Amount received by Hindustan Petroleum Co. for giving facility of selling CNG through their Outlets is not subject to Service Tax: CESTAT [Read Order]

A division bench of New Delhi CESTAT including Justice (Dr.) Satish Chandra, President and B. Ravichandran, Member (Technical) has said that amount received by Hindustan Petroleum Co. for giving facility of selling CNG through their Outlets is not subject to Service Tax.

In the instant case, the appellant, a Government-owned Public Sector Undertaking entered into the contractual arrangement with M/s.Indraprastha Gas Ltd who were engaged in the business of production and distribution of CNG in and around Delhi.

This said IGL Company supplied CNG to various public sectors undertaking including the appellant. During its business appellant company entered into an agreement with IGL for giving facility of selling CNG through their outlets.

Accordingly, the Revenue concluded that consideration received from IGL is in the nature of commission and confirmed the service tax liability.

Revenue considered the commission received for promoting IGL business is for rendering Business Auxiliary Service in terms of Section 65(19) of the Finance Act, 1994 and reiterated the same before the appellate authority.

Narender Singhvi, Advocate for the appellants contended that the said commission which is sought to be taxed is in reality only a discount from the price of gas payable by the appellant to the IGL and also added that Such discounts on sale transactions cannot be subjected to any service tax.

While having both the parties contention and the tribunal examined the terms of the agreement between the IGL and the appellant, thereafter, bench pointed out that similar set of facts are in respect of appellant’s own case in Mumbai and for IOCL with IGL are to be considered.

Finally bench observed that “the transaction between IGL and the appellant are on principal to principal basis. The appellant has been prohibited from holding himself as an agent of IGL. The agreement categorically states that the same is on principal to principal basis”.

Accordingly, Tribunal concluded that service tax liability under BAS cannot be sustained against the appellant.