2007 (8) TMI 55 - AT - Service Tax

Storage and Warehousing Services - Revenue contended that appellant liable to pay service tax under S &W service but appellant contended that their activity is not of warehousing but of purchasing and selling of liquor - Held that demand and penalty not sustainable

Summary

Issues:
1. Whether the appellants are liable to pay Service Tax on the storage charges collected?
2. Whether the demurrage charges collected by the appellants fall under the category of "Storage and Warehousing Services" for the purpose of Service Tax liability?
3. Whether the appellants are providing storage services to themselves?
4. Whether the charges mentioned as storage charges in the Profit and Loss Account are taxable under the Finance Act, 1994?
5. Whether the penalty imposed on the appellants is justified?

Issue 1:
The appeal was filed against the Order-in-Original proposing demand of Service Tax on the storage of goods by the appellants. The Adjudicating Authority confirmed the Service Tax payable by the appellant along with interest and penalties. The appellants contended that they are not providing storage services to anyone but are engaged in purchasing and selling liquor. They argued that the charges collected should not be considered as storage charges for Service Tax purposes.

Issue 2:
The Revenue claimed that demurrage charges collected by the appellants should be considered as "Storage and Warehousing Services" and thus be subject to Service Tax. The Commissioner relied on a Circular stating that charges for providing a service in relation to goods, such as demurrage charges, are taxable. The appellants argued that they only hire storage bases to store liquor purchased by them and do not provide storage services to themselves.

Issue 3:
The appellants contended that they do not provide storage services to themselves as they purchase liquor and hire storage bases to store the goods. The Adjudicating Authority noted that the appellants incur expenses for insuring the goods and bear other related costs, indicating that they receive services for their own goods, not from manufacturers.

Issue 4:
The appellants argued that merely labeling the charges as storage charges in the Profit and Loss Account does not make them taxable under the Finance Act, 1994. They cited Supreme Court decisions emphasizing that the substance of a transaction prevails over its form, and the true nature of the transaction should determine its taxability.

Issue 5:
The Tribunal found that the appellants, a State Government Corporation, are not liable to pay Service Tax on the storage charges collected as they are only recipients of storage and warehousing services, not service providers. The Tribunal emphasized that the demurrage charges collected are not for storage of goods owned by the appellants, and therefore, no Service Tax can be levied. The appeal was allowed, and the penalties imposed were deemed unjustified.

This detailed analysis of the judgment covers all the issues involved comprehensively, providing a thorough understanding of the legal reasoning and arguments presented in the case.