ST - BAS - Agreement between HPCL & IGL for distribution of CNG through HPCL outlets - if Bench felt that agreement called for different interpretation, and that therefore decision of Coordinate Bench required reconsideration, then appropriate course should have been to refer matter to a LB: HC
By TIOL News Service
NEW DELHI, AUG 31, 2015: AN agreement was entered into between HPCL and Indraprastha Gas Ltd. for distribution of Compressed Natural Gas through HPCL owned/leased retai outlet in accordance with the terms and conditions set out in the said agreement.
The department took a view that HPCL was providing Business Auxiliary Services to IGL with regard to the sale of CNG through the retail outlet of HPCL. Inasmuch as the activity of HPCL in marketing or sale of CNG belonging to IGL would fall within the ambit of Section 65 (105) (zzb) r/w Section 65 (19) of the FA, 1994 and, therefore, exigible to service tax, the SCN alleged.
An adjudication order dated 10th May, 2013 came to be passed by the CCE, Delhi-III confirming a service tax demand of Rs.1,36,15,903/- apart from interest and penalties.
Before the CESTAT, in support of its plea that there should be complete waiver of pre-deposit, HPCL relied on the final order dated 4th June 2014 passed by the Mumbai Bench of the CESTAT in Bharat Petroleum Corporation Ltd. & Hindustan Petroleum Corporation Ltd. v. Commissioner of Service Tax, Mumbai 2014-TIOL-1114-CESTAT-MUM wherein it was held that since HPCL and BPCL were themselves buying the CNG from Mahanagar Gas Ltd. the question of rendering services to MGL by way of marketing the CNG did not arise. Inter alia , it was held that ‘ the contention of the learned AR that private parties are paying Service Tax under the category of Business Auxiliary Service on the same activity, therefore, the Appellant are required to pay service tax is not acceptable as in the case of private parties, the invoices on the customers were raised by M/s MGL directly and private parties are receiving commission and there is no transactions of principal to principal basis. '
The appellant also placed reliance on an Interim order No. 50557/2015-ST(Br) dated 09.02.2015 of the CESTAT, Principal Bench, New Delhi in Indian Oil Corporation Ltd. where in a similar agreement between IOCLand IGL the Tribunal, relying on BPCL v. CST, Mumbai (supra) the Bench held that " prima facie, we are of the view that facts of the applicants case are similar to Bharat Petroleum Corp. Ltd" and ordered a complete waiver of pre-deposit.
Be that as it may, both these citations did not fetch the desired result for the appellant before the CESTAT since it was observed by the Tribunal that the Bench had, in both the cited cases, not examined and analysed the agreement entered into between both the parties and, therefore, in the absence of the same, "the conclusions recorded in the above judgement/order cannot prima facie be considered as laying down a ratio which operates as a precedent."
Suffice to say that the Bench in the present case came to the prima facie conclusion that "there is no sale of natural gas or CNG to the appellant and sale of CNGto the retail customers is by the IGL itself without an intermediary transfer of property in CNG in favour of the applicant" and, therefore, the activity would be exigible to service tax.
In fine, the CESTAT directed the appellant to make a pre-deposit of 50% of the assessed liability along with proportionate interest.
It is against this order that the appellant HPCL is before the Delhi High Court and they narrated their woe.
The Counsel for the Revenue showed to the Court a copy of the order dated 23rd February, 2015 passed by the Supreme Court in Civil Appeal No.2471-2473 of 2015 preferred by CST, Mumbai against the aforementioned final judgment in BPCL v. CST, Mumbai (2014-TIOL-1114-CESTAT-MUM), issuing notice but not granting stay.
After considering the submissions the High Court observed -
+ The Court is of the view that since a Coordinate Bench of the CESTAT while interpreting identical clauses of a similar agreement involving HPCL itself came to the conclusion that HPCL was not providing Business Auxiliary Services to MGL in carrying on the activity of providing CNG to consumers through its retail outlets, that final judgment itself constituted a prima facie case in favour of HPCL.
+ 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 (supra) being favour of HPCL, it had a prima facie case.
The High Court also noted that although against the CESTAT, Mumbai order the Revenue had filed an appeal before the Supreme Court, no stay was granted & the issue is pending consideration in the Supreme Court.
It was, therefore, viewed that the CESTAT was not justified in declining to grant an unconditional stay in favour of the Appellant, without requiring the making of any pre-deposit.
The order dated 14.07.2015 of the CESTAT was set aside and an unconditional stay, of the order dated 10.5.2013 passed by the CCE, was granted.
The appeal was allowed.
(See 2015-TIOL-2002-HC-DEL-ST)
