COMMISSIONER OF SERVICE TAX MUMBAI vs M/S BHARAT PETROLEUM CORPORATION LTD. ETC on 20 July, 2026

Nilay Vipinchandra Anjaria, J.

For the purpose of convenient reference, the contents

of this judgment are divided into heads and sub-heads,

mentioned with corresponding paragraphs, as under.

Table of Contents

Sl. No. Head and Sub-Heads Paragraph Nos.

1. Challenge in Appeals 1 to 1.1

2. Issue Involved 2

5. Demand Raised 3.3 to 3.3.2

6. Findings In Orders-in-Original 3.4 to 3.4.2

7. Explanation By BPCL/HPCL 3.5 to 3.5.1

8. Conclusion By Adjudicating 3.6 to 3.6.5

Authority

9. View of CESTAT 3.7 to 3.7.4

10. Submissions of Appellant 4 to 4.1.1

11. Submissions of BPCL/HPCL 4.2

12. Crux of Controversy 5 to 5.1.2

13. Business Auxiliary Service 5.2 to 5.2.2

14. What is ‘Sale’ 5.3 to 5.3.6

15. Concept of Agency 5.4 to 5.4.7

16. ‘Sale’ and ‘Agency’ Distinguished 5.5 to 5.5.2

17. Clauses In Agreements 6 to 6.9.1

(a) Representation by BPCL/HPCL

(b) Definitions

(c) About Supply of CNG

(d) Obligations of MGL

(e) MGL’s Right to Inspect etc.

(f) Mode of Billing, Payments

(g) BPCL/HPCL not liable for

deficiency

(h) MGL to be Indemnified

(i) Right of MGL to Terminate

(j) Sale to be Exclusive

(k) Amended Clauses Compared

18. Decisive Aspects 7 to 7.1.9

(a) Providence of Services

(b) As a Facilitator

(c) Element of Control

(d) Fixation of Price

(e) MGL Is Regulator

(f) Monitoring of Supply of Goods

(g) The Risk Factor

(h) Retention of Control Over

Goods

(i) Commission Agent

(j) Title did not Pass

19. Under Domain of MGL 7.2 to 7.2.2

20. Evident Intention 7.3 to 7.3.1

21. Clauses Constituting Agency 8 to 8.2

22. Commission, Not Trade 9 to 9.1.2

Discount

23. Attribute of Agency 9.2 to 9.2.3

24. “Ownership” retained with MGL 10 to 10.3

25. Recipient Agent 11 to 11.3

26. Within Purview of Definition 12 to 12.2

27. Conclusion and Order 13 to 16

Challenge in Appeals

1.The present Appeals under Section 35L (b) of the Central Excise Act, 19441 read with Section 83 of the Finance Act, 1994 (as amended)2, are preferred by the 1 Hereinafter, “Central Excise Act” 2 Hereinafter, “Finance Act” Commissioner of Service Tax, Mumbai against common order dated 04.06.2014 passed by the Customs, Excise & Service Tax Appellate Tribunal, West Zonal Bench, Mumbai3 in Appeal Nos.ST/778 and 779/12 & ST/85346/13-Mum, which were preferred by M/s Bharat Petroleum Corporation Limited4 and M/s Hindustan Petroleum Corporation Limited5, respondent Nos.1 and 2 herein6 respectively. 1.1 CESTAT allowed the Appeals and set aside the Orders-in-Original Nos. 03-04 and 05-06/ST/SB/2012-13 dated 16.08.2012, whereby the Commissioner of Customs (TAR), Mumbai, confirmed the demand towards service tax against the respondent-Corporations. Issue Involved

2.The issue centripetal to the controversy in the present appeals is whether the activities of the respondentCorporations in relation to sale of Compressed Natural Gas7 to the consumers provided by Mahanagar Gas Limited8 at 3 Hereinafter, “CESTAT” 4 Hereinafter, “BPCL” 5 Hereinafter, “HPCL” 6 Hereinafter, “the respondent-Corporations” 7 Hereinafter, “CNG” 8 Hereinafter, “MGL” and through the petrol pump outlets owned by the respondent-Corporations would fall within the purview of “Business Auxiliary Service” as defined under Section 65(19) read with Section 65(105)(zzb) of the Finance Act and consequently whether it would attract the liability of payment of service tax. Attendant Facts

3.MGL was engaged in manufacturing and

distributing CNG, which is excisable good. MGL had been

receiving natural gas from Gas Authority of India Limited9,

whereafter the natural gas was transported through gas

grids to the various retail outlets including those belonging

to the respondent-Corporations situated across the city of

Mumbai, Thane etc. The gas compressors, dispensers, air

compressors with air tank cascades, and various meters

were installed by MGL, which were used for compression of

natural gas into CNG.

3.1 It was stated that MGL was paying central excise

duty on the manufactured goods, namely CNG, at such

9 Hereinafter, “GAIL”

online stations, retail outlets including the outlets of the

respondent-Corporations. MGL used to supply natural gas

through pipelines to different retail outlets of the

respondent-Corporations. The manufacturing of CNG took

place when the natural gas was compressed to the requisite

pressure by using the compressors installed at the outlets

of the respondent-Corporations.

3.1.1 It was a contractual arrangement between the

parties for which MGL entered into an Agreement with BPCL

on 30.03.1998. The Agreement was renewed on 10.06.2004

and further revised as per amendment Agreement dated

21.11.2008. Similar Agreement dated 01.06.1999 was

executed by MGL with HPCL. The Agreements contained

various clauses and conditions in respect of providing

various services to the respondent-Corporations in

connection with sale of CNG by MGL at the outlets of the

respondent-Corporations.

Claim of Department

3.2 It is the case of the appellant-Department that the

respondent-Corporations were engaged in providing taxable

services such as “Business Auxiliary Service”, acting as

manpower recruitment agency, providing banking and

financial services, transport of goods by road, sponsorship

services, services relating to renting of immovable property,

and supply of tangible goods for use, and for such purposes,

they had obtained the service tax registration under the

provisions of the Finance Act. The appellant stated that the

services provided by the respondent-Corporations in

relation to the marketing of CNG received from MGL would

become “Business Auxiliary Service” within the scope and

ambit of Section 65(19) read with Section 65(105)(zzb) of the

Finance Act.

Demand Raised

3.3 From the intelligence input from the Director

General of Central Excise Intelligence, Mumbai Zone, it was

inter alia revealed that the respondent-Corporations had

been providing the site and manpower for sale of CNG as

vehicular fuel and further that as per the Agreements

entered into by the respondent-Corporations with MGL, the

respondent-Corporations had been receiving a

commission/profit margin at the prescribed rate from MGL

and that, they were liable to pay the service tax.

3.3.1 On the ground that the respondent-Corporations

had been rendering the “Business Auxiliary Service”, the

Additional Director General, DGCEI, MZU, Mumbai issued

a show-cause notice dated 18.10.2010 to BPCL. The said

notice, pertaining to the period from April 2005 to March

2010, stated that MGL was engaged in manufacturing and

distribution of CNG which were excisable goods, that MGL

had installed compressors, etc. and thus had been

discharging the liability of payment of central excise duty

on the said manufactured goods at the outlets, including

those of respondent-Corporations. It was further stated that

based on the actual quantity of CNG sold, the respondent-

Corporations received commission/profit margin. An

amount of Rs.7,20,78,037/- was demanded to be recovered

from BPCL. By another notice dated 19.10.2011, the

Department called upon BPCL to pay Rs.1,40,03,174/- with

interest and penalty in respect of the period from April 2010

to March 2011.

3.3.2 Similar demand notice came to be issued to HPCL

on 18.10.2010 by the competent authority. On the same set

of facts and premises, service tax of Rs.6,86,65,245/- for

the period from 01.04.2005 to 31.03.2010 was demanded

from HPCL. HPCL was served with another show-cause

notice dated 04.10.2011 in which service tax for the period

from 01.04.2010 to 31.03.2011 to the tune of

Rs.1,21,11,933/- with interest and penalty was demanded.

Findings In Orders-in-Original

3.4 The aforementioned show-cause notices issued to

the respondent-Corporations were adjudicated by the

Commissioner (TAR), Mumbai resulting into passing of

Orders-in-Original dated 16.08.2012. It was observed that

the respondent-Corporations had been providing site,

manpower etc. for sale of CNG as vehicular fuel to be sold

to the consumers and receiving commission/profit margin

at prescribed rate. It was noticed that the respondent-

Corporations had entered into an Agreement as amended

by subsequent Agreements with MGL.

3.4.1 It was further noted by the competent authority that

in the process, the respondent-Corporations contravened

various provisions of the Finance Act such as, failed to make

an application for registration with the Superintendent of

Central Excise for payment of service tax under Section 66

of the Finance Act, which was leviable in respect of the

transactions of CNG availed from MGL for selling it to the

consumers from its outlets, did not determine the correct

value of the “Business Auxiliary Service” provided by them

to MGL, failed to pay the service tax, failed to furnish the

accounts in relation to the service tax payable and had also

omitted to provide the particulars of the “Business Auxiliary

Service” and the correct value thereof.

3.4.2 The questions addressed by the competent authority

were whether the arrangement of sale of CNG between the

respondent-Corporations and MGL was for sale of goods,

and whether it would thence fall outside the ambit of

provisions of Chapter V of the Finance Act. Secondly,

whether the nature of activities would be covered under the

definition of “Business Auxiliary Service”. The thrust of the

defence raised by the noticees – the respondent-

Corporations was that they had been purchasing CNG from

MGL and the transaction between them and MGL was in the

nature of sale of goods and would stand out of service tax

net.

