Hindustan Petroleum Corporation ... vs Commissioner Of Central Excise, ...
2015 Latest Caselaw 6249 Del

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*      IN THE HIGH COURT OF DELHI AT NEW DELHI
28.
+                       CEAC 37/2015 & CM No.16153/2015
       HINDUSTAN PETROLEUM CORPORATION
       LTD                                         ..... Petitioner
                    Through: Mr M. P. Devnath, Advocate.

                             versus

       COMMISSIONER OF CENTRAL EXCISE,
       DELHI-III                             ..... Respondent
                   Through: Mr Satish Kumar, Senior Standing
                   Counsel.

       CORAM:
       HON'BLE DR. JUSTICE S.MURALIDHAR
       HON'BLE MR. JUSTICE VIBHU BAKHRU
                     ORDER

       %             25.08.2015

    S. MURALIDHAR, J

1. This appeal by the Hindustan Petroleum Corporation Ltd. ('HPCL') is

directed against the order dated 14th July, 2015 passed by the Customs,

Excise and Service Tax Appellate Tribunal ('CESTAT') in the stay

application in Appeal No. ST/59270-CU [DB] of 2013 filed by HPCL

before CESTAT seeking waiver of the pre-deposit and stay of further

proceedings pursuant to the adjudication order dated 10th May, 2013

passed by the Commissioner of Central Excise ('CCE') confirming a

service tax demand of Rs.1,36,15,903/- apart from interest and penalties.

2. The basis of the demand of service tax on HPCL is an agreement

dated 31st October, 2007 entered into between HPCL and Indraprastha

Gas Ltd. ('IGL') for distribution of Compressed Natural Gas ('CNG')

through the HPCL owned/leased retail outlet in accordance with the

terms and conditions set out in the said agreement. The question that

arose in the proceedings before the CCE was whether in terms of the said

agreement it could be said that HPCL was providing Business Auxiliary

Services ('BAS') to IGL with regard to the sale of CNG through the

retail outlet of HPCL. The CCE answered the question prima facie in the

affirmative and held that the activity of HPCL in marketing or sale of

CNG belonging to IGL, would fall within the ambit of Section 65 (105)

(zzb) read with Section 65 (19) of the Finance Act, 1994 and, therefore,

exigible to service tax.

3. Before the CESTAT, in support of its plea that there should be

complete waiver of pre-deposit, HPCL relied on the final judgment dated

4th June 2014 passed by the Mumbai Bench of the CESTAT in Bharat

Petroleum Corporation Ltd. and Hindustan Petroleum Corporation

Ltd. v. Commissioner of Service Tax, Mumbai 2014 TIOL-1114

(CESTAT-Mumbai) (hereafter referred to as the 'BPCL v. CST,

Mumbai' case). In the said final judgment in the 'BPCL v. CST,

Mumbai' case, the Coordinate Bench of the CESTAT held that since

HPCL and Bharat Petroleum Corporation Ltd. ('BPCL') were themselves

buying the CNG from Mahanagar Gas Ltd. ('MGL'), the question of

rendering services to MGL by way of marketing the CNG did not arise.

Inter alia, it was held that 'the contention of the learned AR that private

parties are paying Service Tax under the category of Business Auxiliary

Service on the same activity, therefore, the Appellant are required to pay

service tax is not acceptable as in the case of private parties, the invoices

on the customers were raised by M/s MGL directly and private parties

are receiving commission and there is no transactions of principal to

principal basis.'

4. Before the CESTAT HPCL also placed reliance was also placed on an

interim the order dated 9th February 2015 of the CESTAT, Principal

Bench, New Delhi in Indian Oil Corporation Ltd v. Commissioner of

Service Tax, Delhi, Stay Order No. 50557/2015-ST(Br) (hereafter the

'IOCL v. CST, Delhi' case) where in a similar agreement between Indian

Oil Corporation Ltd.(IOCL) and IGL the Tribunal, relying on BPCL v.

CST, Mumbai (supra) held that "prima facie, we are of the view that

facts of the applicants case are similar to Bharat Petroleum Corp. Ltd"

and ordered a complete waiver of pre-deposit.

