2019 (1) TMI 377 - AT - Service Tax

Classification of services - supply of tangible goods service or not - wagons given to Ministry of Railways on lease basis - Held that - The matter is no longer res-integra as it has already been decided in the appellant s own case vide this Tribunal s decision in the case of M/S. ULTRATECH CEMENT LTD. VERSUS C.C.E. & S.T., RAIPUR 2017 (4) TMI 1176 - CESTAT NEW DELHI , where it was held that the right of position and effective control is with the Railways and as such, the tax entry has no application for the present transaction - appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of supply of tangible goods service for leasing wagons to Indian Railways before and after tax entry in 2008.

Analysis:
The case involves the classification of the service of supplying tangible goods, specifically leasing wagons to Indian Railways, concerning the tax liability before and after the introduction of the tax entry in 2008. The appellant, a cement manufacturer, leased 168 BCNA wagons to the Ministry of Railways on a lease basis, with invoices raised quarterly against which rent/lease charges were received. The Department issued a show cause notice for service tax, invoking penal provisions under Section 77 and 78, covering the period from May 2008 to March 2012.

The Tribunal analyzed the case in light of a previous decision in the appellant's own case, where it was held that the supply of wagons to Railways does not fall under the taxable service of "supply of tangible goods" due to the Railways' full and effective control over the wagons. The Tribunal emphasized that the supply of wagons occurred in 1996, predating the tax entry in 2008, and thus, there was no tax liability on the activity before the introduction of tax liability. The Tribunal referred to a similar case involving Petronet LNG Ltd. to support its decision.

The Appellate Tribunal found that the impugned order was unsustainable as the effective control of the wagons was with the Railways, aligning with the statutory definition that supply of tangible goods should be without transferring the right of possession and effective control. The Tribunal concluded that the tax entry did not apply to the nature of the transaction under consideration, ultimately setting aside the impugned order and allowing the appeal based on the previous decision in the appellant's own case.

In summary, the Tribunal ruled in favor of the appellant, holding that the order-in-appeal lacked merit and was set aside, allowing the appeal due to the absence of tax liability on the supply of tangible goods, specifically leasing wagons to Indian Railways, before the tax entry in 2008.