2018 (3) TMI 634 - AT - Service Tax

Supply of Tangible Goods service - place of provision of services - the appellant purchased wagons, and lease them to railways for a period of 20 years - Held that - it appears that the amendment came into existence w.e.f. 16.05.2008 in the Finance Act, 1994. But the agreement was executed in the year 1997. The identical issue has come up before the Tribunal in the case of Petronet LNG Ltd. Vs. CST, New Delhi 2013 (11) TMI 1011 - CESTAT NEW DELHI , where the moveable vessel was given on lease rent and it was held that on the long term agreements of the movable property i.e. tanker, the transactions fall within the ambit of the exclusionary clause of Section 65(105)(zzzzj) of the Act and therefore immune to the liability to Service tax. In the instant case, the wagon are not located during the entire period by the appellant within the territory of India so the appellant is not liable to pay service tax under the reverse charge mechanism in view of the proviso to Rule 3(iii). Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of Service Tax liability on lease rent for railway wagons under the Own Your Wagon Scheme.

Analysis:
The appellant, engaged in cement manufacturing, used private railway sidings to dispatch cement to railway wagons. In 1992, the railways introduced the Own Your Wagon Scheme, allowing the appellant to purchase and lease wagons to railways for 20 years. The wagons merged into the railway pool under railway control. The Finance Act, 1994, brought the lease rent under Service Tax as "Supply of Tangible Goods." The department issued a show cause notice demanding Service Tax under Section 65(105)(zzzzj), alleging lease rent as "Supply of Tangible Goods."

During the hearing, it was noted that the amendment in the Finance Act came into effect in 2008, while the agreement was executed in 1997. The appellant's counsel mentioned that the 20-year period had passed, and the railway did not provide information about the wagons, which were now untraceable. Referring to a similar case, the Tribunal observed that the taxable event occurred upon agreement and delivery of the wagons, not on a daily basis. The Tribunal concluded that long-term agreements for movable property fell within the exclusionary clause of Section 65(105)(zzzzj), making the appellant not liable for Service Tax due to the wagons not being located in India throughout the lease period.

Based on the precedent set by earlier orders, the Tribunal found no justification to uphold the impugned order demanding Service Tax. Therefore, the appeal by the appellant was allowed, setting aside the previous order and relieving the appellant from the Service Tax liability on the lease rent for railway wagons under the Own Your Wagon Scheme.