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Gail India Ltd Versus CCE, Delhi

2017 (9) TMI 554 - CESTAT NEW DELHI

Valuation - includibility - marketing margin charged by the appellant for the services of transportation of gas through pipeline in terms of Section 65(105) (zzz) - Held that: - The marketing margin is considered as part of sales transaction value and subject to VAT. After the change of ownership of gas, there is no consideration attributable to any service from the seller to the buyer - any services or activity prior to actual sale of gas has no two persons identifiable as service provider and .....

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andran The appellant is aggrieved by the order dated 15.07.2013 of Commissioner (LTU), New Delhi. The appellants are engaged in trading and transportation of natural gas. The appellants entered into contracts for sale of natural gas with various clients. They have transported the gas for sale up to the point of delivery. In terms of agreement, the appellants indicated three charges in the invoices; the price of gas, marketing margin and transportation cost. They have paid VAT on the entire invoi .....

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ice. Accordingly, a Service Tax demand of ₹ 54,45,99,526/- was confirmed along with equal amount of penalty under Section 78 of the Finance Act, 1994. The original authority also denied a Cenvat credit of ₹ 7,49,820/- and also confirmed a demand of ₹ 24,527/- on supervision charges. These demands on these two, are not contested in the present appeal. 3. The ld. Counsel appearing on behalf of the appellant submitted that the entire contract is for sale of natural gas and the tra .....

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rvice to any other person. Thus it is the case of the appellant that the entire contract value is towards sale of goods and there is no question of any Service Tax on any part of the consideration. In any event, the ld. Counsel submitted that marketing margin is an element completely attributable towards cost price of gas and it has nothing to do with transportation charges. The appellant did not charge any marketing margin where they under take only transportation of gas. For sale of gas involv .....

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ppellants own case in respect of other units, the demand raised by the department of marketing margin has been dropped at the adjudication level itself. 5. The ld. Counsel contested the demand on the question of limitation also. The department was aware about the activities undertaken by the appellant. The appellant did seek the opinion of the department about Service Tax liability. There is no case of suppression or willful mis-statement and as such no demand can survive for extended period and .....

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ing gases to the buyer. The marketing margin is over and above the gas price and accordingly cannot be considered as price of gas. 7. We have heard both the sides and perused the appeal records. The only point of dispute is the liability of the appellant to pay Service Tax of marketing margin indicated in their sale invoices of natural gas. The Revenue contended that marketing margin is relatable to the activity of transportation of gas. We are not in agreement with such proposition. The admitte .....

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to the buyer at the delivery point at buyer s premises/facilities at Jagdishpur. Article 10 of the terms and conditions of the agreement gives details regarding pricing and billing. Admittedly, the appellants paid VAT on the full consideration of their invoice value. We note that while the original authority has taken of this fact, still held that as the appellant was charging and paying Service Tax on the component of transmission charges for providing transportation services to their customer .....

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sale of gas, by the Ministry of Petroleum and Natural Gas. We note that Ministry of Petroleum and Natural Gas fixes the marketing margin that should be charged from the customers by the company marketing the gas. Such marketing margin money will arise only in respect of natural gas sold. As the same is at the delivery point of the customer and transportation of gas is at the risk of the appellant, we find that there is no service element attributable to the consideration received as marketing m .....

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