Principal-agent CNG outlet arrangements constitute taxable Business Auxiliary Service where supplier ownership, pricing control and sales supervision continue.

CNG outlet arrangements constitute a principal-agent relationship where the supplier retains ownership, price control, inspection rights and control over unsold stock, while outlet operators provide infrastructure, personnel and sales support. As title and risk in CNG do not pass to the operators, they facilitate sales to vehicle owners on the supplier's behalf rather than purchase CNG for resale. Payments linked to quantities sold, expressly characterised as commission or profit margin, are remuneration for agency services rather than trade discounts. Such promotion, marketing and sale of CNG for the supplier falls within taxable Business Auxiliary Service and the definition of a commission agent, creating service tax liability.

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Issues: Whether the CNG supply-and-sale arrangement constituted a principal-to-principal sale or a principal-agent arrangement, and whether the respondent-Corporations' activities consequently constituted taxable Business Auxiliary Service.

Analysis: A sale requires transfer of property in goods for a price; agency entails acting on behalf of and subject to the principal's control. The agreements required the respondent-Corporations to provide outlets, infrastructure, utilities and trained personnel; MGL installed and owned the equipment, fixed and revised the retail price, monitored meter readings and supplies, retained inspection rights, and controlled the disposal or return of unsold CNG on termination. The risk and title in CNG did not pass to the respondent-Corporations. The contractual arrangement, read as a whole, therefore established that they facilitated MGL's sales to vehicle owners rather than purchased CNG for resale.

Analysis: The payment linked to actual quantities sold was expressly stipulated as commission/profit margin for services. In the context of MGL's continuing control and ownership, it was remuneration for agency services, not a trade discount. The respondent-Corporations promoted and marketed MGL's CNG and sold it on MGL's behalf, falling within Business Auxiliary Service and the definition of a commission agent.

Conclusion: The arrangement was one of principal and agent, not sale; the respondent-Corporations rendered taxable Business Auxiliary Service to MGL and were liable to service tax.

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