Pipeline delivery charges forming part of sale consideration are not a separate taxable transportation service.
Throughput or delivery assistance charges for pumping naphtha through a supplier-controlled pipeline into storage tanks at the buyer's premises were not separately taxable as service tax. The arrangement treated delivery as complete only on arrival at the tanks, and the transportation charge formed part of the sale consideration. On that basis, no distinct service provider-service recipient relationship arose for the pipeline movement, so the activity could not be split out and taxed as an independent transportation service. Service tax on the throughput charges was therefore not payable.
Issues: Whether service tax was leviable on throughput or delivery assistance charges collected for pumping naphtha through a pipeline into storage tanks owned by the appellant at the buyer's premises.
Analysis: The appellant retained ownership of the storage tanks at the recipient's premises, and the agreement treated delivery of naphtha as complete only on reaching those tanks. The transportation charge formed part of the sale arrangement, and in a case where the transaction was treated as sale and the related value was relevant for excise purposes, the same activity could not be separately treated as a taxable transportation service rendered to another. The cited precedent on pipeline supply supported the view that where the supplier transports and delivers goods through its own pipeline on its own account, with transportation charges forming part of the sale consideration, no separate service provider-service recipient relationship arises for service tax.
Conclusion: Service tax was not payable on the throughput charges, and the demand could not be sustained.
Ratio Decidendi: Where goods are transported through a pipeline owned and operated by the supplier for delivery under a completed sale arrangement, and the transportation charge is part of the sale consideration, the activity does not constitute a separate taxable transportation service for service tax purposes.
TaxTMI 
AI Drafter ✕
TaxTMI 
TaxTMI 
