2007 (8) TMI 822 - AT - Service Tax

Summary

Issues involved:
The issues involved in this case are the liability of service tax on the storage charges collected by the appellants, the nature of services provided by the appellants, and the applicability of penalties imposed by the adjudicating authority.

Summary:

Liability of Service Tax on Storage Charges:
The appeal was filed against the Order-in-Original passed by the Commissioner of Service Tax, Bangalore, proposing demand of service tax on the storage charges collected by the appellants. The Revenue contended that the demurrage charges collected by the appellants should be considered as "storage and warehousing services" and hence taxable under the Finance Act, 1994. The appellants argued that they do not render storage services to anyone as they are primarily engaged in purchasing and selling liquor. They hire storage bases to store the liquor purchased, and any demurrage charges collected are not for providing storage services. The Tribunal held that the appellants, as recipients of storage services, are not liable to pay service tax under that category.

Nature of Services Provided:
The Tribunal observed that the appellants incur expenditure for insuring the goods, security arrangements, electricity charges, and rent for godowns, indicating that they receive these services for their own goods and not for providing services to manufacturers. The demurrage charges collected were found to be related to the detention of rolling stock and not for storage services, as per legal definitions and court precedents cited by the appellants' advocates.

Penalties Imposed:
The adjudicating authority imposed various penalties on the appellants for non-compliance with service tax provisions. However, the Tribunal found no merit in the penalties imposed, especially considering the nature of the appellant as a State Government Corporation. The appeal was allowed with consequential relief granted.

In conclusion, the Tribunal ruled in favor of the appellants, stating that they are not liable to pay service tax on the storage charges collected, as they are recipients of storage services and not service providers. The penalties imposed were deemed unjustified, and the appeal was allowed with relief granted to the appellants.