Explanation By BPCL/HPCL

3.5 The respondent-Corporations proceeded to submit

explanation stating inter-alia that they were Central

Government Public Sector Undertakings engaged in the

business of refining and distributing the petroleum

products all over India through the network of Installations

and Depots under the Ministry of Petroleum and Natural

Gas having refinery known as Bombay Refinery at Mahul. It

was stated that MGL was engaged in the manufacture of

CNG which processes natural gas after purchasing from

GAIL and later the same was distributed through two

channels, one as Piped Natural Gas10 to domestic and

commercial consumers as cooking fuel and the other as

CNG as fuel for vehicles after its conversion as CNG.

According to the respondent-Corporations, their outlets

were of three types namely Mother Stations, Online Stations

and Daughter Booster Stations at which the processing and

compression are carried out.

3.5.1 It was contended by the respondent-Corporations

that the transactions with MGL were in the nature of sale

10 Hereinafter, “PNG”

because (a) the manufacture of CNG takes place at retail

outlets of BPCL, (b) the sole ownership of equipments

installed at such outlets is of MGL, (c) similar arrangements

are made with other private parties who are paid by MGL

for providing similar services, (d) BPCL pays sales tax/VAT

to the State Government which amount is deducted by

BPCL from the sale proceeds of CNG remitted to MGL.

Conclusion By Adjudicating Authority

3.6 The competent adjudicating authority noted that

MGL compresses natural gas at 200 bar pressure to sell the

resultant product of CNG directly to the ultimate consumers

by delivery to vehicles through the outlets owned and

operated by the respondent-Corporations and such other

private parties who are appointed as agents providing

services to MGL. The said outlets by the private parties act

as agents to sell CNG to the consumers on behalf of MGL

under the invoices/bills raised by, on behalf of and in the

name of MGL and that there was a “Principal-Agent”

relationship.

3.6.1 It was further stated that the price charged in the

bills/invoices was the Maximum Retail Price11 determined

by MGL from time to time. These services, it was observed,

are rendered against payment of service charges and the

entire sale proceeds are remitted by the private party agents

– the respondent-Corporations to MGL.

3.6.2 It was further noticed by the competent authority

that the obligation of the service providers under the

contract was to merely provide all facilities including shed,

canopy and other infrastructure for supply and sale of CNG

to motor vehicles, abiding by the terms and conditions of

the contract entered into with MGL. The competent

authority noted that similar arrangement was made by MGL

with other private parties by entering into contracts with

them.

3.6.3 The competent authority concluded that the services

provided by the respondent-Corporations to MGL which

were “Business Auxiliary Service”, were covered within the

ambit of Section 65(19) to become taxable service under

11 Hereinafter, “MRP”

Section 65(105)(zzb) of the Finance Act. The following

services used to take place in course of the transactions

between the respondent-Corporations and MGL. (i) The

respondent-Corporations earmark the site for dispensing

CNG. (ii) Equipments are installed by MGL for the purposes

of dispensation of CNG. (iii) MGL recovers damages from the

respondent-Corporations. (iv) BPCL is obliged to give access

to MGL for inspection of site carried out by the officials of

MGL. (v) Manpower, shed, canopy is provided by BPCL.

3.6.4 The competent authority held that the transaction of

supply of CNG by MGL to BPCL was not on “Principal-to-

Principal” basis but was on “Principal-to-Agent” basis and

that the respondent-Corporations, as the case may be, had

been acting as an agent on behalf of MGL providing services,

finally selling the goods-CNG to the consumers on behalf of

MGL. While arriving at the above conclusion, the competent

authority also considered the statement of one Shri Sibal

Chakraborthy, Senior Manager (R&RJM) of MGL, who

inter-alia stated that the control and ownership of natural

gas as well as CNG manufactured at the respective

outlets/online stations whether or not owned by MGL, till

final dispensation of CNG to the vehicular users as fuel,

remained with MGL and that online stations have no claim

for the stocks of either natural gas or CNG.

3.6.5 The terms and conditions of the Agreements entered

into between BPCL and MGL were considered by the

competent authority and highlighting Clause 8.4 of the

Agreement, it viewed that the respondent-Corporations

were receiving the commission in respect of the services

provided. Finally, the competent authority confirmed the

demand of service tax against the respondent-Corporations

together with interest and penalties under the provisions of

the Finance Act.

View of CESTAT

3.7 The aggrieved respondent-Corporations challenged

the respective Orders-in-Original before CESTAT. Appeal

Nos.ST/778/12-Mum and ST/85346/13-Mum were

preferred by respondent No.1-BPCL, whereas appeal

No.ST/779/12-Mum was preferred by respondent No.2-

HPCL. By common judgment and order dated 04.06.2014,

CESTAT allowed the appeals.

3.7.1 After considering the case of both sides, CESTAT

concluded that the respondent-Corporations were engaged

in buying the goods from MGL and the question of rendering

the services to MGL by them for marketing of goods did not

arise. It was sought to be highlighted that the MGL was

discharging VAT/sales tax liability while selling CNG to the

respondent-Corporations. It was reasoned that merely

because goods were sold at Retail Sales Price12 fixed by

MGL, it would not imply that the profit margin shall be

treated as commission for rendering the service.

3.7.2 CESTAT, by its observations and findings in its

Paragraph 11 in the impugned judgment, accepted the case

and contentions of the appellants on the basis of its own

appreciation of the provisions of the Agreements. The

following was referred,

“As per the said provisions, the service provider

provides service to his client for marketing or

promotion of the goods to third party. In these

cases, appellants themselves are buying goods

from M/s. MGL. Therefore, the question of

rendering the service to the client for marketing of

the goods does not arise. We further find that MGL

is discharging VAT/ST liability while selling the

CNG to appellants. Although the RSP is fixed but it

does not mean that the profit margin shall be

1212 Hereinafter, “RSP”

constituted as commission for rendering the

service.”

3.7.3 It was reasoned further,

“…it is found that all the transactions shown by the

appellants are done on principal to principal basis.

Moreover, the appellants are selling these CNG on

payment of VAT/ST to the buyers. There is no

commission component that have been received by

the appellants from M/s. MGL. For e.g., if the

appellant is receiving goods from MGL at Rs. 100/-

per kg. including VAT but these, goods are sold by

the appellant to customers on RSP fixed at Rs.

102/- per kg., that does not mean that the

appellant are receiving commission of Rs. 2/- from

MGL.”

3.7.4 According to CESTAT, the transaction between the

parties was on “Principal-to-Principal” basis and that there

was no commission component. CESTAT thus accepted the

case of the private parties Corporations that they were not

rendering the services, therefore, not to become liable to pay

the service tax under the category of “Business Auxiliary

Service”.

Submissions of Appellant

4.Heard learned Additional Solicitor General Mr.

Raghavendra P Shankar with learned advocate-on-record

Mr. Gurmeet Singh Makker for the appellant and learned

counsel Mr. M.H. Patil with advocate-on-record M/s. S.

Narain & Co. with other assisting learned advocates for the

respondents at length.

4.1 Assailing the judgment of CESTAT, the following

submissions were advanced on behalf of the appellant:

(i) The respective Agreements between MGL and the

respondent-Corporations were pari materia

stipulating various services to be provided by the

respondent-Corporations to MGL with regard to

the sale of CNG by MGL at the outlets owned by

the respondent-Corporations and that towards

consideration of such services, the payment of

commission/profit margin was contemplated in

Clause 8.4 of the Agreement. The specific services

were provided as enumerated in Clause 4 of the

Agreement.

(ii) The commission/profit margin was to be paid to

the respondent-Corporations per Kg of CNG sold.

The rate initially fixed was modified in the renewal

Agreement. Even in the subsequent instruments

of Agreement, the condition regarding payment of

commission/profit margin was retained.

(iii) The services provided by the respondent-

Corporations to MGL in connection with the sale

of CNG were in the nature of “Business

Auxiliary Service” as defined in Section 65(19)(i)

read with Section 65(105)(zzb) of the Finance Act.

The respondent-Corporations were engaged in

promotion or marketing of goods on behalf of the

appellant, acting as a commission agent.

(iv) Various provisions, terms and conditions agreed

upon and reflected in the Agreements between

MGL and the respondent-Corporations were

highlighted to submit that in form as well as in

substance there was no “sale” inasmuch as there

was no transfer of “property in the goods-CNG”.

(v) The clauses of the Agreement revealed that

neither the title nor the risk passed at any point

of time from MGL to respondent-Corporations.

The parties implemented the Agreement in the

manner consistent with such understanding,

which was confirmed by the statement of Mr.

Saibal Chakraborthy, Senior Manager (R&RM) of

MGL.

(vi) The respondent-Corporations had been acting as

“agents” for the sale of CNG by MGL to customers.

The decision of this Court in Hafiz Din

Mohammad Haji Abdulla vs. The State of

Maharashtra13, was relied on to submit that in

that case similar clauses were interpreted by a

three-Judge bench of this Court whereby the

pricing control was retained by the supplier of the

goods.

(vii) The Order-in-Original dated 16.08.2012

considered in detail the relevant provisions of the

Agreements and the finding was correctly arrived

at it was that a service rendered by respondent-

Corporations to MGL. This position stood

reinforced by the fact that similar Agreements

13 1962 SCC OnLine SC 208

were entered into by MGL with other private

entities for using fuel pumps, which was treated

as services for the purpose of service tax liability

under Section 65(19) read with Section

65(105)(zzb) of the Finance Act.

4.1.1 It was further submitted that,

(a) The impugned order of CESTAT accepted the

factum that the respondent-Corporations were

themselves buying CNG from MGL on a

“Principal-to-Principal” basis. However, CESTAT

misdirected itself to subsequent record the finding

that “the question of rendering the service to the

client for marketing of the goods does not arise”.

