2014 (12) TMI 505 - AT - Service Tax

Tax Tribunal Decision: Including Minimum Demand Charges in Taxable Value, Exempting Marketing Margin as Sale Transaction

M/s Assam Gas Company Ltd. Versus Commissioner of Central Excise, Dibrugarh

The Tribunal upheld the Revenue's position on including Minimum Demand Charges (MDC) in the taxable value for gas transportation but ruled in favor of the ... Waiver of pre-deposit - Valuation - Transport of gas through Pipelines or conduit - Minimum Demand Charges (MDC) collected by the Applicant from their customers. - Held that:- The Revenue's contention is that this amount has been mentioned in the agreement as transmission charges, therefore, the value should be included in the gross taxable value realized towards transportation/transmission of gas. We find force in the contention of the ld.A.R. for the Revenue and on this count, the Applicant could not able to make out a prima-facie case for total waiver of predeosit. However, in relation to the applicability of service tax on marketing margin under the category of Business Auxiliary Service, we find substance in the contention of the ld.C.S. for the Applicant. We find that the applicants were purchasing and selling the gas in retail, however, while fixing the retail price, the Ministry has considered the marketing margin. Prima-facie, the transaction is that of sale and not service. Thus, on this count, the Applicant could able to make out a prima-facie case for total waiver of predeposit of dues adjudged. - Partial stay granted. Issues involved:1. Waiver of predeposit of service tax and penalty under Section 78 of the Finance Act, 1994.2. Consideration of Minimum Demand Charges (MDC) for transportation of gases.3. Applicability of service tax on marketing margin under the category of Business Auxiliary Services.Analysis:1. The Applicant, a Government of India Undertaking engaged in transporting gas through pipelines, sought waiver of predeposit of service tax and penalty totaling &8377; 1.88 Crores. The dispute centered around the collection of Minimum Demand Charges (MDC) from customers, which the Applicant argued should not be considered as part of the taxable value for transportation of gas. The Revenue contended that MDC were transmission charges according to the agreement and should be included in the taxable value. The Tribunal found merit in the Revenue's argument regarding MDC, directing the Applicant to deposit 10% of the amount within eight weeks to avoid dismissal of the appeal.2. The Applicant also faced the issue of service tax on marketing margin collected from consumers for the supply of natural gas. The Applicant argued that since they purchased and sold gas, including the marketing margin in the retail price, it should be treated as a sale transaction, not a service attracting service tax. The Tribunal agreed with the Applicant's position on the marketing margin issue, ruling that it was a sale transaction and not a service. Consequently, the Tribunal granted a total waiver of predeposit of dues adjudged in this regard, with the condition of depositing 10% of the amount related to MDC.3. In summary, the Tribunal upheld the Revenue's stance on including MDC in the taxable value for transportation of gas but sided with the Applicant regarding the treatment of marketing margin as a sale transaction exempt from service tax. The Applicant was directed to deposit 10% of the MDC amount within eight weeks to continue the appeal process, with the remaining dues waived and recovery stayed pending appeal upon compliance. Failure to make the required deposit would lead to dismissal of the appeal.