Service tax demand on transporting chlorine via pipeline set aside by Tribunal due to inclusion in excise duty.

The Tribunal allowed both appeals, setting aside the service tax demand on transporting chlorine through a pipeline. It was determined that the transportation charges were part of the consideration for sale and central excise duty discharge, with no distinct service provider for the transport of goods through the pipeline. The appellant's ownership and operation of the pipeline, along with the inclusion of transportation charges in the assessable value for central excise duty, led to the conclusion that no additional service tax liability applied in this case.

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Issues:
- Service tax liability for transport of chlorine through pipeline under section 65(105)(zzz) of the Finance Act, 1994.

Analysis:
The judgment involved two appeals concerning service tax demand for transporting chlorine through a pipeline. The appellants, engaged in manufacturing excisable products including liquid chlorine, had an agreement with another company for chlorine supply. The Department claimed service tax liability under the category of "transport of gas through pipeline." The Commissioner (A) upheld the service tax demand, leading to the present appeals.

The appellant argued that since the transportation cost was included in the assessable value for central excise duty, no additional service tax should apply for transporting chlorine through the pipeline. On the other hand, the Department contended that the valuation for central excise purposes did not determine service tax liability, emphasizing that the appellant provided transportation services for chlorine through the pipeline.

Upon examination, the Tribunal found that the appellant's agreement with the recipient specified the supply terms, including the charges for pipeline usage. The appellant owned and laid the pipeline, selling and delivering chlorine to the recipient through it. The transaction concluded upon delivery at the recipient's end, with transportation charges included in the assessable value for central excise duty. The Tribunal concluded that there was no distinct service provider and recipient for the transport of goods through the pipeline, as the appellant operated the transportation in their own account.

Ultimately, the Tribunal allowed both appeals, setting aside the impugned order. The judgment clarified that the transportation charges were part of the consideration for sale and central excise duty discharge, finding no legal basis for imposing service tax liability on the appellants in this transaction.

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