2013 (8) TMI 881 - AT - Service Tax

Banking and other financial services - appellants are engaged in the manufacture of industrial gases - Held that - As per the agreement, the vacuum insulated storage tank was supplied to their customers for a fixed term, i.e. for three years, and the appellants are charging ₹ 27,500/- per month. As per the agreement, the property, i.e. tank, always remains the property of the appellants and the same was only loaned for use to their customers. The customers are not entitled to sell or offer for sale, mortgage and pledge the tanks. - Board by the circular relied upon by the appellants, clarified in respect of the activity covered under banking and financial services. As the appellants are not a banking company or a financial institution including a non-banking financial company or any other body corporate or commercial concern in relation to banking and other financial services, therefore, we find merit in the contention of the appellants in this regard. Further, we find that the Tribunal in the case of G.E. India, Industries Ltd. (2008 (7) TMI 29 - CESTAT, AHMEDABAD) in a similar situation where extrusion material was given on lease to Jain Irrigation, the Tribunal after looking into the terms and conditions of the agreement which are similar to the present agreement, set aside the demand. - impugned order is set aside - Decided in favour of assessee.

Summary

Issues:
- Whether the appellants are liable to pay Service Tax for providing banking and other financial services through leasing vacuum insulated storage tanks.

Analysis:
1. Background: The appellants, engaged in manufacturing industrial gases, also lease vacuum insulated storage tanks to customers. The Revenue issued show cause notices demanding Service Tax, claiming the appellants provide banking and financial services.

2. Contention: The appellants argued they are not a banking or financial institution, citing a Board Circular and a Tribunal decision supporting their position.

3. Revenue's Argument: The Revenue contended that the lease of storage tanks constitutes equipment leasing, making the appellants liable for Service Tax as providers of banking and financial services.

4. Agreement Analysis: The terms of the lease agreement state that the tanks remain the property of the appellants and are only loaned for use to customers, who cannot sell, mortgage, or pledge the tanks.

5. Legal Provisions: Section 65 of the Finance Act defines banking and financial services provided by banking companies, financial institutions, or other corporate bodies. The Board's circular clarifies the scope of financial leasing and hire-purchase services.

6. Judgment: The Tribunal found merit in the appellants' argument, as they are not a banking company or financial institution. Referring to a similar case, the Tribunal highlighted that ownership and control of assets remained with the appellants, not the lessees, indicating no transfer of ownership.

7. Precedent: The Tribunal cited a case where the lease agreement did not transfer ownership of assets to lessees, aligning with the appellants' situation. The Board's circular further clarified the distinction between principal amount and finance charges in financial leasing.

8. Decision: The impugned order demanding Service Tax was set aside, and the appeals of the appellants were allowed based on the analysis of the lease agreement terms, legal provisions, and relevant precedents.

This detailed analysis of the judgment highlights the key arguments, legal provisions, agreement terms, and precedents considered in determining the liability of the appellants for Service Tax related to leasing storage tanks.