(b) CESTAT misdirected itself to conclude that since

the invoices were raised by the respondent-

Corporations on the customers and the VAT was

charged in these invoices, there was no service

element.

(c) A manifest error was committed by CESTAT in the

impugned order in holding that the appellants

were not receiving any commission from MGL,

therefore, it could not be presumed that they were

rendering any service to MGL. The admitted

factual position is to the contrary.

(d) CESTAT relied on the decision of Mahanagar Gas

vs. Commissioner of Central Excise14, which

was a misplaced reliance because: (a) CESTAT

relied on the judgment of the co-ordinate bench

presently under Appeal in these proceedings and

cannot therefore cited as a basis for dismissing

the present Appeal; (b) The in limine dismissal by

this Court of the Civil Appeal does not transform

the judgment of CESTAT into a binding decision

rendered by this Court; (c) the matter in issue was

altogether different and concerned whether the

"commission/profit margin" paid by MGL to

respondent-Corporations could be included

transaction value under Section 4(1)(a) of the

14 2017 (348) ELT 175

Central Excise Act for the purposes of

computation of excise duty.

(e) The ratio of Mahanagar Gas (supra) is that the

commission/profit margin was not includable in

the excisable value of the “manufacture” of CNG

by MGL at the pumps of respondent-

Corporations. This is of no relevance to the

question involved in these Appeals, that is

whether service tax is payable on such

commission/profit margin.

Submissions of BPCL/HPCL

4.2 On the other hand, the impugned order by CESTAT

was strenuously supported by the respondent-Corporations.

In addition to canvassing for what is held by CESTAT,

following further submissions were made:

(i) MGL had been selling CNG to respondent-

Corporations and they subsequently sold CNG to

actual users which arrangement stood

substantiated from the following documents:

(a) Summary statement of CNG sold by MGL to

respondent-Corporations on daily basis

during 01.01.2011 to 31.01.2011.

(b) Central Excise invoices issued by respondent-

Corporations for sale of CNG on daily basis on

payment of duty, during 01.01.2011 to

31.01.2011.

(c) Tax invoices of MGL on respondent-

Corporations for sale of CNG, issued in the

month of January 2011 and paying VAT.

(d) Joint tickets for sale of CNG by respondent-

Corporations to one of the BPCL's outlets in

the month of January 2011.

(e) BPCL's invoices for sale of CNG to its

customers and paying VAT.

(f) There is a declaration in each invoice to the

effect of holding registration under VAT and

sale of CNG under the said Act.

(g) For delay in payment, interest is payable by

respondent-Corporations to MGL, as per

Clause 8.3 of the Agreement.

(h) Declaration in Form N-13A is required to be

given.

(ii) The commission received by the respondent-

Corporations was nothing but a discount. The

amount of discount used to change from time to

time. The nomenclature of commission was a

misnomer. The relevant clauses in the

Agreements have to be construed in that way

only. The transactions between MGL and

respondent-Corporations were of purchase and

sale to become “sale” under Section 4 of Sales of

Goods Act, 1930.

(iii) The property in goods-CNG was transferred from

MGL to respondent-Corporations before further

sale to the customers takes place.

(iv) Various clauses in the Agreement such as

Clauses 2.1, 2.3, 2.4, 2.5, 3.2, 4.1, 4.2, 4.6, 4.7,

5.1, 5.2, 7.1, 7.1(d), 8.1, 8.2, 8.3, 8.6 etc. were

relied on to contend that the parties had been

acting on “Principal-to-Principal” basis, and there

was neither an agency nor services rendered.

(v) The expression “commission” did not determine

the real nature of the payment. All clauses of the

Agreement have to be read together for their

conjoint effect. The decisions in Bhopal Sugar

Industries Ltd. vs. Sales Tax Officer15,

Commissioner of Central Excise, New Delhi vs.

DCM Textiles16, Moped India Ltd. vs. Asstt.

Collector of Central Excise, Nellore and

Others17, Union of India and Others vs. Future

Gaming Solutions (P) Ltd. and Another18 were

relied on.

(vi) When the transaction is in the nature of purchase

and sale, the service tax is not payable, as held in

Future Gaming (supra). In order to constitute a

service on behalf of client to cover in the

“Business Auxiliary Service”, there should be

three parties. For this proposition, the decision in

Kafila Hospitality and Travels Pvt. Ltd. vs.

Commissioner of Service Tax - Delhi19 was

pressed into service.

(vii) Sale from MGL to the respondent-Corporations

and further sale by these Corporations to

ultimate consumers do not take place

simultaneously, since the compressed gas was

first stored in the stationary cascades wherein the

meter reading would take place and CNG would

be subjected to necessary pressure.

(viii) Since the activity of compressing natural gas

amounted to manufacture w.e.f. 01.03.2001, the

exclusion clause under Section 65(19) would

apply.

(ix) Even if it is assumed that the respondent-

Corporations were not having absolute control,

19 (2021) 47 GSTL 140 (T.LB)

still it would amount to purchase-sale

transaction, as held by seven-Judge Constitution

Bench of this Court in the case of Vishnu

Agencies (Pvt.) Ltd. vs. Commissioner Tax

Officer and Others20.

(x) Contractual obligations of MGL and respondent-

Corporations’ obligations under Article IV were

for their mutual benefit. The same pertain to

equipment and not pertain to sale of CNG.

Crux of Controversy

5.The core issue that surfaces for consideration is

whether the transaction between the respondent-

Corporations and MGL in supply of CNG was in the capacity

of “Seller and Buyer”, in other words whether MGL was a

seller of CNG which goods used to be purchased by the

respondent-Corporations to sell through their outlets to the

ultimate consumers. Or whether the respondent-

Corporations were only service providers to facilitate MGL

to sell goods as CNG through their outlets to the

consumers/the vehicle owners.

5.1 The respondent-Corporations would contend that

the arrangement was on “Principal-to-Principal” basis and

the transaction was in the nature of “sale” as understood in

law by MGL in their favour. According to the appellant, on

the other hand, the arrangement between them was in the

nature of “Principal-Agent” relationship and the supply of

CNG to the respondent-Corporations was at “Principal-to-

Agent” basis and in no way could be treated as “sale”.

5.1.1 Since the arrangement between the parties was

documented in black and white governed under the

Agreement dated 30.03.1998 with respondent No.1-BPCL

and Agreement dated 01.06.1999 with respondent No.2-

HPCL renewed and amended subsequently, contain

identical terms, they would provide acid test to judge as to

whether the arrangement and the transactions thereunder

done between the parties were in the nature of outright sale

or there was a “Principal-Agent” relationship. It would be

useful to look into the conditions and stipulations of the

said Agreements, for, they in their nature and effect go to

suggest about the jural relationship between the parties.

5.1.2 Before judging the kind of legal arrangement

emanating from the Agreement between MGL and

respondent-Corporations and considering the nature of the

terms and conditions of the said agreements, it would be

useful to discuss the legal corners of sale and what are the

aspects that reveal jural relationship of “Principal and

Agent”, what the law perceives to make an agency.

Business Auxiliary Service

5.2 Since the purport and operational dimension of

definition of “Business Auxiliary Service” would inform the

discussion hereinafter and guide the conclusion as well as

the outcome of these Appeals, it would be apposite to engage

with the said definition at the outset.

5.2.1 Section 65 of the Finance Act deals with definitions.

Sub-section (19) of Section 65 contains the definition of

“Business Auxiliary Service”, which is as under,

(19) “business auxiliary service” means any

service in relation to—

(i) promotion or marketing or sale of goods

produced or provided by or belonging to the

client; or

(ii) promotion or marketing of service provided

by the client; or

Explanation - For the removal of doubts, it is

hereby declared that for the purposes of this sub-

clause, "service in relation to promotion or

marketing of service provided by the client"

includes any service provided in relation to

promotion or marketing of games of change,

organised, conducted or promoted by the client, in

whatever form or by whatever name called, whether

or not conducted online, including lottery, lotto,

bingo;

(iii) any customer care service provided on

behalf of the client; or

(iv) procurement of goods or services, which

are inputs for the client;

Explanation - For the removal of doubts, it is

hereby declared that for the purposes of this sub-

clause, “inputs” means all goods or services

intended for use by the client;

(v) production or processing of goods for, or

on behalf of, the client; or

(vi) provision of service on behalf of the client;

or

(vii) a service incidental or auxiliary to any

activity specified in sub-clauses (i) to (vi),

such as billing, issue or collection or recovery

of cheques, payments, maintenance of

accounts and remittance, inventory

management, evaluation or development of

prospective customer or vendor, public

relation services, management or

supervision, and includes services as a

commission agent, but does not include any

activity that amounts to manufacture of

excisable goods.

Explanation. — For the removal of doubts, it is

hereby declared that for the purposes of this clause,

(a) ”Commission Agent” means any person

who acts on behalf of another person and

causes sale or purchase of goods, or provision

or receipt of services, for a consideration, and

includes any person who, while acting on

behalf of another person —

(i) deals with goods or services or

documents of title to such goods or

services; or

(ii) collects payment of sale price of

such goods or services; or

(iii) guarantees for collection or payment

for such goods or services; or

(iv) undertakes any activities relating to

such sale or purchase of such goods or

services;

(b) “Excisable goods” has the meaning

assigned to it in clause (d) of section 2 of the

Central Excise Act, 1944(1 of 1944);

(c) “Manufacture” has the meaning assigned

to it in clause (f) of section 2 of the Central

(…)’

5.2.2 Similarly, Section 65(105) of the Finance Act defines

“taxable service”, which is as under,

(105) ‘taxable service’ means any service provided or

to be provided-

(zzb) Any service provided or to be provided to a client,

by any person in relation to business auxiliary

service;…’

What is ‘Sale’

5.3 In order to constitute a transaction to be “sale”, it

must satisfy certain essential characteristics. The Sale of

Goods Act, 193021 explains in Section 4 the “sale and the

agreement to sell”. As per sub-section (1) of Section 4 of the

Sale of Goods Act, “a contract of sale of goods is a contract

whereby the seller transfers or agrees to transfer the

property in goods to the buyer for a price”. Sub-section (3)

thereof mentions that “where under a contract of sale the

property in the goods is transferred from the seller to the

buyer, the contract is called a sale”. It adds to mention that

where the transfer of property in the goods occurs at a future

point of time, the contract will be in the nature of agreement

to sell.

