9911796707
Advanced Search 
TMI Blog2025 (3) TMI 578X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fineries 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 Corporation Ltd. through the Respondent's pipeline. 2.3 During the course of Central Excise Audit (EA-2000) conducted by the appellants-department, it has been observed that the respondents-assessee supplied exempted goods i.e. Natural Gas classifiable under Central Excise tariff item 2711 2100 to their various clients from "Uran Terminus". However, in the case of supply to M/s GAIL, Trombay, they have laid the pipeline from Uran to Trombay, and supply is effected from "Trombay Terminal". The sale price of the Natural Gas is fixed by the Government of India and the same price is charged to all their clients including M/s GAIL, Trombay. However, for M/s GAIL, Trombay, an additional charge @Rs.12 per m3 [Cubic Metre] is charged as "Pipeline Transportation Charges" on the total quantity supplied. The assessee was paying service tax on the said charges up to March 2009 and Suo-motto; they stopped paying service t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) dated 22.10.2014 and 25.05.2015, respectively. In adjudication of the said SCNs, the learned Commissioner had dropped the entire demands proposed against the respondents vide the impugned order dated 30.03.2016. Feeling aggrieved with the above order, the appellants have filed this appeal before the Tribunal. 3.1 Learned Authorised Representative (AR) for the appellants-department argued the case stating that the adjudicating authority had dropped the service tax demands based on incorrect interpretation of the taxable service provisions. The authority's view that transportation services are exempt if the goods belong to the transporter does not align with the statutory definition or legislative intent. The service tax is levied on the service component, which is the act of transporting goods through pipelines. The ownership of the goods does not alter the nature of the service provided. The conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 contract for the carriage of goods. 4.3 Further, learned Advocate also stated that as per constitutional provisions and prevailing service tax laws, the sale transactions are not covered under the scope of Finance Act, 1994 i.e., no service tax can be levied on such sale transactions. He further stated that the Hon'ble Supreme Court has held in a plethora of cases that both the sales tax and service tax cannot be levied on same transactions. He submitted that in their case, the delivery point is Trombay Terminal, where sales are concluded, and this fact seems to be overlooked by the appellants-department. He cited the relevant provisions of the Sales Contract between respondent-assessee and GAIL to emphasize that the delivery point in this case is Trombay Terminal, and transportation charges collected from M/s GAIL is the part of sale price. 4.4 He further submitted that the issue involved in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 are selling natural gas to their clients by supplying such goods through their own facility/pipeline and there is no involvement of any service being provided to any other person. In other words, 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 control over the subject goods at the time of delivery of goods at the place of delivery point. Further, the following Clauses of the agreement clearly provide the contractual terms for determining the fact, whether the alleged activity of transportation of natural gas is part of supply of goods or is it a service by itself. The extracts of the relevant clauses/articles of the GSA are given below: "ARTICLE 4 SALE AND PURCHASE OF SELLER'S GAS 4.1 Commencing the effective date until the expiry of the Term of this Agreement, Seller shall sell and deliver to Buyer and Buyer shall purchase from Seller each day, at the Delivery Point, all Seller's Gas nominated for delivery by Seller in accordance with Article 10 as set forth herein, all in accordance with the terms of this Agreement. ARTICLE 5 DELIVERY AND DELIVERY POINT 5.1 All deliveries of Seller's Gas hereunder shall be made by Seller to Buy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivered 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 owned by the respondents. There is no third party or any other person involved in providing the transportation of natural gas, being sold by the respondents-assessee i.e., seller ONGC to the buyer GAIL. These facts clearly prove that there is no element of any service for considering the scope of levy of service tax and accordingly the disputed activities are not amenable to levy of service tax. 9.1 We find that the learned Commissioner had discussed the disputed issue in detail and after carefully examining the agreements, had come to the conclusion that transporting of natural gas by the respondent assessee in their own facility for delivery of such natural gas to the customers cannot be considered as a service. The relevant extract of the conclusion arrived by the learned adjudicating authority is given below: - "4.15 Reading of all the above provisions of the Law and the facts in the case makes it cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 service, primary and dominant object of the contract throws light that contract between the parties was to supply ready mix concrete (RMC) but not to provide any taxable service. Finance Act, 1994 not being a law relating to commodity taxation but services are declared to be taxable under this law, the adjudication made under mistake of fact and law fails." 9.3 We also find that the co-ordinate Bench of the Tribunal have held in the case of GAIL India Pvt. Ltd. (supra) that services or activity prior to actual sale of gas does not have two distinct persons identified as service provider and service recipient. Therefore, the delivery of gas by the seller cannot be subject to Service Tax. "7. We have heard both the sides and perused the appeal records. The only point of dispute is the liability of the appellant to pay Service Tax of marketing margin indicated in their sale invoices of natural gas. The Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting 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 considered as part of sales transaction value and subject to VAT. After the change of ownership of gas, there is no consideration attributable to any service from the seller to the buyer. In other words, any services or activity prior to actual sale of gas has no two persons identifiable as service provider and service recipient. The activities and services by the appellants prior to actual sale, are for self. We also note that in respect of appellant, in others jurisdiction, proceedings were initiated to demand Service Tax on various activities undertaken with reference to the natural gas before sale. The jurisdictional authorities after examining the sale agreement, categorically held that the charges received by the appellant are part of sale of gas and cannot be subject to Service Tax. It was held that the value in dispute is included in the assessable value being part of the sale of gas and applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of gas. Transportation of gas was only a part of the entire sale transaction. Laying down the pipeline and supplying gas through such pipeline were the steps in furtherance of the terms of such a contract. Clear understanding of the parties that the ownership of gas would pass on to the buyer at the delivery point would clearly show that transport of gas by the seller was a step towards execution of contract for sale of gas and there was no contract for carriage of goods. We are not unmindful of the decision of the apex court in case of Associated Cement Co. Ltd. v. CIT reported in (1993) 201 ITR 435 (SC), wherein it was observed that section 194C(1) does not require that a contract to carry out a work or the contract to supply labour to carry out work should be confined to "works contract". However, in the present case, we are not faced with such a situation. We only find that there was no contract betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
