address of the appellants are duly incorporated. 2.1. Briefly stated, the facts of the case are as follows: 2.2 The respondent-assessee is engaged inter-alia in the business of exploration and production of oil and natural gas, and as it contributes to a large portion of India's crude oil and natural gas production, it is recognized as a National Maharatna company in Public Sector. The crude oil and natural gas produced from offshore locations in Mumbai is brought to the Uran location of the Respondent for further processing. After processing, the crude oil is supplied to the public sector units' refineries based on the allocations made by the Ministry of Petroleum and Natural Gas. The crude oil is supplied to- (i) Coastal refineries through vessels hired by the buyer refineries; and (ii) Mumbai refineries of Hindustan Petroleum Corporation Ltd. and Bharat Petroleum Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, the respondents had failed to pay service tax in respect of the above said services and failed to reflect the same in ST-3 returns to be filed with the department. 2.3 The respondents replied to the department stating that the pipeline transportation charges are for the transportation of natural gas from Uran to Trombay and the delivery to GAIL is transferred at Trombay. Thus, these charges are before the delivery of natural gas to GAIL and forms part of the Sales price as per sec. 2(25) of the Maharashtra VAT Act, 2002. Accordingly, transportation charges are liable to VAT. However, the department did not agree with the above understanding of the respondents and initiated show cause proceedings by raising a demand of Rs. 90,81,458/- for the financial years from 2009-2010 to 2010-2014 and Rs.3,65,27,610/- during April, 2014 to March, 2015, respectively, towards short payment service tax under the category of "transport of goods through pipeline or other conduit services" in terms of Section 65(105)(zzz) of the Finance Act, 1994, along with applicable interest under Section 75 ibid and for imposition of penalty under section 76, 77 and 78 ibid vide Show Cause Notices (SCNs) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce as alleged by the appellants-department in the present case is required to be provided by the respondent-assessee to any other person. However, in the present case, the ownership of the goods has not passed on until the delivery point as per the Gas Supply Agreement (GSA). Hence, the respondent is basically transporting its own natural gas and there lacks a supplier-recipient relationship in the said transaction. 4.2 Learned Advocate further submitted that transportation of gas is only a part of the entire sale transaction by relying on the judgement given by the Hon'ble High Court of Gujarat in the case of CIT (TDS) v. Krishak Bharati Co- operative Limited, (2012) 349 ITR 68. He submitted that in the said case, the main question that arose for consideration was whether transportation of gas by GAIL to the assessee was a part of sale transaction of the gas or was it a separate contract for carriage of goods. He further stated that on perusal of the relevant agreement, the Hon'ble Gujarat High Court had observed that the ownership of gas remained with GAIL till it was transported and delivered to the assessee's premises and ultimately concluded that there was no separate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned order, it is claimed that the amounts collected by respondents are for supply of natural gas and not for providing any service, and accordingly the service tax demands proposed in the SCNs were dropped in the impugned order. The issue involved in the present case covers the period from 2009-2010 to 2010-2014 and April, 2014 to March, 2015. Therefore, the question of taxability of the service of transport of goods through pipeline, needs to be examined for both prior to negative list period i.e. up to 30.06.2012 and post negative list period from 01.07.2012. 7. In the pre-negative list regime, the levy of Service Tax was on specific services which are defined as 'taxable service' under Section 65(105) of the Finance Act, 1994. In the pre-negative list regime, the service of transportation of goods other than water by pipeline was brought into service tax levy w.e.f. 16.06.2005 vide clause (zzz). In order to qualify any activity as a 'taxable service', there shall be a person providing the service and such service shall be rendered for other person(s), and there shall be an involvement of consideration. The factual matrix of the case indicates that the respondent-assessee ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ects of the definition of service. 'Service' has been defined in clause (44) of the new Section 65B ibid to mean, (i) any activity that is provided (ii) for consideration and such activity shall be (iii) carried out by a person for another, and (iv) it includes a 'declared 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. Examples of such services would include a service provided by one branch of a company to another or to its head office or vice versa. Further, it is not the case that the disputed activity has been included in the list of 'Declared Services' under Section 66E ibid. 8.3 Besides the above legal aspects of service tax levy, we have also examined the factual matrix involving the details of agreement entered between the respondents-assessee and their buyer M/s GAIL. The terms of "ONGC-GAIL Gas Supply Agreement (GSA)" dated 07.07.2006, determine the issue whether the legal right of possession have been transferred from one to another, and who has the effective contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Buyer at the offtake pipeline flange at the inter-connection of Seller's Gas gathering and delivery system and Buyer's Pipeline at the Delivery Point. Upon delivery at the Delivery Point, Buyer shall deemed to be in exclusive control and possession of Seller's Gas and shall