5.3.1 The “contract of sale” as defined in Section 4 of the

Sale of Goods Act is similarly in its import to Section 2 of the

English Sale of Goods Act, 1979. The emphasis is that, in a

contract of sale of goods, the seller transfers or agrees to

21 Hereinafter, “Sale of Goods Act”

transfer “the general property in goods to the buyer for a

price”.

5.3.2 The essence of the transaction of sale is that it has

the effect of transferring property in goods from one person

to another that is from the buyer to seller. The necessary

ingredients of the transaction are explained in the following

words in Benjamin’s Sale of Goods (4th Edn. 1992),

“The seller must agree to transfer the property and

the buyer to take it, and they must agree to do so

in return for money which is paid and received as

the price of the goods. Where the consent of the

parties does not extend so far, or does not exist at

all, there is no sale. Such transactions or events are

sometimes termed as quasi-contracts of sale or

implied contracts of sale; but there is no true

analogy with a contract of sale properly so-called

and the Sale of Goods Act is not applicable to

them.”

5.3.3 The term “property” implies “ownership of goods”. In

other words, the ownership must be transferred to a buyer

from the seller in the transaction which becomes a sale

transaction. Whether the property or ownership in the goods

is transferred or not, is in its ultimate analysis, dependent

upon the intention of parties, which intent is to be gathered

from the terms and conditions of the Agreement and their

comprehensive effect.

5.3.4 When the transfer of property or ownership occurs,

it becomes a sale. It is obvious that such transaction of sale

makes the buyer the owner of the goods and he can exercise

in respect of the goods which has come in his possession by

way of sale, all the proprietary rights. It signifies buyer’s total

control over the disposition of the goods bought to his own

fullest discretion. The seller, in a transaction of sale, is

divested of such control once the sale transaction gets

complete.

5.3.5 The other attributary effect of a transaction of sale is

that risk of loss of goods travels and is on the buyer. One

more essential aspect attached to sale is that the transaction

involves payment of price by the buyer to the seller which

comes as corresponding obligation for transfer of ownership

of goods in favour of buyer. If the remuneration in

transaction cannot be termed as a price, it will remain

doubtful in law to treat the transaction to be sale. In the

circumstances where the element of price is not found, the

transaction may be anything other than sale.

5.3.6 This Court in Sri Tirumala Venkateswara Timber

and Bamboo vs. Commercial Tax Officer, Rajahmundry22,

referred to its own earlier judgment in State of Madras vs.

Gannon Dunkerley & Co. (Madras) Ltd.23 and explained

what is “sale”,

“…It is a nomen juris, its essential ingredients

being an agreement to sell movables for a price and

property passing therein pursuant to that

agreement. In other words, it is necessary for

constituting a sale that there should be an

agreement between the parties for the purpose of

transferring title in the goods, that the agreement

must be supported by money consideration and

that as a result of the transaction the title to the

property must actually pass in the goods.”

(Unnumbered Paras)

Concept of Agency

5.4 Since the test to be applied is to find out as to

whether the relationship between the parties is one of “seller

and buyer” or that of “Principal and Agent”, who does the

service for the Principal, it will be useful to consider the

concept of agency as understood in law. Section 182 of the

Contract Act, 187224 defines “agent” and “principal”. The

Section is as under,

22 (1968) 21 STC 312 23 (1958) 9 STC 353 24 Hereinafter, “Contract Act”

“182. “Agent” and “principal” defined.—An

“agent” is a person employed to do any act for

another, or to represent another in dealings with

third persons. The person for whom such act is

done, or who is so represented, is called the

“principal”.”

5.4.1 Section 183 of the Contract Act states who may

employ an agent, whereas Section 184 mentions who may

be an agent. No consideration is necessary to create an

agency, as per Section 185. In view of Section 186, an

agent's authority may be expressed or implied. Section 187

defines express authority and implied authority. An

authority is said to be express when it is given by words

spoken or written. The implied authority is one when it is to

be inferred from the circumstances of the case and the

things spoken or written. The extent of an agent's authority

is defined under Section 188 of the Contract Act. An agent

has authority to do every lawful thing which is necessary in

order to do such act. An agent is to be indemnified, provides

Section 222 of the Act, against the consequences of lawful

acts.

5.4.2 In Future Gaming Solutions (P) Ltd. (supra), this

Court referred with approval to “Bowstead and Reynolds on

Agency”, 23rd Edition to explain the idea of agency as

understood in law (para 62 of the decision),

“…agency is the fiduciary relationship which

exists between two persons, one of whom

expressly or impliedly manifests assent that the

other should act on his behalf so as to affect his

legal relations with third parties and the other

of whom similarly manifests assent so as to act

or so acts pursuant to the manifestation. Thus,

the one on whose behalf the act or acts have to

be done is called the principal and the other

who is to act is called the agent. Any person

other than the principal and the agent may be

referred to as the third party.”

5.4.3 It was further explained,

“The authority of the agent to act on behalf of

the principal constitutes a power to affect the

principal's legal relations with third parties.

Such authority could be called actual authority

or apparent authority. Thus, the essence of

agency is that a person acts on the principal's

behalf. Therefore, the term agency is used to

connote an authority or capacity in one person

to create legal relations between a person

occupying the position of principal and third

parties. Usually, the legal relations so created

will be contractual in nature.”

5.4.4 And the following was added,

“Conversely, the mere fact that a person does

something in order to benefit another and the

latter is relying on the former to do so or may

have requested or even contracted for

performance of the action, does not make the

former the agent of the latter. The centrality to

agency is the conferral of authority to alter legal

relations; as such in common law, being an

agent is not a status but a description of a

person, while and only so long as the person is

exercising such authority. Thus, where one

person (the principal), requests or authorises

the other (agent), to act on his behalf and the

other agrees to do so, the law recognises that

such agent has power to affect the principal's

legal position by acts which, though performed

by the agent, are to be treated in certain

respects as if they were acts of the principal. It

is common to regard control by the principal as

a defining characteristic of agency. Thus,

agency is termed as acting on behalf of the

principal and subject to principal's control.”

5.4.5 This Court in Bharti Cellular Limited v. CIT25,

explained the concept of agency. In that case, the assessees

were cellular mobile service providers. The issue involved

was regarding the liability to deduct tax at source under

Section 194H of the Income Tax Act, 1961 on the amount

payable. As per the Revenue, the amount which was

payable was the commission to an agent by the assessees

under the Franchise/distributor agreements existed

between the assessees and the franchise holders.

5.4.6 The law of agency was discussed in the context of

the expression “acting on behalf of another person”. After

referring to the group of provisions of Section 182 and

others of the Contract Act, the Court stated that the agency

is a triangular relationship between the principal, the agent,

and the third party. It was further observed that in order to

comprehend what is required to be examined is an inter-se

relationship between the principal and the third party on

one hand and the agent and the third party on the other.

5.4.7 It was highlighted that for creating a legal

relationship of “Principal and Agent”, certain decisive

considerations weigh,

“a. The essential characteristic of an agent is

the legal power vested with the agent to alter his

principal's legal relationship with a third party

and the principal's co-relative liability to have

his relations altered. [ F.E. Dowrick, “The

Relationship of Principal and Agent”, (1954) 17

Modern Law Review 24, 37.]

b. As the agent acts on behalf of the principal,

one of the prime elements of the relationship is

the exercise of a degree of control by the

principal over the conduct of the activities of the

agent. This degree of control is less than the

control exercised by the master on the servant,

and is different from the rights and obligations

in case of principal to principal and

independent contractor relationship.

c. The task entrusted by the principal to the

agent should result in a fiduciary relationship.

The fiduciary relationship is the manifestation

of consent by one person to another to act on

his or her behalf and subject to his or her

control, and the reciprocal consent by the other

to do so. [Restatement (Third) of

Agency (American Law Institute Publishers,

2007).]

d. As the business done by the agent is on the

principal's account, the agent is liable to render

accounts thereof to the principal. An agent is

entitled to remuneration from the principal for

the work he performs for the principal.”

‘Sale’ and ‘Agency’ Distinguished

5.5 Sri Tirumala Venkateswara Timber and Bamboo

(supra) highlighted the distinction between the contract of

sale and contract of agency. It was observed that the agent

is authorized to sell or buy on behalf of the principal and

account for either the sale proceeds or the goods. It was

observed that the essence of the contract of sale is the

transfer of title to the goods for the price paid or promised

to be paid.

5.5.1 It was succinctly stated,

“…As a matter of law there is a distinction between

a contract of sale and a contract of agency by which

the agent is authorised to sell or buy on behalf of

the principal and make over either the sale

proceeds or the goods to the principal. The essence

of a contract of sale is the transfer of title to the

goods for a price paid or promised to be paid. The

transferee in such a case is liable to the transferor

as a debtor for the price to be paid and not as agent

for the proceeds of the sale. The essence of agency

to sell is the delivery of the goods to a person who

is to sell them, not as his own property but as the

property of the principal who continues to be the

owner of the goods and will therefore be liable to

account for the sale proceeds. The true relationship

of the parties in each case has to be gathered from

the nature of the contract, its terms and conditions,

and the terminology used by the parties is not

decisive of the legal relationship.”

