2019 (6) TMI 269 - AT - Service Tax

Classification of services - whether the activities rendered by M/s. Ocean Sparkle Ltd. is outward transportation of goods or whether it is merely management of Marine Terminal Facility (MTF)? - HELD THAT - M/s. Ocean Sparkle Ltd. is engaged to provide mainly Port Operations, Ship Management Services and also manpower supply service at MTF, Karaikal Port. Undisputedly, this MTF is owned by the appellant. So also from the factory gate pipeline is laid upto the MTF for transportation of the final product namely caustic soda to the MTF from where it is transported to Visakhapatnam Port. The appellant has explained in the Show Cause Notice that the activity rendered by M/s. Ocean Sparkle Ltd. is not outward transportation of goods from the factory. There is no discussion with regard to the purchase order or the agreement for delivery of the goods upto the Visakhapatnam Port in the impugned orders. Needless to say that when the ownership of the goods remained with the appellant till the buyer s premises, the sale takes place only at the buyer s end. Thus, it is the duty of the appellant to establish whether the ownership of the goods is with the appellant till the goods reaches the buyer s premises. If the appellant has agreed to supply the goods upto the buyer s premises at his own risk then, of course, the ownership belongs to the appellant till the goods reaches the buyer s premises. This fact has to be verified. Appeal allowed by way of remand.

Summary

Issues:
1. Eligibility of credit for service tax paid on services provided by M/s. Ocean Sparkle Ltd.
2. Determination of the nature of activities rendered by M/s. Ocean Sparkle Ltd. - outward transportation of goods or management of Marine Terminal Facility (MTF).
3. Interpretation of the place of removal concerning the sale of goods.

Analysis:
1. The case revolved around the eligibility of credit for service tax paid on services provided by M/s. Ocean Sparkle Ltd. The appellant contended that the services were not in the nature of outward transportation of goods, emphasizing that the activities were related to MTF management as input services eligible for credit. The respondent argued that the sale occurred at the factory gate, and the credit was not eligible beyond the place of removal, which was deemed to be the factory gate. The authorities referred to relevant circulars and legal precedents to support their positions.

2. The crucial issue was determining whether the activities by M/s. Ocean Sparkle Ltd. constituted outward transportation of goods or management of MTF. The appellant argued that the services provided were not outward transportation but rather related to the transportation of goods from the factory to the buyer's premises at Visakhapatnam Port. The respondent maintained that the services were indeed outward transportation, and the sale took place at the factory gate. The Tribunal noted the conflicting interpretations and the lack of clarity regarding the nature of services provided.

3. The interpretation of the place of removal in relation to the sale of goods was a key aspect of the judgment. The appellant asserted that the sale occurred at the buyer's premises in Visakhapatnam Port, not at the factory gate. The Tribunal highlighted the importance of establishing where the property in the goods passed from the seller to the buyer to determine the place of removal. The lack of discussion on the purchase orders and agreements for delivery of goods up to the buyer's premises led the Tribunal to remand the matter to the original authority for further examination.

In conclusion, the Tribunal remanded the appeal to the original authority for a detailed assessment of the place of removal, ownership of goods, and the nature of services provided by M/s. Ocean Sparkle Ltd. The judgment highlighted the need for a comprehensive analysis to determine the eligibility of credit for the service tax paid on the services in question.