Custom, Excise & Service Tax Tribunal
Cce & S.Tax - Dibrugarh vs M/S. Oil India Limited, on 22 October, 2024
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
KOLKATA
REGIONAL BENCH - COURT NO.2
Service Tax Appeal No. 109 of 2011
(Arising out of Order-in-Appeal No. 02/DIB/CE(A)/GHY/2011 dated 05.01.2011 passed
by Commissioner, Customs & Central Excise (Appeals), Guwahati.)
Commissioner of CGST & Central Excise, Guwahati,
(C. R. Building, P. O.- C. R. Building, Dibrugarh-786003.)
...Appellant
VERSUS
M/s Oil India Limited,
(P. O.- Duliajan, Dist.- Dibrugarh, Assam Pin No. 786602.)
.. ...Respondent
APPERANCE :
Shri P. Dash, Authorized Representative for the Appellant None, for the Respondent CORAM:
HON'BLE MR. R. MURALIDHAR MEMBER (JUDICIAL) HON'BLE MR. RAJEEV TANDON MEMBER (TECHNICAL) FINAL ORDER No...77672/2024 DATE OF HEARING : 22.10.2024 DATE OF DECISION : 22.10.2024 Per R. Muralidhar :
The Appellant Oil India Ltd, a Government of India enterprise, was engaged in providing browser transportation services of crude oil to Indian Oil Corporation Digboi from Kharsang Arunachal Pradesh to Digboi refineries. Treating the same as Business Auxiliary Service being provided by the appellant, demand was raised on them to pay the Service Tax. The appellant submitted that they are not providing any BAS service to their client but they are actually transporting the goods and are getting reimbursed for the cost incurred by them. After due process, the adjudicating authority confirmed the demand along with interest and penalty.2
Service Tax Appeal No. 109 of 2011
2. Being aggrieved, the appellant filed appeal before the Commissioner (Appeals). The Commissioner (Appeals) was the impugned order-in-appeal No. 02/DIB/CE(A)/GHY/2011 dated 05.01.2011 allowed the appeal filed by the appellant and set aside the order passed by the adjudicating authority being aggrieved the revenue is before the Tribunal.
3. The Leonard A R appearing on behalf of the revenue reiterates the submissions made in their rounds of appeal. He submits that there are seven services under the sub-clauses under the category of Business Auxiliary Service. The transportation of crude oil by the appellant would fall within the category of Business Auxiliary Service. Therefore, he justifies the demand confirmed by the lower authority. Accordingly, he submits that the impugned order passed by the Commissioner (Appels) may be set aside. Since the matter pertains to the year 2011 and no one is appearing on behalf of the appellant and even the hearing notices are being returned by the postal authorities, in the interest of justice, the revenues appeal was taken up for disposal with the active help of the Learned A R. On going through the Show Cause Notice OIO and OIA, we find that the appellant was engaging in the transportation of crude oil from Karsang to its refinery at Digbui. This crude oil transportation was carried out by browser transportation through contractors. Bills raised by these contractors were being recovered by the appellant from Indian Oil Corporation, Digbui. 3
Service Tax Appeal No. 109 of 2011
4. The Department treated this as Business Auxiliary Service being provided by the appellant to IOCL. The appellant had submitted before the lower authorities that they are engaged in production of crude oil. They had hired browsers from the contractors for transporting their crude oil to the Digbui unit of IOCL. They are not taking up any transportation service on behalf of any other person. Therefore, the Revenue is in error in classifying this as Business Auxiliary Service being provided by them to IOCL. They are merely getting reimbursement for the transportation cost given to the various transporters by them from their clients.
5. The Appellant is not making any profit on such transportation activity and only getting reimbursed for the manpower and transportation cost incurred by it. Therefore, they had submitted that the appeal should be allowed on merit.
6. They also submitted that being a public sector enterprise, they had no intention to evade and all the transactions were properly recorded in their books of account. Therefore, they submitted that the demand confirmed for the extended period is required to be set aside even on account of time bar.
