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2025 (4) TMI 632 - AT - Service TaxLevy of service tax - supply of tangible goods service - fixed facility charges collected by the appellant for supply of tanks for storing the liquid gases - HELD THAT - The very same issue for the previous period from May 2008 to March 2009 has come up for consideration before this Tribunal and has been decided in the appellants favour in the case of M/s. Inox Air Products Ltd v The Commissioner of GST Central Excise Puducherry Commissionerate 2023 (6) TMI 849 - CESTAT CHENNAI where it was held that During the disputed period the appellant has been discharging excise duty on the FFC which is not disputed by the department. Since it is also clarified by the Board in the appellant s own case that the said charges have to be included in the transaction value for payment of excise duty we find no reason to hold that FFC charges are in the nature of consideration received by appellant for providing supply of tangible goods. Relevant Board circular is binding on the department. Conclusion - The service tax demand on the FFC is not sustainable. Appeal allowed.
ISSUES PRESENTED and CONSIDERED
The core legal question addressed in this judgment is whether the service tax demand on the fixed facility charges (FFC) collected by the appellant for supplying Vacuum Insulated Storage Tanks (VIST) for storing liquid gases is valid. The issue revolves around the classification of the transaction as a 'supply of tangible goods service' under Section 65(105)(zzzzj) of the Finance Act, 1994, and whether the appellant's payment of VAT on these charges precludes the imposition of service tax. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The legal framework primarily involves the interpretation of 'supply of tangible goods service' as defined under Section 65(105)(zzzzj) of the Finance Act, 1994. The definition specifies that the service involves the supply of tangible goods without transferring the right of possession and effective control. The appellant argued that the transaction constituted a transfer of the right to use the tanks, thereby qualifying as a deemed sale subject to VAT, not service tax. The appellant cited the precedent set by the Hon'ble Apex Court in Imagic Creative Pvt. Ltd. Vs. Commissioner of Commercial Taxes, which held that VAT and service tax are mutually exclusive. Court's Interpretation and Reasoning The Tribunal referenced its prior decision in the appellant's case for an earlier period, where it was determined that the FFC collected for the supply of tanks should be included in the assessable value for excise duty purposes. The Tribunal found that the appellant retained ownership of the tanks, while the possession and effective control were with the customers, aligning with the definition of 'supply of tangible goods service'. However, the Tribunal emphasized the binding nature of the Board's clarification, which mandated the inclusion of FFC in the transaction value for excise duty. Key Evidence and Findings The appellant provided evidence of VAT payment on the FFC, arguing that this precluded service tax liability. The Tribunal noted that the appellant had been discharging excise duty on the FFC and that the Board's circular clarified the inclusion of FFC in the assessable value for excise duty. The Tribunal also considered the appellant's compliance with the Board's circular and the precedent set in the appellant's favor for the earlier period. Application of Law to Facts The Tribunal applied the legal framework to the facts by recognizing the appellant's compliance with the Board's circular and the precedent set in the appellant's favor. The Tribunal found that the FFC was part of the transaction value for excise duty and that the appellant had discharged the duty accordingly. The Tribunal concluded that the service tax demand on the FFC was not sustainable. Treatment of Competing Arguments The Tribunal considered the appellant's argument regarding the mutual exclusivity of VAT and service tax, supported by the Imagic Creative Pvt. Ltd. case. The Tribunal also evaluated the department's position that the FFC constituted a 'supply of tangible goods service'. Ultimately, the Tribunal sided with the appellant, emphasizing the binding nature of the Board's circular and the precedent in the appellant's favor. Conclusions The Tribunal concluded that the service tax demand on the FFC was not tenable. It set aside the impugned order and allowed the appeal with consequential relief, if any. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning The Tribunal stated: "We find no reason to hold that FFC charges are in the nature of consideration received by appellant for providing supply of tangible goods. Relevant Board circular is binding on the department." Core Principles Established The Tribunal reinforced the principle that VAT and service tax are mutually exclusive and that compliance with a Board's circular is binding on the department. It also reaffirmed the necessity of including FFC in the assessable value for excise duty. Final Determinations on Each Issue The Tribunal determined that the service tax demand on the FFC was not sustainable, setting aside the impugned order and allowing the appeal with consequential relief.
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