Commissioner of Service Tax Mumbai Vs Bharat Petroleum Corporation Ltd. Etc. (Supreme Court of India)
The Supreme Court allowed the appeals filed by the Commissioner of Service Tax, Mumbai and set aside the CESTAT’s common order dated 04.06.2014, restoring the Orders-in-Original confirming service tax demands against BPCL and HPCL. The dispute concerned whether the respondent corporations’ activities relating to the sale of CNG supplied by Mahanagar Gas Limited (MGL) through their retail outlets constituted “Business Auxiliary Service” under Sections 65(19) and 65(105)(zzb) of the Finance Act. After examining the agreements between MGL and the respondent corporations, the Court held that the arrangements reflected a principal-agent relationship rather than a principal-to-principal sale. It noted that MGL retained control over pricing, equipment, supply, inspection, unsold stock and other contractual aspects, while the respondent corporations provided infrastructure, manpower and related services for the sale of CNG and received commission/profit margin for those services. The Court held that the respondent corporations acted as marketing agents and commission agents for MGL, that their activities fell within the definition of “Business Auxiliary Service”, and that they were liable to pay service tax. The service tax demands as adjudicated were held enforceable.
Issue: Whether BPCL and HPCL, while selling CNG supplied by Mahanagar Gas Ltd. (MGL) through their retail outlets, acted as buyers of goods or as commission agents rendering “Business Auxiliary Service” liable to service tax?
