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2016 (12) TMI 103 - SUPREME COURT

2016 (12) TMI 103 - SUPREME COURT - 2016 (45) S.T.R. 489 (SC) - Nature of activity - Sharing of expenditure under joint venture agreement - Storage and Warehousing Services - levy of tax on incineration charges - 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? - Held that: - handling portion and maintenance including incineration facilities is in the nature .....

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is setup by the GFSC and GACL amounts to 'storage' or not and we leave the said question open. - The demand of 'service tax' made by the respondent is unwarranted and is hereby set aside - appeal allowed - decided against Revenue-respondent. - Civil Appeal No (S). 4066-4067/2015 - Dated:- 22-11-2016 - A. K. Sikri And Abhay Manohar Sapre, JJ. For the Appellant : Mr. Prag P. Tripathi, Sr. Adv. Mr. Preetesh Kapoor, Adv. Ms. Hemantika Wahi,Adv. Mr. Kabir Hathi, Adv For the Respondent : Mr. P.K. .....

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9;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 service to GACL for which the aforesaid 'incineration .....

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n agreement was arrived at between GSFC and GACL on the aforesaid basis and, therefore, there was no question of providing any services by one party to the other. This contention of the appellants was not accepted by the Adjudicating Authority which confirmed the demand of 'service tax' along with interest and also imposed penalties under various sections including Section 78 of the Finance Act, 1994. The appellants preferred appeal there-against before the Commissioner (Appeals) which w .....

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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 .....

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nsumers end, HCN supply from M/s. RIL is stopped, remaining quantity in tank is immediately consumed by either of the plants. The question of storing HCN does not arise because it is not permissible to store HCN on safety ground. The hold tank is duly washed and kept empty for further use. Insofar as 'incineration charges' are concerned, the manner in which GSFC and GACL had agreed to share these charges between themselves was also explained, as can be seen from the following portion of .....

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for spare consumed in plant, charges towards power for incineration/refrigeration steam and other facilities such as salary, wages and employees benefit, overheads, factory 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 .....

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d by GSFC to GACL and, therefore, question of payment of any service tax did not arise. Sub-Section (102) of Section 65 of the Finance Act defines 'Storage and Warehousing' in the following terms: (102) 'Storage and Warehousing' includes storage and warehousing services for goods including liquids and gases but does not include any service provided for storage of agricultural produce or any service provided by a cold storage. Sub-Section (105) of Section 65 of the Finance Act enu .....

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order to levy service tax pertaining to 'Storage and Warehousing' of goods, following two conditions are required to be satisfied: 1. The goods in question have to come within four corners of the definition of 'Storage and Warehousing' contained in Sub-Section 102 of Section 65 of the Finance Act, 1994; 2. In order to attract service tax, 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 app .....

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39;storage tank' for convenient purposes is there only to sustain the continuous process of both the plants and to facilitate smooth operation of suction pumps and to avoid any damage thereto. It is, thus, argued that nothing is stored in the said so-called storage tank and, therefore, this process would not qualify the term 'Storage'. Mr. Parag P. Tripathi, learned senior counsel appearing for the appellants, has referred to the definition of 'storage' contained in Black' .....

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the plain meaning of the word 'store' appearing in the aforesaid dictionaries, it would be clear that the expression contains an element of continuity of creating a stock and using that stock on a future date. According to the appellants, none of these ingredients are present in the instant case. In support, the learned senior counsel has also relied upon the judgments of this Court in Bijaya Kumar Agarwala v. State of Orrisa, (1996) 5 SCC 1 as well as Indian Oil Corporation v. AP Indus .....

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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 aforesaid it was argued that no services were provided by the GSFC to GACL and on the contrary, the expenses which were incurred on the maintenance of the said storage/holding tank were .....

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in the storage/holding tank and from there it was distributed between GSFC and GACL in the ratio of 60:40 and, therefore, the said storage/holding tank would qualify as storage facilities . It was further submitted that since GSFC was collecting 'incineration charges' from GACL, it was rightly held that the service was provided by GSFC to GACL and, therefore, the provisions of clause (zza) of Sub-Section (105) of Section 65 of the Finance Act, 1994 were clearly attractive. Learned couns .....

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nd 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 b .....

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