(Unnumbered Paras)

5.5.2 It was further stated thus,

“It is manifest that the question as to whether the

transactions in the present case are sales or

contracts of agency is a mixed question of fact and

law and must be investigated with reference to the

material which the appellant might be able to place

before the appropriate authority. The question is

not one which can properly be determined in an

application for a writ under Article 226 of the

Constitution.”

(Unnumbered Para)

Clauses In Agreements

(a) Representation by BPCL/HPCL

6.Having discussed the jurisprudential and judicially

propounded concepts of “sale” and “agency” and considered

the attributes of relationship between “Buyer and Seller” on

one hand and “Principal and Agent” on the other, noticing

in that light with some details the clauses in the Agreements

between MGL and respondent-Corporations, so as to

comprehend what type of relationship they manifest. The

various clauses are referred to from the Agreements by MGL

with BPCL, as the Agreement with HPCL contains identical

terms.

6.1 It was stated that MGL was a registered company

established for marketing, distribution, and supply of

natural gas in the city of Mumbai, and that part of its

business activity is to supply CNG to light motor vehicles

through its own outlets as well as the outlets of certain

public sector oil marketing companies, including those

belonging to the respondent-Corporations. It was stated in

the preface of the Agreement that the respondent-

Corporations had represented before MGL that they had the

requisite site to set up retail outlet for the supply and sale

of CNG at locations in the city and that MGL agreed to

permit them to open retail outlets for the sale of CNG to

motor vehicles.

(b) Definitions

6.1.1 In the definition section in paragraph 1.1, sub-

clause (b), “equipment” is defined to include gas

compressors, storage tank/cascade, meter and check

meter, dispenser, and other fixtures including pipeline and

all equipment and accessories required for filling of CNG in

vehicles. The “Outlet” in sub-clause (d) included the outlet

to be opened by the corporation. “Retail price” was defined

in sub-clause (f) to be charged by the corporation as

communicated by MGL from time to time. “Safety measures”

were contemplated in definition in sub-clause (g) to mean

the procedures, directions, guidelines and measures as

communicated by MGL to the corporation from time to time

for the purpose of safe storage and sale of CNG.

(c) About Supply of CNG

6.2 In Paragraph II, under the title “Supply and Sale of

CNG”, Clause 2.1 provided as under,

“MGL appoints the Corporation to open one or more

Outlets for sale of CNG to Vehicles, on· the terms

and conditions hereinafter contained and the

Corporation accepts such appointment.”

6.2.1 Clause 2.2 reads as under,

“The Corporation shall perform the functions and

provide the services in relation to sale of CNG as

hereinafter mentioned.”

6.2.2 In Clause 2.3, it was inter alia stated that the parties

may, from time to time, agree upon additional locations or

sites for the purpose of the sale of CNG from such additional

outlets. Clause 2.4 stated as under,

“The Retail Price of CNG shall be fixed by MGL and

the Corporation shall sell the CNG only at the Retail

Price, communicated by I MGL to the Corporation,

from, time to time. MGL may, at any time, revise

the Retail Price and such revised Retail Price shall

be binding on the Corporation from the date of

communication thereof to the Corporation. The

current Retail Price of CNG as on the date of this

·Agreement will be the price specified in Annexure

II, which Retail Price shall remain in force until

revised by MGL.”

6.2.3 As per Clause 2.5, it was stated that the corporation

shall furnish to MGL monthly forecast of its requirements

for CNG at the outlets in advance.

(d) Obligations of MGL

6.3 The obligations of MGL under the Agreement were

mentioned in Paragraph III, incorporated in Clauses 3.1 to

3.3, extracted hereinunder,

“3.1. MGL shall install on the Site, at its own cost,

the Equipment. The details of the Equipment to be

installed at the current· outlets are given in

Annexing I. MGL shall be responsible for

maintaining the Equipment in proper-· working

condition. All repairs to and replacement of any

defective Equipment shall be undertaken by MGL

at its own cost, save in the case of any damage to

the Equipment on account of negligence by the

Corporation or · any of its employees or agents in

which case the cost of repairs and replacement

shall be recoverable by MGL from the Corporation.

3.2. MGL shall supply CNG from the tap-off point

on its line to the intake line for Online station or

into the storage tanks/cascades for daughter

station on the Site to enable sale of CNG to Vehicles

by the Corporation. MGL shall endeavour that

adequate quantity of CNG is supplied to the

Corporation to enable the Corporation to meet the

demand therefore, provided that this obligation of

MGL is subject to the Corporation having provided

MGL with the monthly forecast, as hereinbefore

mentioned.

3.3. MGL shall obtain statutory approvals as

required from concerned authorities with respect to

the design and manufacturing aspect of the

Equipment to be supplied by them.”

6.3.1 On the other hand, Paragraph IV of the Agreement

sets out the obligations of the Corporation. Clauses 4.1 to

4.2 were as under,

“4.1. The Corporation shall ear mark that an

adequate area, as described in Annexure-I is

available at all times on the Site for installation of

the Equipment and for easy entry and exit of

Vehicles as and when the need arise.

4.2. The Corporation shall construct an appropriate

foundation, shed(s), trenches and boundary of a

chain fence or an RCC wall around the Site. The

corporation shall ensure that the Site is at all times

kept free from any encroachment.”

6.3.2 Clause 4.3 mentioned that the Corporation shall

make provision for continuous and adequate supply of

water, electricity and other utilities as may be required for

filling CNG at their own cost. As per Clause 4.4, the

Corporation would take care of the equipment and shall

ensure that the same are operated by properly trained staff,

whereas Clause 4.5 enjoined them to follow the safety

procedures as specified by MGL. The Corporation was

obliged to obtain all statutory approvals from the competent

authorities for opening the outlets, installation of

equipments, power supply, etc., the taxes such as property

tax and municipal tax would be payable by the Corporation.

6.3.3 Paragraph V is equally important. Clause 5.1 therein

stipulated that the equipment shall be the absolute property

of MGL and that BPCL should not claim any right of

ownership in the equipment, whereas the site will be the

property of the Corporation as per Clause 5.2.

(e) MGL’s Right to Inspect etc.

6.4 Paragraph VI of the Agreement was regarding the

confirmations by the Corporation, in which, as per Clause

6.1, it was provided that the Corporation shall not be

entitled to any compensation for the site and utilities

provided. That the Corporation shall, at all times, permit the

regional officers or other authorized representatives of MGL

to enter upon the site for the purpose of taking meter

readings to calculate CNG sales.

6.4.1 As per Clause 6.3, the Corporation shall permit the

officers and representatives of MGL to inspect the

equipment and verify the safety procedures, and the

Corporation shall not have any right to adjust, repair, or

clean any of the equipment. The equipment is provided to

be the property of MGL as per Clause 6.4, in which the

Corporation shall not claim any right.

6.4.2 Clause 6.5 contemplated that in case, any of the

outlets are to be operated by a third party, as dealer of the

Corporation, the responsibility and liability of the

Corporation shall continue for the acts of such third party.

Representations and warranties are mentioned in

paragraph VII. Clause 7.1 was with regard to

representations by the Corporation, whereas general

representations were mentioned in Clause 7.2.

(f) Mode of Billing, Payments

6.5 Clause 8.1 in Paragraph VIII titled as “Billing and

Payments” provided that the retail prices shall be paid by

the respondent-Corporations to the MGL after accounting

for sales tax and the amounts of commission/profit margin

for the actual quantity of CNG sold. The retail prices

applicable on the date of Agreement were specified in the

annexures to the Agreement. It was further stipulated that

the taxes, duties and cesses payable shall be collected by

the respondent-Corporations and to be paid by them under

the applicable laws.

6.5.1 Clause 8.2 mentioned that MGL shall, in the

beginning of the month, send to the respondent-

Corporations the invoices of the quantity of CNG sold during

the preceding month, which invoices shall be based on the

meter readings on CNG dispensers jointly taken by MGL

and respondent-Corporations. As per Clause 8.3, the

respondent-Corporations shall pay MGL the invoice values

for CNG as per the invoices.

6.5.2 Clause 8.4 noticeably reads as under,

“8.4. In consideration of the services provided by

the Corporation, MGL shall agree to pay to the

Corporation commission/profit margin as may be

agreed between the parties from time to time as per

the Government Directive, as may be applicable, in

the matter. Provided that such commission/profit

margin shall be payable on the actual Corporation.

quantity sold by the Commission/Profit margin

agreed at present is specified at Annexure III. It is

further agreed between the parties that MGL shall

raise the Invoice after adjusting such

commission/profit margin and reducing the Retail

Price by sales tax amount, as applicable from time

to time, 1n the manner specified in Annexure III.”

6.5.3 Clause 8.5 stated about the mechanism to be

adopted in the event of discrepancy in the invoice value or

the amount of commission payable to the respondent-

Corporations. As per Clause 8.6, in case of delay by

respondent-Corporations in payment of the invoice value,

delayed payment interest at the rate of 24% to be levied on

the unpaid amount.

(g) BPCL/HPCL not liable for deficiency

6.5.4 As per Clause 9.1 in Paragraph IX, it is contemplated

that MGL shall be liable for the quantity of CNG supplied

and that BPCL shall not be liable for any deficiency in

quantity of CNG or any claims made by any owner of any

vehicle in respect of such deficiency. The respondent-

Corporations are held liable for safety and security of the

equipment installed at the site as per Clause 9.2. Under

Clause 9.3, respondent-Corporations agreed to indemnify

MGL against any loss, damage, claim, action, proceeding,

costs etc., that may be suffered by MGL on account of any

damage or injury to the person or property of the third

party.

