2019 (9) TMI 530 - AT - Service Tax

Classification of services - Supply of Tangible Goods service or otherwise - appellant had received income under the head Gas Connection Charges from Industrial, Commercial and Domestic customers and perusal of the sale agreements and invoices, revealed that such charges were collected for supply of pipes and measuring equipments at the time of providing new gas connections to the customers - recovery alongwith Interest and penalty - benefit of cum-tax value. HELD THAT - The service should be provided by any person to any other person for use of that person. In the present case, the appellant is distributing gas to its customers through pipes and for this purpose, it has installed an equipment called SKID at the customers site. It is true that the equipment is installed at the site of customer and at the cost the customer without transferring the ownership or possession and that the appellant retains the right to use the equipments, but the issue that arises for consideration is whether the supply of tangible goods, namely the equipment is for the use of the customer. The terms of the agreement leave no manner of doubt that the purpose of the equipment is to measure the amount of gas supplied to the customer for the purpose of billing. They are, therefore, for the use of the appellant and are not for use by the customers. The finding to the contrary recorded by the Adjudicating Authority is, therefore, not correct. The Adjudicating Authority was, therefore, not justified in confirming the demand of duty on the collection charges under the taxable service- Supply of Tangible Goods - In this view of the matter, it may not be necessary to examine as to whether the appellant refunds the collection charges to the customers on termination of the gas connection. Demand set aside - decided in favor of assessee.

Issues Involved:
1. Classification of "Gas Connection Charges" under "Supply of Tangible Goods Service."
2. Ownership and use of measurement equipment.
3. Refund of collection charges on termination of gas connection.
4. Benefit of cum-tax value granted by the Adjudicating Authority.

Issue-wise Detailed Analysis:

1. Classification of "Gas Connection Charges" under "Supply of Tangible Goods Service":
The primary issue was whether the "Gas Connection Charges" collected by the appellant for providing measurement equipment at the time of new gas connections fell under the category of "Supply of Tangible Goods Service" as defined under Section 65(105)(zzzzj) of the Finance Act, 1994. The Department contended that these charges were for the supply of tangible goods (measurement equipment) for use by the customers, thus attracting service tax. The Adjudicating Authority confirmed this view, stating that the provision of measurement equipment involved an element of service, making the customers service recipients.

2. Ownership and use of measurement equipment:
The appellant argued that the equipment was installed without transferring ownership or possession to the customers and was for the appellant's use to measure gas consumption for billing purposes. The Adjudicating Authority, however, held that the equipment was for the use of the customers, fulfilling the conditions of "Supply of Tangible Goods Service." The Tribunal disagreed, stating that the equipment was for the appellant's use and not for the customers' use, thus not satisfying the definition of taxable service under Section 65(105)(zzzzj).

3. Refund of collection charges on termination of gas connection:
The Adjudicating Authority rejected the appellant's plea that collection charges were refunded upon termination of connections, noting that refunds were not always complete. However, the Tribunal found this issue irrelevant to the primary question of whether the charges constituted a taxable service.

4. Benefit of cum-tax value granted by the Adjudicating Authority:
The Department appealed against the Adjudicating Authority's decision to levy service tax on the cum-tax value of the services rather than the entire value of gas connection charges. The Tribunal upheld the Adjudicating Authority's decision, affirming the benefit of cum-tax value to the appellant.

Conclusion:
The Tribunal set aside the orders confirming the demand of service tax on "Gas Connection Charges" under "Supply of Tangible Goods Service," agreeing with the appellant that the equipment was for their use and not the customers'. Consequently, the appeals filed by the appellant were allowed, and the appeals filed by the Department were dismissed.

← Previous Next →