be fully responsible for and shall indemnify Seller against 'any damages or injury resulting for the transportation, handling or use of the Seller's Gas." 8.4 From plain reading of the above agreement, it clearly transpires that the agreement dated 07.07.2006 is for sale of gas by respondent-assessee M/s ONGC limited (who is the 'seller'), which is purchased by GAIL (who is the buyer), at the place of delivery which is termed as 'Delivery point' where the parties to contract have agreed to take delivery of the goods/natural gas and 'Custody Transfer Point' being the point of measurement where the quantity of gas delivered is getting measured for payment of sale consideration in respect of the goods sold between the seller and buyer. It is also a fact on record that the pipeline segments connecting the plant/asset of the respondents-assessee to the point of delivery at Uran Trombay/Uran are ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods sold by them at the delivery point to GAIL. As such, the transportation is connected with the supply of goods and not for providing any Service. The above Judgments are squarely applicable in the present case. Further I agree with the noticees argument that, since they are transporting their own gas (Ownership gets transferred to GAIL at Trombay Terminal) for delivery at customer's location, this cannot be considered as service or a service for a consideration. Hence I find that the demands made vide both the show cause notices are liable to be dropped and with the consequent relief of penalty and interest. 9.2 Further, the learned adjudicating authority had also relied upon the decision of the Tribunal in the case of GMK Concrete Mixing Pvt. Ltd. (supra), wherein the issue of sale of ready-mix concrete for delivery at the site was held as not exigible to Service Tax. The relevant paragraph of said order is given below: "5. Record does not reveal involvement of any taxable service aspect in the entire supply of RMC. Rather the contract appears to be a sales contract instead of a service contract. In absence of cogent evidence to the effect of providing taxable servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding the tax liability for marketing margin. The nature of such consideration has to be examined. Admittedly, marketing margin is an approved consideration on sale of gas, by the Ministry of Petroleum and Natural Gas. We note that Ministry of Petroleum and Natural Gas fixes the marketing margin that should be charged from the customers by the company marketing the gas. Such marketing margin money will arise only in respect of natural gas sold. As the same is at the delivery point of the customer and transportation of gas is at the risk of the appellant, we find that there is no service element attributable to the consideration received as marketing margin. As already noted that the original authority apparently gave finding on the tax liability because the transportation charges are suffering Service Tax in respect of sale transaction. This by itself will not justify the Service Tax liability on marketing margin. There is no service by the appellant to the buyer of gas, independent to the sale transaction, as the sale transaction and the delivery point has been clearly defined in terms of the contract. The value liable to VAT is also clearly identified. The marketing margin is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir assessable value of chlorine for Central Excise purpose. The appellants are selling chlorine and upon delivery of chlorine through pipeline at the buyers end, the transaction is concluded. The pipeline is laid and owned by the appellants. The said pipeline is used for transport and sale of chlorine to M/s. Gwalior Chemical Industries Limited. In these factual background, we find there is no service provider and service recipient with reference to transport of goods through pipeline for charging service tax. The transport of chlorine through pipeline is done by the appellant in their own account and the delivery on sale is made to the buyer. The transportation charges are included as a consideration for sale and to discharge Central Excise duty. As such we find no justifiable legal basis to sustain any service tax liability on the appellants in the above transaction." 9.5 We also find that in the case of Krishak Bharati Co-operative Ltd. (supra), the Hon'ble High Court of Gujarat has observed that the ownership of the gas remained the seller till it was transported and delivered to the buyer's premises. "19. In our view, the agreement essentially was for purchase and sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xt of levy of service tax on the licence fee paid by the appellant therein to Oracle USA and therefore the value of the licence fee whether could be added in the value of the media packs imported or not. It was held that the licence fee being a condition of sale is includible in the assessable value of the media packs in terms of the Customs Act, 1962 and the Rules made thereunder and there is no provision warranting exclusion from the assessable value for customs purposes, on the ground that service tax has become chargeable on such licence fee under a different statute. The facts of the case relied upon are entirely different from the one being examined here and has no relevance for the issue in dispute here. 10.4 Therefore, we find that the decisions of the Tribunal relied upon by the learned AR in such referred cases are not relevant to the issue for consideration before us. 11. In view of the above discussions, we are of the considered opinion, that both on the facts of the case and on the interpretation of legal provisions of the Finance Act, 1994, and based on the decisions of the Tribunal and higher judicial forum, the demand of service tax on transportation of natural ga ..... X X X X Extracts X X X X X X X X Extracts X X X X
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