2019 (4) TMI 999

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....e of direct sale of CNG through their own outlet the Appellant discharge central excise duty/ VAT on the sale price to the retail customers. In case of sale to OMCs the duty is paid by the Appellant at the sale price to the OMCs who in turn sell it to retail customer and pays VAT on their sale price. Since the sale price has to be uniform regular at all the sale outlets the Appellant grants a Trade Margin to the OMCs to cover their expenses, outgoings and profit margin. As per the agreement the OMCs has to provide the Appellant space for installation of machines, personnel, utilities, insurance and proportionate auxiliary expenses etc. for running the CNG stations. Vide the impugned order the adjudicating authority has confirmed demand of duty on such "Trade Margin" on the ground that the 'Trade Margin' is compensation given by the Appellant to OMCs in lieu of facilities received by the Appellant by means of Lease/ Rent of the outlet/CNG station by OMCs, Personnel expenses for the CNG Station borne by OMCs, Other utilities provided at the outlet/ CNG Station by the OMCs and any other ancillary expenses related to CNG Station/ outlet by OMCs. The Trade Margin is part and parcel of t....

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....f OMCs or vice-versa. Para 8.8 of the agreement states that the trade margin is a genuine pre-estimate of the costs and expenses and commission to dealers, which means the OMCs can recoup their expenses and profit margin. Para 5 of the agreement provides a point of time at which the title to the goods pass from the appellant to the OMCs and thereupon to the consumers. It is at this passing of title to the goods from the appellant to the OMCs that the VAT payment is made by the appellant and the OMCs also paid VAT at the time that they made further sale of gas to the customer. The appellant issued sales invoice to OMCs and paid VAT on such value and the same value was also shown in the sales tax return at which the goods are sold to the buyers. Clause 3.6 of the agreement entered between the Appellant and Indian Oil Corporation on 25.4.2011 provides that the ownership of CNG is transferred from the appellant to OMCs at the Inlets of the CNG stations and therefore the Appellant had taken the insurance cover in respect of risk and liability for CNG delivered and stored at the retail outlets. Clause 8.8 of the agreement dated 25.4.2011 only provides the factors for considering the trad....

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.... and the Department also claims that sale is not taking place between the appellants and OMCs. We have perused the copies of Central Excise invoices issued by MGL to OMCs on daily basis for dispensing CNG from 6.00 am to 6.00 am showing the quantity supplied, assessable value, duty paid/payable, etc. We also find that there are joint tickets prepared outlet-cum-party-wise showing the sale period starting at 0600 hrs. on preceding day and ending at 0600 hrs. on the succeeding day and also show the quantity of CNG dispensed with opening reading, closing reading, total reading and total quantity supplied. Such joint-tickets are also signed by both parties, i.e. appellants and OMCs. Thereafter, the appellants are raising tax invoices upon OMCs on monthly basis with specific business days within which payment has to be made by OMCs and for any delay in payment, interest is also payable by OMCs. The appellants have paid VAT/sales tax on their sale of CNG to OMCs, as evidenced from the invoices. Further, sales invoices of OMCs for resale of CNG to ultimate buyers, VAT/sales tax is paid by them on their sales price. In nutshell, the appellants are paying VAT on its sales price to OMCs and ....

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....pply/sale of CNG to the vehicles by MGL. For acting as an agent of MGL, PPs get specified service charges on "per kg" basis of the CNG sold by them on behalf of MGL. Since the PPs are acting as agents of MGL for supply of CNG, PPs consider their activity as Business Auxiliary Service and pay service tax on the commission received from MGL. We find that sale of CNG by the appellants to OMCs is on principal-to-principal basis, which is clear from various terms/covenants of the agreements between MGL and OMCs, i.e. retail sales price is the price at which CNG is to be sold to vehicles by the OMC as communicated by MGL to OMCs, from time-to-time; OMC shall sell CNG at the outlets situated at the site; Retail Price of CNG shall be fixed by MGL and the OMCs shall sell the CNG only at the retail price communicated by MGL to OMCs, from time-to-time; OMCs shall pay to MGL the retail price as reduced by profit margin/commission/discount; MGL shall, before 5th of every month, send to OMCs an invoice for the quantity of CNG sold by OMCs during the preceding month. Such invoices shall be based on the meter reading on CNG dispensers jointly taken by MGL and OMCs; OMCs shall pay to MGL the invoic....

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....to-principal basis and, hence, as held by Hon'ble Supreme Court in Perfect Circle Victor - 1992 (60) E.L.T. 676 (S.C.) and D.C.M. Textiles - 2006 (195) E.L.T. 129 (S.C.), etc. trade discount allowed by whatever name called is an admissible deduction and the appellants are not liable to include the same for the purpose of payment of duty. In the present case, the appellants have charged mutually agreed price, which is transaction value between the appellants and OMCs in the normal course of their business for sale of CNG and no additional consideration, whatsoever, flows from OMCs to MGL. Further, by virtue of its technical necessity, the supply of CNG could have been done in the manner in which the appellants have done, as natural gas by the process of compression amounts to manufacture for the purpose of marketing as CNG for use as fuel which has been done at the time of dispensing. Inasmuch as NG is compressed at 210 bars pressure in Mother Stations and Online Stations and got stored in stationary cascades and dispensed by bringing the pressure to 200 bars to vehicles. Likewise, NG is compressed and filled at 230 bars pressure in cascades of cylinders mounted on light motor vehic....

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....from their foreign principal as evidenced from the bank realization certificate dated 6-9-2007 and the proceeds have been credited to the appellant's accounts and the commission paid or payable is shown as nil. However, in the books of accounts they had shown the mark up made in the transaction as 'commission income'. Therefore, the department came to the conclusion that the appellant was acting as a Commission agent for M/s. Tyco Electronics Corporation India (P) Ltd., and hence on the mark up made by them, they are liable to pay Service Tax under the category of "Business Auxiliary Service". Accordingly, a notice was issued and the demands were confirmed vide order dated 16-12-2008 solely on the ground that the mark up made by them in the transaction was shown as commission income in their books of account. The appellant preferred an appeal against the said decision before the lower appellate authority, who rejected the appeal. Hence, the appellant is before us. Para 6.1 We have also perused the purchase order and sale invoices issued by M/s. Tyco Electronics Corporation India (P) Ltd. The invoice clearly shows that VAT liability has been discharged which indicates the s....