M/S GUJARAT STATE FERTILIZERS & CHEMICALS LTD. & ANR. Vs. COMMISSIONER OF CENTRAL EXCISE
SUPREME COURT OF INDIA
M/s Gujarat State Fertilizers And Chemicals Ltd. And Anr.
COMMISSIONER OF CENTRAL EXCISE
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(1.) Heard learned counsel appearing for the parties.
(2.) These appeals are filed by the appellants which are two Public Sector Undertakings of the State of Gujarat. They were served with show cause notice dated 04.05.2011 alleging therein that the appellant no. 1 (hereinafter referred to as 'GSFC') was collecting 'incineration charges' from M/s. Gujarat Alkalies & Chemical Ltd. (hereinafter referred to as 'GACL') and the said amount charged by GSFC from GACL amounted to providing 'Storage and Warehousing Services' falling under clause (zza) of Sub-Section (105) of Section 65 of the Finance Act, 1994. The GSFC submitted its reply questioning the very basis of the said show cause notice and submitted that the process which was undertaken did not amount to 'Storage Facilities' and, in any case, GSFC was not providing any service to GACL for which the aforesaid 'incineration charges' were collected. It was explained that though the GSFC and GACL were receiving Hydro Cynic Acid (HCN) from M/s. 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. It was also mentioned that an agreement was arrived at between GSFC and GACL on the aforesaid basis and, therefore, there was no question of providing any services by one party to the other. This contention of the appellants was not accepted by the Adjudicating Authority which confirmed the demand of 'service tax' along with interest and also imposed penalties under various sections including Section 78 of the Finance Act, 1994. The appellants preferred appeal there-against before the Commissioner (Appeals) which was dismissed by the Appellate Authority upholding the order of the Adjudicating Authority. Further appeal to the Customs Excise & Service Tax Appellate Tribunal(CESTAT) has met the same fate inasmuch as vide impugned judgment dated 04.02.2015, the CESTAT has affirmed the order passed by the Adjudicating Authority as well as the Appellate Authority. The present appeals challenge the order of the CESTAT.
(3.) In order to appreciate and understand the matter it requires to first state the process of receiving the HCN through pineline and the manner in which it is shared between GSFC and GACL and also the manner in which 'incineration charges' are divided between them. The appellants had explained the same in their reply to the show cause notice. The relevant portion thereof reads as under:
"G. In the existing procedure of ACH production in GSFC-PU, HCN is one of the main raw material HCN is received from M/s. RIL, Vadodara through pipeline directly by gravity from their plant. It is taken in an intermittent hold tank which is situated in GSFC-PU premises. As per agreement, the quantity of HCN as soon as it is received is being consumed at 60:40 ratio by GSFC-PU and GACL - Sodium Cyanide Unit. The hold tank is there to sustain continuous process of both the plants and to facilitate smooth operation of the suction pumps and to avoid starvation of the pumps. Starvation of pump is not allowed as it causes damage to the pump and disturb the process. In case of any problem at consumers end, HCN supply from M/s. RIL is stopped, remaining quantity in tank is immediately consumed by either of the plants. The question of storing HCN does not arise because it is not permissible to store HCN on safety ground. The hold tank is duly washed and kept empty for further use.";
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