2023 (6) TMI 849 - AT - Service Tax

Supply of tangible goods service - Fixed Facility Charges collected by the appellant for supply of tanks for storing the liquid gases - period of dispute is from 16.05.2008 to March 2009 - HELD THAT - The appellant entertained doubts as to whether FFC has to be included in assessable value for discharging excise duty and also whether credit can be availed of such duty. Though letters were issued to department seeking clarifications, there was no response. The appellant then filed W.P before Hon ble High Court of Bombay in INOX AIR PRODUCTS LTD. VERSUS UNION OF INDIA 2014 (9) TMI 529 - BOMBAY HIGH COURT , the Hon ble High Court directed the Board to issue clarification. Pursuant to this, the Board vide circular dt. 10.11.2014 has clarified that FFC charges has to be included in the assessable value for discharging cenvat credit. It can be seen that ownership of the tanks remains with the appellant and the possession and effective control of the tanks is with the customers during full term of the agreement. The definition of supply of tangible goods as per section 65 (zzzzj) defines as any service provided or to be provided to any person, by any other person in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances . In the peculiar nature of the products, the appellant has to supply tanks before supply of liquid gases to the customers. Thus the assessee is required to include the value of FFC and MOTP in the transaction value of the gases for discharging the Central Excise duty. There are no reason to hold that FFC charges are in the nature of consideration received by appellant for providing supply of tangible goods. Appeal allowed.

Summary

Issues:
The issues involved in the judgment are whether the appellant is liable to pay service tax on the Fixed Facility Charges (FFC) collected for providing storage tanks and whether the FFC should be included in the assessable value for discharging excise duty.

Issue 1: Liability to Pay Service Tax on FFC:
The appellant, engaged in the manufacture of liquid gases, provided storage tanks to customers for continuous supply of nitrogen liquid. The appellant collected FFC from customers for providing these tanks. The department contended that the appellant was providing services in the nature of 'supply of tangible goods'. The appellant argued that they had already paid Excise Duty and VAT on the FFC, and thus should not be liable for service tax. The appellant cited a Board Circular clarifying the duty payment on FFC and Minimum-Take-Or-Pay charges. The Tribunal referred to a similar case and a High Court decision supporting the appellant's position. The Tribunal held that the appellant was not liable to pay service tax on the FFC collected.

Issue 2: Inclusion of FFC in Assessable Value for Excise Duty:
The appellant sought clarification on whether FFC should be included in the assessable value for discharging excise duty. The appellant filed a writ petition before the High Court, which directed the Board to issue clarification. The Board's circular clarified that FFC charges should be included in the assessable value for discharging CENVAT credit. The High Court upheld the Board's clarification, stating that the ownership of the tanks remained with the appellant, and the effective control was with the customers. The Tribunal found that since the appellant had been discharging excise duty on the FFC, as per the Board's clarification, there was no basis to consider FFC charges as consideration for providing tangible goods. The Tribunal set aside the impugned order, allowing the appeal with consequential relief.

*(Separate Judgment delivered by MS. SULEKHA BEEVI, MEMBER (JUDICIAL) AND MR. M. AJIT KUMAR, MEMBER (TECHNICAL))*