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TMI Blog2018 (10) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... e Praxair’s sole and exclusive ownership of the oxygen plant equipment or any part thereof - the demands raised against the appellants for leasing the oxygen plant equipment are not sustainable in law. Management, Maintenance or Repair Services - Whether the service tax demanded on ‘Management, Maintenance or Repair Service’ is sustainable in law? - Held that:- The appellants have entered into an agreement dated 30.12.2006 for establishment of VPSA based oxygen plant with M/s. UML. Para 2 of the agreement deals with operation and maintenance of the plant. As per the agreement, for OM service rendered by the appellants, M/s. UML will pay the appellant the amounts specified in Schedule 4 of the agreement - the appellants are rendering OM services to the plant which is under lease to M/s. UML. The appellants are also charging M/s. UML for this particular O&M services. If it were the case of the appellant that the service rendered was to themselves, there was no need whatsoever for M/s. UML to pay the appellants for O&M charges in terms of the agreement - Demand upheld. Storage and Warehousing Service - Whether the service tax demanded on ‘Storage and Warehousing Service’ is sust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d lease it out to iron and steel, copper units. They also undertake maintenance and repair of such plants. The appellants have entered into an agreement with Usha Martin Ltd. (UML) and Usha Alloys and Steels Division, a division of Usha Beltron Ltd, over a period of time. 2. The Revenue contended that the appellants are engaged in banking and other financial services, management maintenance or repair service, storage and warehousing service. Initially, a show-cause notice dated 6.2.2007 was issued to the appellants covering the period August 2005 to August 2006 and demand of service tax raised therein were confirmed. Subsequently, show-cause notices were issued for further periods and the demands were confirmed by the adjudicating authorities along with interest and penalties. Details of orders passed, amounts demanded and appeals preferred by the appellants are as follows: Appeal No OIO /OIA No. /Date Period Amounts demanded under various Heads (INR) Banking Other Financial Services Management Maintenance or Repair Services Storage and warehousin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of M/s. UML has been lifted. It clearly indicates that the transaction of the lease was affected and also M/s. UML has received the goods and installed the VPSA (Vacuum Pressure Adsorption Plant). The appellants have commissioned the VPSA plant on 13.7.2001 and have started the operations and have also started charging for the lease, operations and maintenance of the equipment on and from 13.7.2001. A reference to the agreement dated 11.7.2001 would clearly indicate that the effective date would be the date on which the agreement was signed i.e., 11.7.2001. In terms of the agreement, the oxygen plant would at all times remain with the appellants only. The nature of the agreement also would indicate that the appellants have given to the lessee the plant on purely a lease-rent basis. Agreement dated 29.12.2006 also had similar clauses as mentioned in the agreement dated 11.7.2001 except for the fact that lease rent per month was revised. 3.1.1 The learned counsel submitted that the Ld. Commissioner has observed that the equipment is whether operational or financial are covered under Banking and Other Financial Services and therefore, taxable. Ld. counsel has brought the attent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that Banking and Other Financial Services provided by a banking company or a financial institution or a non-banking financial company or any other service provider similar to a bank or a financial institution are liable to service tax under Section 65(105) (zm) of the Finance Act, 1994. Department of Posts is not similar to a bank or a financial institution and hence does not fall within the category of any other similar service provider. (Para 4). The counsel submitted that the appellants not being a Banking Company or a Financial Institution including a non-banking financial company, or any other body corporate or (any other person) in relation to banking and other financial services . Therefore, in respect of both the plant (1) leased out prior to 16.7.2001 and plant (2) set up in terms of agreement dated 29.12.2006, so service tax is leviable in terms of Section 65(105) (zm) of the Finance Act, 1994. 3.2 Ld. Counsel submitted regarding demand of service tax on Management, Maintenance and Repair services is concerned, the appellant entered into a separate agreement dated 30.12.2006 for operation and maintenance of the oxygen plant set up by them and owned by them. As pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indings of the OIO/OIA. 5. Heard both sides and perused the records of the case. Brief issues involved in the present set of appeals are: (i) whether the lease rentals received by the appellants from M/s. UML would fall within the definition of Banking and Other Financial Services or would fall within the meaning of Operating Lease . (ii) Whether the service tax demanded on Management, Maintenance or Repair Service is sustainable in law. (iii) Whether the service tax demanded on Storage and Warehousing Service is sustainable. 5.1 Coming to the issue No. (i), the learned Commissioner has contended that CBEC vide letter F. No.B-11/1/2001-TRU dt.9.7.2001 clarified that agreements entered before 16.7.2001 will not be liable to service tax provided the property/goods have also been received by the lessee prior to 16.7.2001. The Commissioner contended that the stamp paper on which the said agreement was made was purchased on 4.9.2001 as per the endorsement on the reverse side of the stamp paper. He contended that therefore, by any stretch of imagination, the agreement could not have been concluded before 16.7.2001 and that Shri Asith Gangopadhyaya in his statement d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Superintendent of Central Excise, Jameshedpur to the appellants for releasing the plant and equipment. 5.1.2 Shri Asith Gangopadhyaya in his statement cited above has also stated that the plant was detained by Excise Officers on 1.2.2001, which was vacated on 13.7.2001. The complete plant was ready for operation from early July itself but could not be commissioned because the plant was under detention. It was commissioned after the stay was vacated and hence, the agreement effective from 11.7.2001 was signed. However, the actual signature was taken at a later date. Going by the circumstances of the case, it is evident that the plant was in existence in the premises of M/s. UML well before 16.7.2001. Therefore, in view of the Board Circular cited above, the appellants cannot be charged to pay service tax under the heading Banking and Other Financial Services for leasing of the plant to M/s. UML. 5.1.3. The counsel for the appellants has also taken a plea that the services rendered by them was only for leasing of the equipment and was not a financial lease. Therefore, they cannot be categorized under Banking and Other Financial Institutions . They have tried to diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bears a unique number. 2.1.3 The EMIs consist of recovery of principal amount (towards the original cost of the equipment) and finance/interest charges. The allocation between the principal and the finance/interest charges are known to and agreed upon by both the parties. The customer repayment schedule contains the details of the EMIs with the break-up for the principal and the interest. In respect of leasing and hire purchase, the amount recovered as principal is not the consideration for services rendered but is credit to the capital account of the lessor/hire-purchase service provider. The interest/finance charges is the Revenue or income and is credited to the Revenue account. Such interest or finance charges together with the lease management fee/processing fee/documentation charges is the consideration for the service rendered and therefore, they constitute the value of taxable service and Service Tax is payable on this value. Accordingly, it is clarified that Service Tax in the case of financial leasing including equipment leasing and hire purchase will be leviable only on the lease management fee/processing fee/documentation charges (recovered at the time of entering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rfere with the impugned orders as far as demand in respect of Management, Maintenance or Repair Services . 5.3 Coming to the issue of demands under Storage and Warehousing Service , we find that the appellants have entered into an agreement dated 1.8.1999 with M/s. UML. As per the agreement, PIPL deliver liquid oxygen into the storage installations and would permit the buyer (UML) to use the storage facility subject to clause 10 of the agreement regarding the use of the installation exclusively by M/s. UML. It is evident that the appellants have not rendered any warehousing services. It is not the case where the appellants hold a storage facility in their own premises and customers will come with their goods to the facility to deposit /store the goods for a period of time. No warehousing activities are involved as the appellants have built an oxygen tank in the premises of their customers and have leased the same to the customers. The appellants are not concerned with the receipt, storage and clearance of the goods stored in the tanks. They do not maintain any accounts for that matter in this regard. They have only leased out the tanks for a certain period of time for a consid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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