7. The Commissioner (Appeals) in the OIA has given a very detailed and considered findings extracted below:
"7.3 "C" "Service tax does not arise under business auxiliary service". It is evident that the nature of service provided under an agreement is to be determined from the terms and conditions thereof, and the facts and circumstances obtaining in a particular case. Briefly, the Appellant have urged that the definition of BAS is wide-ranging and comprises seven parts (sub-clauses) and each sub-clause can be considered as a 4 Service Tax Appeal No. 109 of 2011 distinct, separate and independent activity in its own right. That, therefore, it is incumbent upon the Lower Authority to specifically record a finding as to the sub-clause under which he has proposed to cover the impugned activity as falling under BAS category; that having failed to do so and as he has not given any cogent reasons for considering the said activity under BAS category, this would ipso facto render the impugned Order as bad. Reliance has also upon placed on the Board's Circular No. 80/10/2004/ST dated 17.9.04, for not considering the inclusion of the activity as falling under sub-clause (vi) of BAS, viz. "provision of service on behalf of the client", it is evident from the said Circular that any activity of service 'on behalf of the client' would cause such activity to fall within the scope of this service, including the whole or part of which is being carried out by the service provider or an agent on behalf of the client; that in the instant case, however, the Appellant was not providing any service on behalf of IOCLAOD. This is because firstly, IOCLAOD did not undertake to provide any service to any other person which could be said to be outsourced to the Appellant; that on the contrary, transportation of crude oil from Kharsang to Digboi refinery was for IOCLAOD's own purpose; that if the Appellant was not directed to carry out the said transportation then the same would have been done by IOCLAOD itself and that therefore, clause (vi) of the definition of BAS cannot at all arise in the present case. That even if it is assumed for the sake of argument that the Appellant was providing any service then also at best, it can be said that the Appellant was providing a service to or for IOCLAOD and not on behalf of IOCLAOD. That there is a difference between the words 'for' and 'on behalf of. Reliance has been placed on Board's Circular F.No. B-1/6/2005-TRU dated 27.7.05. That the SCN has not invoked any clause but relied upon definition of BAS. That it is further evident that IOCL is not a client of the Appellant and that the Appellant was not engaged in any transportation service also and therefore, did not have any clients for rendering any transportation service.5
Service Tax Appeal No. 109 of 2011 On examination, I find that the Appellant's pointed and elaborate submissions are true and valid. However, the Lower Authority has not examined and recorded any basis and reasons in this matter, as also regarding the specific and forceful submission (above) made in defence, as also why the Board's said Circular, which is binding on him, would not apply in the instant case. He has simply ignored and bypassed these material submissions, which he cannot do as a quasi-judicial officer. It is evident on merit that no service has been rendered by the Appellant. The impugned Order suffers also from the vice of being "non-speaking". This action/inaction indicates non-application of mind on his part and is not proper. 74 "D"-"Reimbursements are not included in the value of the service,"
Briefly, the Appellant have submitted that the reimbursements are not included in the value of the service. It has been urged that in terms of Section 67 of the F.A., the taxable value for the purpose of charging service tax is the actual amount of consideration charged by the service provider from the service receiver rendering of the service. They have relied upon the Trade Notice No. 7/98-ST dated 13.10.1998 issued by the Mumbai Commissionerate-I stating that reimbursable/out- of- pocket expenses charged to the client on actual basis are not subject to service tax; that similarly, in terms of Trade Notice No. 5/97-ST dated 12.6.1997 issued by the Mumbai Commissionerate-1 in the context of Customs House Agents services, it has been clarified that the CHA will be required to pay service tax only on the agency commission received by them and not on the other reimbursable expenses incurred on behalf of the client. They relied upon the decision of the Hon'ble Tribunal in the case of S. Jayashree vs. CCE, Mangalore [2007(6)S.T.R.389 (Tri Bang.)] to the effect that expenses which are being reimbursed on actual basis by the principal are not liable to be included in their gross receipts for calculating service tax liability. They also relied upon the following cases:
(i) E.V. Mathal & Co. vs. CCE-2003(157)101(Tri-Bang.); (ii) Bhagyanagar Services vs. CCE [2006 (4)STR22(Tri-Bang.)];6
Service Tax Appeal No. 109 of 2011
(iii) Sri Sastha Agencies Pvt. Ltd. vs. ACCE [2007(6) STR185(Tri-Bang.)]; (iv) In re: Business Aids Marketing Division [2006(2)STR 81 (Com.Appl.)]; (v) K.D. Associates vs. CCE-2007(7)S.T.R.6(Tri-Bang.)); (vi) K.D. Sales Corporation vs. CCE-2007(6)S.T.R.418(Tri-Bang.)].
That, therefore, the re-imbursement expenses on actual basis is not liable for service tax and that in the instant case the Appellant have been reimbursed by IOCLAOD for the costs on transportation which were the actual amounts paid to the bowser contractors as also the costs for its own employees; Chartered Accountant's certificate was enclosed with their reply; that this fact itself further substantiated their submission and their argument that they themselves are not rendering any service, that had they been rendering any service then they would have charged a consideration for the service render. They also placed reliance on the Hon'ble Delhi High Court order in the case of Home Solution Retail India Ltd. vs. U.O.I. [2009(237) E.L.T.209(Del.)] - wherein it has been held that the service tax is VAT and is chargeable on value addition; that, in effect, since there is no value addition therefore, there can be no question of rendering of any services. Further they relied upon Circular No. 62/11/2003-ST dated 21.08.2003 wherein it has been held that services rendered free of charge are not leviable to service tax.
On examination, I find that the Appellant's pointed and elaborate submissions are true and valid. The ratios relied upon squarely apply to the instant case. S.T. cannot be charged on actual reimbursement payments basis, as is applicable in the instant case. However, there is no mention made by the Lower Authority in this regard who has not examined and recorded any basis and reasons for its non-applicability, etc. in the instant case, as was required. He has simply ignored and bypassed these material submissions, which he cannot do as a aquasi-judicial officer. The impugned Order suffers also from the vice of being "non-speaking".
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Service Tax Appeal No. 109 of 2011
8. From the above detailed findings given by the Commissioner (Appeals), we find that the activity undertaken by the appellant would not fall under the category of Business Auxiliary Service.
9. Further, it gets also clarified that the appellants were only getting reimbursed for the cost already incurred by them. During the period under consideration, the appellant's case was duly covered by the decision of Hon. Delhi High Court in the case of Intercontinental Conslt. & Tech. Pvt. Ltd., Vs. Union of India-2008(12)S.T.R. 689 (Del.) wherein it has been held that the reimbursement are not liable for Service Tax and accordingly in that case, the High Court had set aside Rule 5 of Service Tax Rules.
10. Therefore, we do not see any reason to interfere with the detailed order passed by the Commissioner (Appeals). Accordingly, we dismiss the appeal filed by the revenue.
(Dictated and pronounced in the open court) Sd/-
(R. Muralidhar) Member (Judicial) Sd/-
(Rajeev Tandon) Member (Techinical) Tushar Kr.