2021 (6) TMI 723 - AT - Service Tax

Classification of services - SGS system installed in the customers premises to enable the customer to procure LPG in bulk quantities - taxable under the head supply of tangible goods service or otherwise? - change of Revenue's View - levy of interest - penalty - extended period of limitation - HELD THAT - The department cannot take a different stand for the earlier period for the same transactions. As the department has accepted that effective control and possession have been transferred to the customers, no service tax can be levied under the head Supply of Tangible Goods Service . Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Taxability of lease rentals under the category of "supply of tangible goods service"
- Application of extended period of limitation under proviso to Section 73(1) of the Finance Act 1994
- Charging of interest under Section 75 of the Finance Act 1994
- Imposition of penalties under Section 77 & 78

Analysis:

Taxability of Lease Rentals:
The appellants were engaged in trading LPG and supplied 'manifold/Super Gas system (SGS)' to customers for bulk gas procurement, collecting lease rentals monthly. The issue was whether these lease rentals were liable to service tax under "supply of tangible goods service". The appellant argued that since they transferred effective control and possession of goods to customers, VAT was paid, and hence, no service tax should be charged. They cited previous orders-in-appeal and order-in-original where the department accepted the transfer of control and possession. The Tribunal ruled in favor of the appellants, stating that the department cannot change its stance for the earlier period, and since control and possession were transferred, no service tax was applicable.

Extended Period of Limitation and Interest:
The Tribunal's decision on the taxability issue rendered the question of invoking the extended period of limitation and charging interest under Section 75 moot. Since the lease rentals were not subject to service tax, the provisions related to the extended period of limitation and interest did not apply in this case.

Imposition of Penalties:
Regarding penalties under Section 77 & 78, the Tribunal did not delve into this issue explicitly in the judgment. However, since the impugned order was set aside due to the non-taxability of lease rentals, it can be inferred that penalties under these sections were also not applicable in this scenario.

In conclusion, the Tribunal allowed both appeals, setting aside the impugned order and providing consequential relief if any. The decision was based on the finding that the lease rentals were not subject to service tax as effective control and possession of goods were transferred to customers, as evidenced by previous orders where the department accepted this position.