2024 (3) TMI 455 - AT - Service Tax

Nature of transaction - service or deemed sale - supplying tankers to OIL - supply of tangible goods service or not - whether effective control and possession of the tankers/bowsers have been transferred to OIL or lies with the Appellant? - Extended period of limitation - interest and penalty - HELD THAT - In this case, the Agreement signed by the Appellant with OIL, is perused, to ascertain whether possession and control have been transferred not. From some of the clauses in the Agreement, it is found that the Appellant carries out the repair and maintenance of tankers; incurred expenditure for fuel and consumable; provides crew, and is responsible to comply with the statutory acts. These clauses of the Agreement indicate that the title or ownership vests with the Appellant only and not transferred to OIL. Accordingly, the Appellant is liable to pay service tax under the category of 'supply of tangible goods service'. The Appellant submits that for the period from July 2012 to March 2014, the impugned Order has confirmed the demand of Service Tax amounting to Rs. 33,41,267/- on the ground that the same falls within the ambit of supply of tangible goods service under Section 65 (105)(zzzzj) of the Finance Act 1994. In this regard, it is observed that post 01.07.2012, the provisions of Section 65 (105)(zzzzj) cannot be invoked to demand service tax on supply of tangible goods service - the demand confirmed by citing the non-existent legal provisions cannot be sustained CESTAT, New Delhi in the case of COMMISSIONER OF CENTRAL TAX GOODS AND SERVICE TAX, DELHI EAST VERSUS M/S SANJAY ELECTRICALS (VICE-VERSA) 2024 (1) TMI 891 - CESTAT NEW DELHI held that demand confirmed by citing the non-existent legal provisions cannot be sustained. Thus, the demand for the period 01.07.2012 to March 2014 is liable to be set aside. Extended period of limitation - HELD THAT - The Appellant was under the bona fide belief that no service tax is payable since the instant transaction in dispute constitutes a 'deemed sales' for which VAT was already paid. In the case of M/S. CARZONRENT (INDIA) PVT. LTD. VERSUS CST, DELHI 2017 (1) TMI 98 - CESTAT NEW DELHI has held that when there is an element of dispute and ambiguity whether a transaction is covered by VAT law or Service Tax, and the same needs to be decided based on the facts and applicable law, then extended period of limitation cannot be invoked. In the impugned order demand has been confirmed for the period April 2009 to March 2014, by invoking extended period of limitation. The Show Cause Notice in this case was issued vide C. No. V(15)100/ADJ/ST/COMMR/DIB/ 2014/ 11154 on 16.09.2014. Under the normal period of limitation, demand can be issued only for a period of 18 months. Thus, the demand for the period prior to 2013 demanded in the Notice dated 16.09.2014, is time barred. Interest and penalty - HELD THAT - The entire demand confirmed in the impugned order is not sustainable and accordingly, the same is set aside. Since the demand itself is not sustainable, the question of demanding interest and imposing penalty does not arise. Appeal allowed.

Summary

Issues Involved:
1. Whether the transaction between the Appellant and OIL constitutes a "Deemed Sale" or "Supply of Tangible Goods Service".
2. Applicability of service tax post 01.07.2012 under the negative list regime.
3. Invocation of extended period of limitation.
4. Imposition of interest and penalties.

Summary:

1. Deemed Sale vs. Supply of Tangible Goods Service:
The Appellant supplied tankers/bowsers to OIL for transporting crude oil, treating the transaction as a "Deemed Sale" under the Assam VAT Act, 2003, and paid VAT accordingly. The Department contended that the transaction falls under "supply of tangible goods service" as defined in Section 65(105)(zzzzj) of the Finance Act, 1994, and issued a Show Cause Notice demanding service tax. The Appellant argued that effective control and possession were transferred to OIL, making it a deemed sale, thus exempt from service tax. The Tribunal observed that the Appellant retained control over the tankers, including maintenance and operational responsibilities, indicating that the transaction is liable for service tax under "supply of tangible goods service".

2. Applicability of Service Tax Post 01.07.2012:
The Tribunal noted that post 01.07.2012, the provisions of Section 65(105)(zzzzj) cannot be invoked due to the advent of the negative list regime. The Show Cause Notice and the impugned order did not reference the negative list provisions. Citing the CESTAT, New Delhi decision in Commissioner of Central Tax Goods and Service Tax, Delhi East v. M/s. Sanjay Electricals, the Tribunal held that demands based on non-existent legal provisions are unsustainable. Consequently, the demand for the period post 01.07.2012 was set aside.

3. Invocation of Extended Period of Limitation:
The Appellant claimed a bona fide belief that no service tax was payable due to the transaction being a deemed sale with VAT already paid. The Tribunal referenced several decisions, including Carzonrent (India) Pvt. Ltd. v. Commissioner of Service Tax, Delhi - I, which held that extended periods cannot be invoked when there is ambiguity or dispute over tax applicability. The Tribunal found no suppression of facts by the Appellant and ruled that the extended period of limitation was not applicable, making the demand for periods prior to 2013 time-barred.

4. Imposition of Interest and Penalties:
Given the findings that the demand itself is unsustainable, the Tribunal concluded that the imposition of interest and penalties was unwarranted. The entire demand along with interest and penalties was set aside.

Conclusion:
The Tribunal ruled that the services rendered by the Appellant fall under "supply of tangible goods service", but demands post 01.07.2012 are unsustainable due to incorrect legal provisions cited. The extended period of limitation was also inapplicable due to the Appellant's bona fide belief, leading to the setting aside of the entire demand, interest, and penalties. The appeal was allowed in favor of the Appellant.