Tribunal overturns order, remands for fresh adjudication.

The Tribunal set aside the impugned order and remanded the matter to the Commissioner for fresh adjudication, considering the observations made. The case outcome resulted in the order being overturned, and the matter was sent back for further review by the Commissioner.

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Issues Involved:
1. Eligibility of cenvat credit on transportation charges paid for natural gas.
2. One-to-one correlation between input services and output services.
3. Applicability of the term "activities relating to business" in the definition of input services.
4. Extended period of limitation for demand.
5. Duplication of demand for cenvat credit utilized.

Detailed Analysis:

1. Eligibility of Cenvat Credit on Transportation Charges:
The Revenue filed an appeal against the dropping of a demand for cenvat credit availed by the respondent on transportation charges paid to GSPL. The demand included Rs. 85,60,750/- for cenvat credit and Rs. 25,10,648/- for service tax. The respondents, engaged in distributing natural gas, availed cenvat credit for the service tax paid on transportation of gas received through GSPL pipelines. The Revenue argued that the sale of gas is a trading activity and not liable to service tax, thus the service of gas transportation does not qualify as an input service under Rule 2(b) of the Cenvat Credit Rules, 2004.

2. One-to-One Correlation Between Input Services and Output Services:
The respondent's advocate argued that Rule 3 of the Cenvat Credit Rules, 2004 does not necessitate a one-to-one correlation between input services received and output services provided. They cited the Tribunal's decision in M/s Sri Sri Plastics Pvt. Ltd - 2002 (150) ELT 547, emphasizing that any input services received by a provider of output service are admissible as cenvat credit and can be utilized for payment of service tax for any output service.

3. Applicability of the Term "Activities Relating to Business":
The respondent argued that prior to 01.04.2011, the term "activities relating to business" was included in the definition of input services, making them eligible for cenvat credit for services received in this category. The demand pertained to a period up to December 2010, during which this term was applicable. The Tribunal's decision in CST vs. Convergys India Pvt. Ltd - 2009 (16) STR 198 (Tri.- Del) was cited to support the argument that input service costs, including transportation, should be allowed to avoid the cascading effect of taxes.

4. Extended Period of Limitation for Demand:
The respondent contended that the extended period of limitation could not be invoked as the department was aware of the cenvat credit availed on transportation charges, which were disclosed in the ST-3 returns. They argued that the demand for Rs. 25,10,648/- was rightly utilized for payment of service tax on output services, and a second demand for the same amount resulted in duplication, which is unsustainable.

5. Duplication of Demand for Cenvat Credit Utilized:
The Tribunal observed that the respondents were engaged in trading activities, including the installation and maintenance of gas pipelines and sales promotion for CNG pumps, for which they paid service tax. The definition of input services under Rule 2(l) of CCR, 2004, and the term "output service" under Rule 2(p) were considered. The Tribunal noted that the impugned order relied on the Tribunal's decision in Ultratech Cement Ltd - 2010 (20) STR 577 (Bom.), which held that activities integrally connected with the business qualify as input services.

The Tribunal highlighted that the transportation of gas is integrally connected with the respondent's business, and the cost of transportation was recovered from customers. However, since the trading of gas is not liable to service tax, no cenvat credit is admissible under Rule 6(1) of CCR, 2004. The Tribunal also noted that the impugned order did not examine the issue of limitation and the second demand relating to the utilization of said credit.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter to the Commissioner for fresh adjudication, considering the observations made. The CO also stands disposed of.

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