(h) MGL to be Indemnified

6.5.5 Similarly, under Clause 9.4, the respondent-

Corporations agreed to indemnify MGL against any loss,

damage, claim etc., suffered or incurred by MGL on account

of any acts done or caused to be done by them, its

employees, or agents. It is provided in Paragraph 9.5 that

the indemnity provision as above shall survive till the expiry

or termination of the Agreement. Paragraph X deals with the

aspect of ‘Force Majeure’, providing that neither of the

parties shall be liable in the eventualities of force majeure

for any delay or in respect of failure to discharge their

respective obligations, including the shutdown of gas

supply. Paragraph XI contains Clauses No.11.1 to 11.3,

dealing with the confidentiality about the information of

business transactions etc. Paragraph XII, in its Clauses

12.1 and 12.2, provides that the 5 years duration of the

Agreement unless terminated in the events mentioned

under the termination clause.

(i) Right of MGL to Terminate

6.6 Paragraph XIII of the Agreement contains Clause

Nos.13.1 to 13.2, which entitles MGL to terminate the

Agreement at any time by written notice. Sub-clauses (a) to

(j) enlist such circumstances which would entitle MGL to

terminate the Agreement. Similarly, Clause 13.1.3 mentions

the eventualities in clauses (a) to (g) under which the

respondent-Corporations may terminate the Agreement.

Paragraph 13.2 is about the effect of termination. The

termination would entail an obligation on the part of

respondent-Corporations to pay the retail prices to MGL

payable till the date of termination and as per Clause

13.2.2, the respondent-Corporations shall also pay MGL the

costs, charges, and expenses incurred by MGL on account

of the premature termination.

6.6.1 Clause 13.2.3 postulates that the termination of the

Agreement would result into three consequences (a) MGL

shall forthwith stop further supply of CNG (b) all unsold

CNG in the possession of the respondent-Corporations shall

be returned to MGL or shall be disposed of in accordance

with the directions of MGL (c) MGL shall become entitled to

remove the equipment from the site and to take back the

possession thereof, for which purposes the authorized

officers and the representatives of MGL shall enter the site

without any obstructions. Clause 13.2.4 says that once the

termination is effected, the respondent-Corporations shall

not sell CNG to any vehicles.

(j) Sale to be Exclusive

6.7 Clause 15.1 in Paragraph XV, dealing with

exclusivity, stated that the respondent-Corporations shall

not sell gas of any other supplier or manufacturer at the

outlet and that the outlet shall be exclusive for the purpose

of CNG supplied by MGL. Paragraph XVI onwards deals with

the aspects of prevalence of the Agreement, benefits of the

Agreements, assignments and notices, costs and expenses,

partial invalidity, future acts, etc. Paragraph XXIV was the

arbitration clause.

6.8 The Agreement dated 01.06.1999 was executed

between MGL and HPCL containing identical clauses of

terms and stipulations. While the terms and conditions of

the original Agreement dated 30.03.1998 remained the

same, in the renewal dated 10.06.2004, Clauses 8.1 to 8.6

came to be modified. In the same way, in the renewal and

amendment Agreement dated 21.11.2008, Clause 6.1 was

inserted in place of Clause 8.4, which deals with

commission/profit margin.

(k) Amended Clauses Compared

6.9 Instead of reproducing the amendment Agreement,

the following comparative part would make it clear as to the

modification and the replacement in the conditions done by

virtue of the renewal/amendment Agreements as above in

comparison with the original Agreement dated 30.03.1998,

Comparison of Agreements executed between M/s

Mahanagar Gas (“MGL”) and BPCL

Agreement Renewal Renewal and dated Agreement Amendment 30.03.1998 dated Agreement

10.06.2004 dated

21.11.2008 CLAUSE 8.4 Clause 8.1-8.6 have After inquiries

been modified by Clause began (see Pg. 251,"In consideration of

II (Billing and Payment) showing thatthe services

as under, inquiry began asprovided by the

far back asCorporation, MGL

"II. Billing and

23.08.2007),shall agree to pay to

Payments

Clause 6.1the Corporation

(Commission /commission/profit

2.1 Clauses 8.1 to 8.6

Profit margin)margin as may be

with regard to billing

agreed between the and payment replaces Clause 8.4

parties from time to contained in the said of the Agreement

time as per the Agreement shall stand dated 30.03.1998 as

Government modified to the under,

Directive, as may be following extent.

applicable, in the "It is hereby agreed

matter. Provided 2.2 MGL shall raise between the Parties

that such Invoice for the that for CNG sold

commission/profit quantity of CNG sold [effective from

margin shall be by the Corporation on January 01st 2006,

payable on the or before 5th day of 0600 hours, the

actual quantity sold each month. Such Commission / Profit

by the Corporation. Invoice shall be based Margin payable by

Commission/Profit on the meter readings MGL to the

margin agreed at on the CNG Corporation as per

present is specified dispensers jointly Annexure III shall

at Annexure III. It is taken by MGL and the stand revised to Rs.

further agreed Corporation. Provided 1.40/Kg (Rupees

between the parties further that One and Paisa forty

that MGL shall raise Corporation shall Only). It is agreed

the Invoice after ensure that its that the

adjusting such authorized Commission/ Profit

commission/profit representative is Margin is towards

margin and deputed at the sale of CNG by MGL

reducing the Retail (illegible) certify the to the Corporation

Price by sales tax meter reading at the on principal to

amount, as time and the date as principal basis to

applicable from time may be notified by enable the

to time, in the MGL from time to Corporation to

time. In case, where, maintain the

manner specified in authorized uniform MRP at all

Annexure III." representative is not the outlets in the

deputed as aforesaid given municipal

the meter reading area."

taken by MGL shall be

final and binding on

the parties.

2.3 The Corporation

shall pay to MGL the

Invoice value for CNG

sold as stated in the

Invoice ("Invoice

Value") along with

requisite Form

(presently Form N -

13A) as required by

the Bombay Sales Tax

Act/ other applicable

laws/rules within 7

(Seven) - days from

the date of receipt of

the Invoice;

2.4 In case of delay by

the Corporation in the

payment of any

Invoice Value, for the

period commencing

form April 1, 2003 the

Corporation shall pay

Delayed Payment

Charges "DPC") @16%

(Sixteen percent) P.A.

on the amount unpaid

from the due / date of

payment until the

payment / realization.

Such delayed

payment Charges

shall be compounded

monthly. "

6.9.1 Even after and pursuant to amendment and

additions in the Agreements, the original terms and

conditions remained the same for their operation and effect.

Decisive Aspects

7.It is trite that any written document, for its nature

and effect, has to be construed through the terms and

conditions incorporated therein. The stipulations have to be

read in totality and collectively for comprehending the true

purport and intent thereof. It is not the form but the

substance of the conditions becoming operative in their

totality, has to be considered. From various clauses in the

Agreement entered into between MGL and the respondent

Corporations for supply and sale of CNG, certain decisive

features emerge, which go to establish that the supply of

CNG by MGL to the respondent-Corporations was not in the

nature of sale and in the transaction, there was no legal

attribute for creating the supply.

(a) Providence of Services

7.1 The Agreements were meant to provide services by

the respondent-Corporations to MGL for selling CNG on

behalf of MGL to the ultimate consumers. The respondent-

Corporations were obliged to extend and provide services as

expressly enumerated in Clause 4 of the Agreements as well

as those emanating from other clauses. At the cost of

repetition, the services to be provided by the respondent

Corporations included making available the outlets and

online stations, constructing sheds and laying the

foundation at the site, providing electricity, water and other

such requirements, and also to provide trained staff for the

purpose of operation of the equipments at the outlets. It was

incumbent upon the respondent-Corporations to obtain the

statutory approval.

(b) As a Facilitator

7.1.1 The whole status of the respondent-Corporations

becomes that of a facilitator, who by providing different kind

of agreed upon services, arrange and smoothen the sale by

MGL to the vehicle owners. The respondent-Corporations

acted in the process, in capacity of an agency without any

real and effectual dominion over the goods. Their task was

to promote the sale on behalf of MGL and make the

marketing of goods convenient. A facilitator cannot be a

buyer. It only acts on behalf of supplier-principal to become

an agent.

(c) Element of Control

7.1.2 It could be gathered from the various conditions in

the Agreements that the control over the supply of CNG till

the subsequent sale by the respondent Corporations to the

vehicle owners, remained with MGL. The respondent-

Corporations facilitated to provide the site and the retail

outlets for the sale of CNG supplied by MGL to the

customers on behalf of MGL. All the equipments installed

such as gas compressors, storage tanks, check meters,

dispensers, and all such others including pipeline and

accessories for filling CNG in vehicles belong to MGL. They

were supplied by MGL. The safety measures mentioned in

sub-clause (g) in Clause 1.1 were to be ensured.

(d) Fixation of Price

7.1.3 The fixation of price and monitoring thereof was in

the hands of MGL. The respondent Corporations were

enjoined under the Agreements to sell CNG at the price fixed

by MGL. Clause 2.4 mentioned that the retail price of CNG

shall be fixed by MGL and that the respondent Corporations

shall sell the goods only at such price communicated by

MGL from time to time. The power to revise the retail price

was also with MGL to remain binding on the respondent

Corporations. The prices were mentioned in the Agreement

itself.

