Service Tax - Sharing a common storage facility does not amount to one party providing a service to another - Supreme Court
GSFC and GACL were receiving Hydrocyanic Acid (HCN) from Reliance Industries Limited through common pipeline, which was partially utilized in their factory for manufacturing of their final product and was shared between them in the ratio of 60:40. Since incineration process was also required to be undertaken, the charges, which were incurred on the said process, were also shared in the ratio of 50:50. The Adjudicating Authority confirmed the demand of 'service tax' along with interest and also imposed penalties. The Commissioner (Appeals) dismissed by the appeal upholding the order of the Adjudicating Authority. Further appeal to the CESTAT has met the same fate.
The Supreme Court observed that in 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 Supreme Court considered the second question first and noted that for installation of these facilities both the parties had contributed towards the investment. Since the said handling facilities are in the premises of GSFC, incineration also takes place at the said premises. Handling facilities expenditure thereof is shared equally by both the parties. That is clearly provided in the agreement/arrangement that was agreed to between the parties and is reflected in the Minutes dated 06.07.1980.
The Supreme Court found that handling portion and maintenance including incineration facilities is in the nature of joint venture between two of them and the parties have simply agreed to share the expenditure. The payment which is made by GACL to GSFC is the share of GACL which is payable to GSFC. By no stretch of imagination, it can be treated as common 'service' provided by GSFC to GACL for which it is charging GACL.
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