No Service Tax Payable On Activity Of Installing And Maintaining Fixed Facility For Supplying Oxygen Gas: CESTAT

The appellant/assessee is in the business of manufacturing oxygen and argon gases for various iron and steel manufacturers across India. The Appellants have entered into an agreement with M/s. Indian Iron & Steel Co. Ltd. (IISCO), a fully owned subsidiary of M/s. SAIL, for its steel plant at Burnpur, West Bengal (SAIL, ISP) for the supply of oxygen gas at the factory.

In order to maintain a continuous supply of oxygen, the contract stipulates that the Appellant would install fixed facilities on "Build-Own-Operate" basis in the factory which were being used by the Appellant to ensure an uninterrupted supply of oxygen to M/s. SAIL, ISP.

As per the contract, the appellant, in addition to the price of gas, was entitled to "fixed facility charges' for the creation of appropriate facilities to ensure an uninterrupted supply of oxygen of the specified parameters. The Appellant was paying excise duty on the fixed facility charges by considering the same as part of the transaction value of gas for the period prior to August 2009.

The Department observed that the fixed facility charges shall not be added to the value of the gas cleared to SAIL, ISP and no excise duty is payable and, accordingly, no Cenvat credit on the value is available to SAIL, ISP.

Accordingly, SAIL and ISP stopped reimbursing the excise duty to the Appellants. Therefore, from August 2009, the appellant was not discharging any excise duty on fixed facility charges under the bona fide belief that no excise duty was payable.

After introduction of negative list w.e.f. 01.07.2012, the Appellants started discharging Service Tax on the fixed facility charges. Further, as submitted by the Appellant that since the invoices for the period from 01.04.2012 to 30.06.2012 were issued by the Appellant after 01.07.2012, the Appellant discharged Service Tax on the same to avoid any dispute.

The Department conducted an audit of the Appellant and during audit it was alleged that the fixed facility charges received by the Appellant falls within the purview of 'Business Support Services' and the same is liable to Service Tax.

The Show Cause Notice was issued alleging that the Appellant has not discharged their Service Tax liability under the category of 'Business Support Service' for the period from August 2009 to November 2012.

The adjudicating authority confirmed the demand of Service Tax holding that the fixed facility charges fall within the ambit of 'Business Support Service' and it was liable to Service Tax. However, the Ld.Adjudicating authority dropped the penalty proposed under Section 76 and reduced the penalty under Section 78 of the Act up to 50% of the total demand. The Department is in Appeal, being Service Tax.

Counsel appearing on behalf of the appellant submitted that the main activity of the Appellant was manufacture and supply of gas to the client and in furtherance of the same the Appellant has installed fixed facilities in terms of specific contracts with the buyer/client for continuous supply of gas. He argued that this cannot be considered as providing "Infrastructure Support Service" or "Business Support Service".

Counsel for the department contended that fixed facilities installed by the appellant in the premises of the customer/buyer for uninterrupted supply of gas supplied by them to the customer/buyer falls within the preview of Business Support Services and therefore, the same is liable to service tax.

The CESTAT found that the activity to fall within the ambit of Business Support Services, it is essential that activity should be supportive to the main activity undertaken by the client. Whereas in the present case, the activity of installing and maintaining a fixed facility undertaken by the Appellant assessee for supplying oxygen gas manufactured by it to the buyer/client.

The Tribunal while setting aside the demand for service tax which was confirmed by the Adjudicating Authority, noted that the fixed facility installed by the assessee was used by the assessee itself and it is in no way construed as supporting activity for the buyer/client of the assessee. The fixed charges received by the assessee from the buyer/client cease to fall within the ambit of business support services.

Case Title: M/s. Goyal MG Gases Private Limited Versus Commissioner of Central Excise & Service Tax, Bolpur

Citation: Service Tax Appeal No.75492 of 2015

Dated: 14.03.2022

Counsel For Appellant: Advocate Pawan Kr. Pahwa

Counsel For Respondent: Authorized Representative S.S.Chattopadhyay

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