(e) MGL Is Regulator

7.1.4 The respondent Corporations were under obligation

to furnish to MGL the monthly forecast of their

requirements of the quantity of CNG at the outlets. This

monthly assessment was to be given to MGL in advance. As

per Clauses 3.1 to 3.3 of the Agreement, it was MGL which

shall install at the site, at its own cost, the equipments. In

the event of any damage to the equipment on account of

negligence by the respondent-Corporations or by their

employees or agents, MGL could recover the costs of repairs.

Again, the repairs were to be undertaken by MGL itself.

Right to inspection is with MGL, whose officers can enter

the outlets as of right.

(f) Monitoring of Supply of Goods

7.1.5 The supply of CNG by MGL from the tap-off point on

its line to the intake line was to be facilitated by MGL to

enable selling of CNG to the vehicle owners by the

respondent-Corporations, which would act in the process on

behalf of MGL. Furthermore, MGL was to ensure the supply

of adequate quantity of CNG to the respondent-Corporations

which, in turn, were under corresponding obligation of

supplying the monthly forecast.

(g) The Risk Factor

7.1.6 The risk relating to supply and sale and other things

relevant thereto were to be the responsibility of MGL.

Handling of risk factors was an obligation of MGL. The risk

did not pass at any point of time from MGL to respondent-

Corporations from the starting point of supply of CNG till

CNG is dealt with and sold to the vehicle owners by the

respondent-Corporations. When the risk was not

transferred, it would suggest that the title would also not be

transferred.

(h) Retention of Control Over Goods

7.1.7 One of the important indicators of the fact that there

is no passing of title in goods in favour of the respondent

Corporations is the retention of right over the stocks. While

the responsibility to supply the goods-CNG in adequate

quantity rests on MGL, CNG never becomes the property of

the respondents in view of the terms of the Agreement. A

clear indication thereof is available from the clauses relating

to termination of the Agreement. One of the resultant

postulates, upon termination of the Agreement, the effect of

which is mentioned in Clause 13.2, is that all unused stock

of CNG in possession of the respondent Corporations shall

be returned to MGL or the same shall be disposed of as per

the directions given by MGL. MGL is entitled to remove or

take back the stock from the possession of the respondent-

Corporations. Not only that, for any such purpose, the

authorised officers of MGL are entitled to enter the site

without obstruction from the respondent Corporations.

(i) Commission Agent

7.1.8 The Agreements in terms stipulated about the

payment of commission by incorporating express clause in

form of Clause 8.4. The brooding ingredient of payment of

commission is elaborated separately in the succeeding

paragraph.

(j) Title did not Pass

7.1.9 All the terms and conditions of the Agreement taken

together in their operation invariably suggest that the title

or ownership in the goods did not pass at any point of time

to the respondent Corporations. MGL continued to hold the

title over the goods for all procedural and practical

purposes. This is elaborated in succeeding paragraph 10.

Under Domain of MGL

7.2 In M/s Snow White Industrial Corporation,

Madras versus Collector of Central Excise, Madras26, the

appellant was engaged in manufacturing supercem

waterproof cement paint in its factory at Madras which had

entered into an agreement which was described as

“agreement of sale” with Company named Gillanders

Arbuthnot and Co. Ltd. which was described as “selling

agent”. While considering as to whether the agreement was

an agreement for agency for the purpose of payability of the

duty on the basis of the price at which the goods were sold

by the Company, this Court looked at the terms and

conditions in the agreement standing in the background.

7.2.1 The Court stated,

“It is true that though the appellants described 'G'

as selling agent, but that is not conclusive. It is also

true that the difference of the prices between the

transfer and the selling prices is suggestive of an

outright sale. But in the instant case the most

important fact suggesting agency was the clause

which enjoined that the stocks left over unsold

beyond two years from their receipt could be

returned to the appellants who were bound to

replace these. This should be considered with the

fact that the appellants were to prefer all claims for

recovery of damages from the carriers and any

reduction in price during the currency of the

agreement was to be duly reflected in the price of

stock lying unsold with 'G' and the obligation that

on the termination of the contract by either the

appellant or 'G', unsold stocks lying with the latter

were to be returned to the former. Therefore, the

Tribunal was right in considering this agreement as

the agreement for sole selling agency and not as an

outright sale.”

(Paras 7 and 10)

7.2.2 Thus, M/s Snow White Industrial Corporation,

Madras (supra) highlighted the important facet which would

suggest the creation of agency which was the clause which

enjoined that the stocks left over or remaining unsold would

be returned to the appellant. In the present case also, the

domain over the stock of CNG continues to remain with

MGL.

Evident Intention

7.3 The Agreements between the parties record, as

previously stated, that the respondent Corporation

concerned approached MGL telling it that they had the

facility of outlets/online stations available at different sites

in the city of Mumbai and elsewhere through which the

respondent-Corporations could facilitate the sale of CNG to

the consumers which may be supplied by MGL to them.

This offer was agreed upon by MGL resulting into execution

of the Agreements containing the terms as above. All the

terms in the Agreements came to be accepted by the

respondent-Corporations.

7.3.1 The intention of parties was thus evidently reflected

that MGL was to supply CNG which would be sold by the

respondent-Corporations to the vehicle users by providing

various services in the process, to complete the sale

occurring from MGL to the vehicle owners.

Clauses Constituting Agency

8.In Hafiz Din Mohd. Haji Abdulla vs. State of Maharashtra27, the agreement in question contained conditions of the similar nature as envisaged in the present case. This Court addressed the question as to whether the agreement between the appellant-Hafiz Din-the assesseesthe bidi merchants, who was used to dispatch the bidis to other merchants at the diverse places in India upon licence issued by the Government of the Central Provinces for the manufacture and sale of bidis in and outside the State of Madhya Pradesh, created a relation of principal and agent or vendor and purchaser between the assessees and the merchants to whom the bidis were dispatched. It was observed that relationship between the parties has manifestly to be ascertained in the light of the terms incorporated in the letter and the attendant circumstances. 27 1962 SCC OnLine SC 208. 8.1 It was explained thus, “…The designation which a party chooses to give to the relation, especially in cases of liability to pay tax, is of little consequence. The Court has in each case, having regard to the terms and the attendant circumstances, to ascertain the true relation between the parties without giving undue importance to the special expressions used by them. It is true that in commercial usage, especially in modern contracts, the expression "agents" or "agency" has acquired an extended meaning: often the so-called agent is merely a buyer who has been given favourable terms in a particular area to sell the manufacturer's or supplier's goods…” (Para 9) 8.1.1 The Court thereafter considered various covenants in the agreement which contemplated the transfer and supply of bidis by the appellant-assessees to the merchants, to come to conclusion on the basis thereof that the relationship between the parties was that of “principal and agent” and not of “vendor and purchaser”. 8.1.2 The clauses in the contract were highlighted to elaborate, “By clause (3) of the agreement, the merchant receiving the bidis has agreed to sell them at the rates fixed by the assessees: he is only entitled to add to the rate fixed by the assessees the expenses incurred. By clause (6) the merchant is entitled to Rs. 3-3-0 as commission per box. That remuneration is expressly stated to be in lieu of "labour". By clause (7) the assessees are given the right to increase or reduce the rate of bidis; even in respect of goods which are in stock with the merchant the rate may be increased or decreased and on such alteration of the rate there is an obligation to make necessary adjustment in the accounts (see clause 8). By clause (9) if the merchant is found acting in contravention of the conditions, the assessees have the right to cancel the agency and have the right to make arrangements for the sale of bidis (remaining on hand) as they think best. Clause (9) therefore contemplates that if after the bidis have been despatched and before they are sold, "the agency" of the merchant is cancelled the assessees would have the right to arrange for sale of the bidis remaining in stock. These clauses clearly indicate that the bidis even in the hands of the merchants to whom they were despatched remained the property of the assessees. By clauses (3) and (9) these bidis in the hands of the merchants are expressly referred to as "your bidis"…” (Para 9) 8.1.3 It was further enumerated, “Clause (4) emphasizes that the property in the bidis despatched to the merchants remained with the assessees. By that clause the merchant undertakes to remit "money towards goods" after sales are effected. Therefore under the agreement between the parties the goods are to be sold at a price fixed by the supplier, the prices are liable to be altered at the instance of the supplier, the person to whom the goods are supplied is to receive a fixed remuneration for his exertion, and is liable to remit the price only after the sale is effected. These are clear indications that the relation is of principals and agent and not of vendors and purchaser. The terms of clause (1) imposing an obligation upon the assessees to meet the demands of bidis of the merchants in the areas assigned to them further emphasizes that character of the relation between the parties…” (Para 9) 8.1.4 The Court proceeded and stated, “It is true that by clause (5), for damages or risk to the goods during transit or in the shop of the merchant, the latter is responsible, but that does not alter the true nature of the right in which he holds the goods. It is open to an agent to undertake a liability in respect of goods after they are delivered to him even though the property in goods does not pass to him. Clause (2) providing for giving delivery at the town where the merchant resides has no special significance. The diverse clauses of the agreement, in our judgment, create a relationship of principals and agent and not of vendors and purchaser between the assessees and the merchants to whom the bidis were despatched.” (Para 9) 8.2 As the total effect of the Agreement and the terms thereof is required to be considered to understand the real nature and purport as well as intention of the parties, even if at some place in an isolated context, the word “sale” is mentioned or arrangement for serve limited aspect is described as “Principal-to-Principal”, it would not alter the real jural relationship revealing in substance from the Agreement read in totality. Commission, Not Trade Discount

