Effluents are not ‘Goods’ for imposing Service Tax on GTA Services: CESTAT Quashes Tax Demand on ONGC [Read Order]

ONGC - Taxscan

The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), while quashing service tax demand made by the department against ONGC, held that the effluents cannot be treated as ‘goods’ for the purpose of imposing service tax under the head ‘Goods Transport Agency’ under the Finance Act, 1994.

The appellants, in the instant case, are a Public Sector Undertaking primarily engaged in the oil and gas exploration activities around Karaikkal region. They extracts well fluids from the well head which is then transported to the production installations where the effluent water is separated from the well head. The crude oil that emerges is then sent to the refinery through pipeline. Effluent water separated from the condensate is transported to the Effluent Treatment Plant (ETP) to fulfil pollution control norms. The department took a view that the transportation of effluents by the appellants is subject to service tax.

The assessee claimed that the said activity would not attract service tax liability under GTA service since the same cannot be treated as ‘goods’.

Referring a catena of judicial decisions, the tribunal bench held that the transportation of effluents cannot be treated as transportation of ‘goods‛ and hence there cannot be any service tax liability under ‘Goods Transport Agency’ as defined in Section 65 (150b) of the Finance Act, 1994.

“This being so, the tax liability of Rs.11,24,258/- and the penalty imposed thereof cannot sustain and are set aside,” the bench said.

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