5. In the impugned order, the CESTAT, Principal Bench at New Delhi

(of the same Bench strength as the Coordinate Bench of the CESTAT in

Mumbai which passed the judgment in BPCL v. CST, Mumbai (supra),

did notice the said decision but observed that it did not "appear to have

examined the terms of the agreement between the retail petroleum outlet,

the appellant therein and MGL in sufficient detail and proceeded on an

assumption that there was an anterior sale of CNG to the appellant

therein'. Similarly, as regards the interim order in IOCL v. CST, Delhi

(supra), the CESTAT observed that in the said order too there was no

examination and analysis of the agreement between in the parties and in

the absence of the same, "the conclusions recorded in the above

judgement/order cannot prima facie be considered as laying down a ratio

which operates as a precedent."

6. In the impugned order, the CESTAT then proceeded to analyse the

individual clauses of the Agreement dated 31st October, 2007 between

HPCL and IGL and came to prima facie, conclusion that "there is no sale

of natural gas or CNG to the appellant and sale of CNG the retail

customers is by the IGL itself without an intermediary transfer of

property in CNG in favour of the applicant". The corresponding prima

facie, conclusion, therefore, was that the activity of BPCL in marketing

without IGL would be exigible to service tax. In para 12 of the impugned

order, the CESTAT, Principal Bench noticed that there were "in respect

of identical transactions covered by substantially similar agreements the

final order in Bharat Petroleum Corporation Ltd. (supra) and the

interim order in Indian Oil Corporation Ltd. (supra)". The CESTAT

held that on balancing the interests of the Revenue and HPCL, requiring

the making of a pre-deposit of 50% of the assessed liability along with

proportionate interest would be justified.

7. At the hearing of the present appeal on 21st August, 2015, the Court

recorded the submission of Mr Devnath, learned counsel for the

Appellant, that he would on the next date produce a copy of the

agreement entered into between HPCL and MGL, which was the subject

matter of the final order in BPCL v. CST, Mumbai. He also undertook to

inform the Court whether any appeal had been filed against the said

order.

8. The Court has today been shown the copy of the Agreement dated 7th

December, 2009 entered into between MGL and HPCL together with the

earlier renewal agreements containing the relevant clauses. The Court

notices that the agreement which formed the subject matter of the final

order of the CESTAT, Mumbai Bench in BPCL v. CST, Mumbai (supra)

is identical to the agreement between HPCL and IGL which forms the

subject matter of the present case. The Court is of the view that since a

Coordinate Bench of the CESTAT while interpreting identical clauses of

a similar agreement involving HPCL itself came to the conclusion that

HPCL was not providing Business Auxiliary Services to MGL in

carrying on the activity of providing CNG to consumers through its retail

outlets, that final judgment itself constituted a prima facie case in favour

of HPCL. If the Principal Bench of the CESTAT felt that the agreement

between HPCL and IGL, identical to the agreement between HPCL and

MGL, called for a different interpretation, and that therefore the decision

of the Coordinate Bench of the same strength in BPCL v. CST, Mumbai

required reconsideration, then the appropriate course for the Principal

Bench, CESTAT to adopt would be to refer the matter to a larger Bench

of the CESTAT. In any event, at the stage of considering an application

for stay, the CESTAT, Principal Bench ought to have proceeded on the

basis that in light of the final judgment in BPCL v. CST, Mumbai

(supra) being favour of HPCL, it had a prima facie case.

9. The Court has been shown a copy of the order dated 23rd February,

2015 passed by the Supreme Court in Civil Appeal No.2471-2473 of

2015 preferred by CST, Mumbai against the aforementioned final

judgment in BPCL v. CST, Mumbai (supra) issuing notice but not

granting stay. The issue is, therefore, pending consideration in the

Supreme Court.

10. In that view of the matter, the Court is of the view that the CESTAT

was not justified in declining to grant an unconditional stay in favour of

the Appellant, without requiring the making of any pre-deposit.

11. For the aforementioned reasons, the impugned order dated 14th July

2015 of the CESTAT is hereby set aside. There shall, during the

pendency of the appeal preferred by HPCL before the CESTAT, be an

unconditional stay of the order dated 10th May, 2013 passed by the CCE,

Delhi-III, which is under challenge in the said appeal.

12. The appeal is allowed in the above terms.

13. Dasti under the signature of the Court Master.

S.MURALIDHAR, J

VIBHU BAKHRU, J AUGUST 25, 2015 MK