9.Clause 8.4 of the Agreement expressly contemplated that the respondent Corporations would receive commission/profit margin from MGL. This stipulation about the payment of commission or profit margin, standing in forefront, suggests that the jural relationship between MGL and the respondent Corporations is one of “Principal and Agent”, and that the supply of CNG by MGL to the respondent-Corporations was not in the nature of “sale”. 9.1 There may be a spacious argument that the nomenclature as “commission” would not be determinative, however, in the instant case, read in conjunction with other stipulations in the Agreements and the nature of the Agreements considered in wholesome manner which are for providing services and for marketing and promotion of sale, the stipulation of commission in Clause 4 in the nature of remuneration paid to the agent rendering services by the Principal. It, in no other way, could be construed. The word “commission” here has the intake of its true sense. 9.1.1 The respondent Corporations harped that what was contemplated in Clause 4 was not a commission but a trade discount. In Union of India vs. Bombay Tyre International Ltd.28, the concept of trade discounts was explained by this Court as under, “(i) Trade discounts.—Discounts allowed in the trade (by whatever name such discount is described) should be allowed to be deducted from the sale price having regard to the nature of the goods, if established under agreements or under terms of sale or by established practice, the allowance and the nature of the discount being known at or prior to the removal of the goods. Such trade discounts shall not be disallowed only because they are not payable at the time of each invoice or deducted from the invoice price.” (Para 3) 9.1.2 What is necessary for becoming the payment to be the trade discount is that such discount must be part of the terms of the trade or a condition in the transaction of sale of goods. Trade discount is something, the payment in the nature of which, is by established practice in trade. It is the allowance and the nature of discount known at or prior to the removal of the goods. The concept of trade discount is relevant where the sale is on “Principal-to-Principal” basis, which is indeed not the case here. Attribute of Agency 9.2 The commission contemplated in Clause 8.4 was a payment for the agency services. MGL was to pay, under the Agreement, to the respondent Corporations the commission or profit margin as agreed upon between the parties from time to time as per the directives of the Government, made applicable. The amount of commission is made dependent upon the actual quantity sold to the consumers on behalf of MGL by the respondent Corporations. The extent of the commission is specified in the annexures to the Agreements. The invoices are to be raised by MGL after adjusting the commission amount and further by reducing the retail price towards the sales tax amount. 9.2.1 Clause 8.5, when considered, inter alia provides that in case of any discrepancy in the invoice value or the amount of commission payable to the respondent-Corporations concerned, it will be possible for the respondent Corporation concerned to lodge a claim with the regional office within stipulated time. MGL may accept such claim to the extent it deems fit and shall issue a credit note in favour of the respondent Corporation. Such amount of credit note will be adjusted in the invoice value for the following month. 9.2.2 What is stipulated in Clause 8.5 either about closing of the claim for discrepancy and the discretion on the part of MGL to accept the claim to the extent deemed fit by MGL. This aspect as well as the stipulation about the adjustment of such amount in the invoice of the following month, and the condition in Clause 8.6 cements the factum that the commission mentioned in Clause 8.4 is a commission payable by the principal-MGL to the agents-the respondent Corporations for rendering services. 9.2.3 The payment of commission as an attribute of the principal-agent relationship or for the creation of an agency was recognized by this Court in Future Gaming Solutions (P.) Ltd. (supra) in the following observations, “…The distinction between an agent and the buyer for resale normally turns on whether the person concerned acts personally to make such profit as can be made, or is remunerated by pre-arranged commission. A supplier who fixes the resale price is likely to be a buyer for resale. If a party takes a profit on the resale, it will make him a seller. On the other hand, if a commission is paid on the resale, then, he is likely to be an agent.” (Para 64) “Ownership” retained with MGL

10.As discussed hereinbefore, the clinching consideration as to whether the relationship which exists is that of “Buyer and Seller” or the relationship of “Principal and Agent” is created, would be the element of passing of property in goods from one party to another. It would become decisive as to whether the property in goods or title over goods is retained or travels to another party. If the property passes, it will become contract of sale. If the title in the goods does not pass, it would be conclusive factor to suggest that the arrangement is one of agency, even though the goods may have been delivered. Dominion over property and continuance thereof is a litmus test. In a sale transaction, the buyer becomes owner of the property and the seller ceases to have any vestige of title left in the property. 10.1 On the other hand, the agent, after taking delivery of the property of the goods, does not sell it as its own property but sells the same as the property of principal as per the instructions and directions of the principal. The agent does not become owner of the goods. If any loss is suffered by the agent, he will be liable to be indemnified by the principal. All the terms and conditions in the Agreements between MGL and the respondent Corporations confirm that the arrangement flowing from the Agreement is one of “Principal and Agent”. They conform to the concept of agency as legally understood. The respondent Corporations sell CNG to the vehicle users acting on behalf of MGL. In Bhopal Sugar Industries Ltd. vs. Sales Tax Officer29, it was observed that the agent upon taking delivery of the goods does not become owner thereof, nor does he sell the goods as its own property. 10.2 The Agreements dated 30.03.1998 and 01.06.1999 between the parties in the present case do suggest that the supply of CNG by the appellant did not involve passing of property to the other side, namely BPCL/HPCL, who act only in capacity of agents to deal with the goods to be supplied to the consumers as middlemen acting on behalf of the appellant and by obeying the terms and conditions prescribed by the appellant. It would be seen that no clause or condition of the contract is indicative of an element of passing of property in favour of the respondent Corporations. 10.3 The respondent Corporations are the commission agents rendering the services to the appellant in distributing CNG acting on the basis of terms and conditions of the Agreement, of course, they are free to perform the task which they are entrusted with by the appellant-principal as per the terms of the Agreements. They do the business as facilitator and promote to sell CNG for the appellant. The respondent Corporations may be enjoying certain “powers” but they do not have the authority to override the principal–appellant and to hold the goods with any titular authority. Recipient Agent

11.In the facts of the case, there is no gainsaying that no buying and selling takes place between the parties under the Agreement. As could be noticed from the arrangement flowing from the Agreements, the respondent Corporations do not take the goods with the authority to be able to resell to earn the profit out of the sale, as if LPG belongs to them. The respondent Corporations are not the buyers. MGL is not the seller. MGL sells LPG through the agency of respondent Corporations to the vehicle users, at a price charged which is fixed by MGL. The relationship born out is that of “Principal and Agent”. The respondent Corporations do not buy CNG and do not resell the same. The respondent Corporations are the “recipients” of the goods-CNG supplied by MGL. 11.1 In Benjamin’s Sale of Goods,11th Edition, Sweet & Maxwell, the author mentions distinguishing the sale from a contract of agency inter alia that when goods are delivered to another for sale to a third party, the recipient may be an outright buyer or he may take the goods on sale or return or may merely be the supplier’s agent to sell the goods or an agent of a del credere commission, that is, an agent who guarantees to the principal that the buyer will duly pay the price. 11.2 In light of the delineation, the respondent Corporations which act as marketing promoters can claim the status of agents only. As buying and selling does not take place and the terms and conditions of the Agreement go to show that agency services are provided by the respondent Corporations to MGL, any other relationship between the parties except that of “Principal and Agent”, stands ruled out. 11.3 In K. Arumugam vs. Union of India30, explained with reverse logic what is “Business Auxiliary Service”. In that case, the appellants were carrying out buying and selling of lottery tickets which they used to purchase from the State Government, and in turn, sell them in various other states. The Central Government sought to levy the tax on the premise that the activities of the appellant were “Business Auxiliary Service” chargeable to service tax. The Supreme Court held that the lottery tickets would not fall within the meaning of the expression “goods”. Therefore, the lottery selling transaction would not attract the concept of “Business Auxiliary Service”. However, in the decision the Court indicated certain essential aspects which when present would make the activity a “Business Auxiliary Service”. 30 (2024) 10 SCC 733. Within Purview of Definition

12.It was stated that the activity for promotion of sales or marketing services rendered by the assessees would fall within Clause 65(19) of the Finance Act where the party acts as a promoter of the business and is a marketing agent, the relationship between the parties would be principal and agent. Since in K. Arumugam (supra), there was no promotion or marketing of service on behalf of the State, therefore, it would fall outside the purview of service within the meaning of the Finance Act. The present case is a precise case where the respondent Corporations act as marketing agents and promoters of sale for MGL. 12.1 The agent Corporations provide promotional services for marketing and sale of goods belonging to the MGL. Their activity stands squarely covered under Section 65(19) as “Business Auxiliary Service”. MGL is the customer of services provided by the respondent Corporations and facilitated by such services, MGL sells the goods-CNG as marketed and promoted by the respondent Corporations to the vehicle owners as per the arrangement in the Agreements. 12.2 The commission is paid to the respondent Corporations for rendering such services. The respondent Corporations are covered within the ambit of “commission agent” as per Explanation (a) of the definition. The services rendered by the respondent Corporations are “taxable services” as defined and understood in Section 65(105) of the Finance Act. Conclusion and Order

13.The respondent Corporations cannot escape the payment of service tax. The view taken by the adjudicating authority in determining the amounts payable towards service tax by the respondent Corporations, and the reasons recorded therefor, were eminently proper. The order of CESTAT reversing the same cannot stand valid. 13.1 Resultantly, the impugned common order of the Customs, Excise & Service Tax Appellate Tribunal, West Zonal Bench, Mumbai dated 04.06.2014 allowing the Appeal Nos. ST/778 and 779/12 & ST/85346/13-Mum is hereby set aside. The Orders-in-Original Nos. 03-04 and 05-06/ST/SB/2012-13 dated 16.08.2012 passed by the Commissioner of Customs (TAR), Mumbai, would stands to operate. 13.2 The appellant is entitled to enforce the demand towards the service tax against the respondent Corporations and for the demand of service tax as adjudicated.

14.All the appeals are allowed. Any interlocutory application(s), as may be pending, shall not survive in view of disposal of the Appeals as above. [ARAVIND KUMAR] [N.V. ANJARIA] NEW DELHI; JULY 20, 2026.