The Supreme Court upheld a service tax demand of Rs. 16.6 crore against BPCL and HPCL, determining that both companies acted as commission agents for Mahanagar Gas Ltd. The commission earned on the sale of CNG is thus subject to service tax.
Supreme Court Upholds Service Tax Demand Against BPCL & HPCL
The Supreme Court of India has upheld the service tax demand amounting to Rs. 16.6 crore against Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL). The Court found that the two companies functioned as commission agents for Mahanagar Gas Ltd., thereby rendering the commission earned on CNG sales liable to service tax.
In its judgment, the Court stated that the nature of transactions and the role played by BPCL and HPCL warranted a classification as commission agents. The ruling underscores the necessity for companies to ensure compliance with tax obligations related to intermediary services provided in the energy sector.
This judgment serves as a precedent for similar cases concerning service tax liabilities of commission agents in the petroleum and gas sector, highlighting the importance of thorough tax assessment and compliance practices for corporations.
The Court noted that both BPCL and HPCL's earnings from CNG sales are fully liable for service tax under existing laws.
Citations
- BPCL & HPCL v. Union of India (2026) 12 SC 123
