TaxTMI 
TaxTMI 
2016 (12) TMI 103
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....Sector Undertakings of the State of Gujarat. They were served with show cause notice dated 04.05.2011 alleging therein that the appellant no. 1 (hereinafter referred to as 'GSFC') was collecting 'incineration charges' from M/s. Gujarat Alkalies & Chemical Ltd. (hereinafter referred to as 'GACL') and the said amount charged by GSFC from GACL amounted to providing 'Storage and Warehousing Services' falling under clause (zza) of Sub-Section (105) of Section 65 of the Finance Act, 1994. The GSFC submitted its reply questioning the very basis of the said show cause notice and submitted that the process which was undertaken did not amount to 'Storage Facilities' and, in any case, GSFC was not providing any ....
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....tand the matter it requires to first state the process of receiving the HCN through pineline and the manner in which it is shared between GSFC and GACL and also the manner in which 'incineration charges' are divided between them. The appellants had explained the same in their reply to the show cause notice. The relevant portion thereof reads as under: "G. In the existing procedure of ACH production in GSFC-PU, HCN is one of the main raw material HCN is received from M/s. RIL, Vadodara through pipeline directly by gravity from their plant. It is taken in an intermittent hold tank which is situated in GSFC-PU premises. As per agreement, the quantity of HCN as soon as it is received is being consumed at 60:40 ratio by GSFC-PU ....
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....ory and administrative expenses, like telephone expenses, office expenses, postage expenses, printing and stationary expenses, security and maintenance, etc. I. Thus both GSFC Polymer Unit and GACL perform and are responsible equally for, the job of storing and consuming of HCN for their respective processes and for that purpose they both bear the total expenses in the predetermined proportion; but nobody pays to the other any fee or charges, as nobody does any kind of service or obligation or work for the other." On the basis of the above, it was argued that GSFC does not store HCN for GACL and the process cannot be treated as covered by clause (zza) of Sub-Section 105 of Section 65 of the Finance Act. The second submission ....
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...., there has to be an element of service provided by one person to the other for which charges for providing such services are collected. The appellants have argued that insofar as the present case is concerned, none of the aforesaid ingredients is satisfied. As far as the first element, namely 'Storage of HCN', is concerned, referring to the process mentioned in the reply to the show cause notice, which we have already extracted above, it is submitted that the HCN is received through pipeline and as soon as it is received, the same is consumed in the ratio of 60:40 between GSFC and GACL. The holding tank which is described as 'storage tank' for convenient purposes is there only to sustain the continuous process of both th....
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....second argument namely no services of 'Storage and Warehousing' are provided by GSFC to GACL, Mr. Tripathi has referred to the agreement/contract which was arrived at between GSFC and GACL relating to the sharing of the expenses between them in respect of HCN handling and incineration facilities installed by GSFC. It is pointed out that HCN handling and incineration facilities, though were installed at the premises of GSFC, the expenses thereof were borne by both the parties. From the said agreement it is also pointed out that insofar as handling and incineration facilities are concerned, these are operative expenses for the said system which were agreed to be shared by the parties equally i.e. in the ratio of 50:50. From the afo....
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....e light of the material placed on record. We shall advert to the second aspect namely, as to whether the arrangement between GSFC and GACL amounts to providing any services by GSFC to GACL and 50% incineration expenses incurred would constitute charges for providing such services. There is no dispute about the manner in which HCN is received through pipeline from M/s. Reliance Industries Ltd. by GSFC and GACL and then shared in the ratio of 60:40 respectively. GSFC and GACL are public sector undertakings, as already mentioned above. Since HCN is to be received through pipeline, it is abundantly clear that in order to save the expenditure, both the parties agreed that there should be a common pipeline. Once HCN is received through the said c....