2014 (8) TMI 144 - AT - Service Tax

Import of services - receipt of storage and warehousing service from the foreign service provider - possession and effective control of the tank - reverse charge - ection 66A of the Finance Act read with Rule 2(1)(d)(iv) of the Service Tax Rules, 1994 - Held that - admitted facts are that the appellants are importing helium in the tanks. As the helium is to be stored at extremely low temperature i.e. 269 0 C hence the same is imported and transported in vacuum insulated tanks. Admittedly, the appellants are paying rent in respect of the insulated tanks in which helium is imported. The appellants are paying rentals calculated from the date of bill of lading ex-Dubai till the date of bill of lading ex-Mumbai towards the shipment of empty container from Mumbai towards the shipment of empty container from Mumbai to New York. - the exporter has no control over the tanks. Circular dated 1.8.2002 clarified regarding the scope of warehousing service. - It has been clarified that mere renting of space cannot be said to be in the nature of service provided for storage and warehousing of goods. Essential test is whether the storage keeper provides for security of goods, stacking, loading/unloading of the goods in the storage area. - the exporter of helium cannot be held to be a storage and warehouse keeper as he has no control over the tanks. - demand set aside - decided in favor of assessee.

Summary

Issues:
Common issue of service tax liability on storage and warehousing service received from a foreign service provider.

Analysis:
The lower authority confirmed the demands of service tax, interest, and penalties on the basis that the appellants received storage and warehousing service from a foreign service provider, making them liable to pay service tax under Section 66A of the Finance Act and Rule 2(1)(d)(iv) of the Service Tax Rules, 1994 on reverse charge mechanism. The appellants, engaged in the manufacture and sale of gases, imported liquid helium stored in vacuum insulated tanks at extremely low temperatures. They argued that the activity does not qualify as 'storage and warehousing service' under the Finance Act, citing relevant provisions and a Board Circular. They emphasized that the foreign supplier did not provide warehousing activities, and the tanks were under their effective control post-customs clearance. Additionally, they referenced a Tribunal decision supporting their position.

The Revenue contended that the appellants, by importing helium in tanks and storing it on their premises, were receiving service from the foreign provider. They argued that as the appellants paid separately for tank usage and helium, they were liable for service tax under reverse charge mechanism. The Tribunal analyzed the provisions of the Finance Act related to 'storage and warehousing,' noting that the definition includes services for goods but excludes agricultural produce or cold storage. Referring to a Board Circular, the Tribunal highlighted that essential services like security, loading/unloading, and inventory management are crucial for a service to qualify as storage and warehousing.

The Tribunal observed that the appellants imported helium in tanks, paid rent for the tanks, and undertook activities like unloading, transportation, and stock maintenance, indicating control over the tanks. Considering the Board Circular's criteria for storage and warehousing services, the Tribunal concluded that the foreign supplier could not be deemed a storage and warehouse keeper due to the lack of control over the tanks. Consequently, the Tribunal found merit in the appellants' argument that they did not receive a service falling under 'storage and warehousing service.' The impugned orders were set aside, and the appeals were allowed.