2018 (9) TMI 1279 - AT - Service Tax

Supply of Tangible Goods - lease of railway wagons to the railways - Held that - Tribunal in the case of Petronet LNG Ltd. vs. Commissioner of Service Tax New Delhi 2013 (11) TMI 1011 - CESTAT NEW DELHI has considered an identical situation and held that inasmuch as the lease agreement for supply of tangible goods was one time event which acted prior to introduction of this taxable service w.e.f. 16.05.2008 no liability to pay service tax would arise against the assessee. Admittedly in the present case the agreements entered into by the appellant with the Railways are upto the year 2000 i.e. much prior to 16.05.2008. The ratio of the above decision of Tribunal is fully applicable to the facts of the present case. Appeal allowed - decided in favor of appellant.

Summary

Issues: Service tax demand under the category of 'Supply of Tangible Goods' for lease agreements with Railways entered before 16.05.2008.

Analysis:
1. Issue of Service Tax Demand: The appeals revolve around the confirmation of service tax demand against the appellant under the category of 'Supply of Tangible Goods' for lease agreements with Railways. The appellant entered into agreements for the supply of wagons through a lease agreement known as the "Own Your Wagon Scheme, Category of Pure Lease Basis" before 16.05.2008. The Revenue initiated proceedings based on the view that the lease of railway wagons constitutes a service falling under the category of supply of tangible goods, leading to the passing of impugned orders.

2. Contention of Appellant: The appellant argued that they do not fall under the said category as effective possession and control of the wagons were handed over to Railways, thus not satisfying the definition of supply of tangible goods. However, the Tribunal focused on the timing of the agreements, emphasizing that they were entered into prior to 16.05.2008 when the said category of service was introduced in the statutory book.

3. Precedent and Decision: The Tribunal referred to the case of Petronet LNG Ltd. vs. Commissioner of Service Tax, New Delhi, where a similar situation was considered. Citing support from precedent decisions and a Board's letter dated 09.07.2001, the Tribunal held that since the lease agreements for the supply of tangible goods were one-time events that occurred before the introduction of the taxable service on 16.05.2008, no liability to pay service tax would arise. The agreements in the present case were dated much earlier, up to the year 2000, aligning with the rationale of the aforementioned decision. Consequently, the Tribunal set aside the impugned orders and allowed both appeals with any consequential relief.

In conclusion, the judgment centered on the timing of the lease agreements in relation to the introduction of the taxable service category, ultimately leading to the dismissal of the service tax demand against the appellant based on the principle that no liability arises for events occurring before the introduction of a specific taxable service.