9911796707
TMI Blog2024 (8) TMI 717X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that possession and effective control of the wagons. When the control and possession of the Railway Rakes were with the Indian Railway, question of Supply of Tangible Goods Service by the Appellant for use to their clients does not arise. Further, it is observed that the wagon/rakes were allotted by the Indian Railways to the Appellant under the Agreement from the common pool and it was not the same rakes/wagons supplied by the Appellant to the Indian Railways. Accordingly, the activity under taken by the appellant in the instant case cannot be considered as taxable service under the category of supply of tangible goods services . It is observed that in the case M/S. RASHTRIYA CHEMICALS FERTILISERS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX (LTU) , MUMBAI [ 2024 (3) TMI 1341 - CESTAT MUMBAI] , after analysing the agreement, which is almost similar to the agreement in the present case on hand, the Tribunal held that leasing out the wagons to Railways would not fall under the category of taxable service of ' Supply of Tangible goods'. In the present case, the appellant did not have the effective control and possession of the rakes supplied by them to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant is entitled to get the following considerations: (a) 10% freight rebate on 6 Guaranteed Rakes for use in transportation of goods by the Appellant and (b) two Bonus Rakes without freight rebate for transportation of goods by the Appellant. (ii) The second contract in the Agreement is between the Appellant and their private clients whom the Appellant allow to use the benefit of the 6 Guaranteed Rakes and 2 Bonus Rakes. In this contract, the appellant collects the 10% of freight (Rebate Component) from the clients and sometimes, premium is also charged by the Appellant from their clients. 3.1. The instant Service Tax demand is on the second contract. 4. A perusal of the conditions stipulated in the Agreement dated 21.02.2007 indicates that the wagons supplied by the appellant are under the control and possession of the Indian Railways for a period of ten years, while the ownership vests with the investor (appellant herein) during the period of this ten years. After ten years, the ownership is transferred to Indian Railways. The rakes supplied by the appellant to the Indian Railways were used by the Indian Railways for transportation of goods as per their requirement. The appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian Railways for a period of ten years; the Indian Railways were not issuing the same rakes to the appellant. The appellant submits that they have been given six nos. of guaranteed rakes for use in transportation of goods with freight rebate of 10%; two nos. of bonus rakes without freight rebate were also given to them. The appellant submits that the wagons supplied by them to Indian Railways would fall within the ambit of supply of tangible goods service as defined under Section 65(105)(zzzzj) of the Finance Act, 1994, only when the effective control and possession of these rakes are retained by them. In this case, the effective control and possession of those rakes were always with the Indian Railways. Thus, the activities undertaken by them in this case would not fall within the definition of supply of tangible goods service as defined under Section 65(105)(zzzzj) of the Finance Act, 1994. 6.1. The submissions made by appellant are summarized as under: - (i) As per the Agreement dated 21.02.2007, the Railway Wagon/Rakes were at all times in the exclusive physical control and possession of Indian Railways. (ii) During the material period the possession and control over the Rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated 28-12-2012 bearing no. CCE/BBSR- II/S.Tax/No.25/Additional Commissioner/2012, following Circular No. 334/1/2008-TRU dated 29-02-2008, constitutional provisions under Article 366(29A)(d) read with Entry 54 of Union list, Section 65(105)(zzzzj) of the Act, judgment of the Hon'ble Apex court in the case of Rastriya Ispat Nigam Ltd., Vs. CTO reported in (1990) 77 STC 182, has set aside the demand, which has been accepted by the Department and hence the decision attained finality. (x) In the instant case there is only one taxable service involved i.e. Transport of Goods by Rail Services as defined under Sec 65(105)(zzzp) which is provided by the Indian Railways to the Appellant, which service Appellant in turn allows its clients to use. The Appellant is not providing any supply of tangible goods services to their clients. (xi) The Appellant further submits that the Central Government vide Notification No. 33/2009-ST dated 01-09-2009 has exempted services falling under Section 65(105)(zzzp) by Government owned Railways. (xii) The railway rakes made available to the Appellant under the contract were meant for transportations of goods by rail upon payment of freight, hence the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position of penalty is unwarranted in the facts and circumstances of the case. The dispute in the instant case relates to the period from 2008-09 to 2009-10 whereas the impugned Show Cause Notice was issued on dated 23-07-2012. The instant proceeding is initiated on the basis of Audit of Books of Accounts and scrutiny of Profit Loss A/c. [Schedule XV (Other Income)] of the Appellant. No fresh material is brought by the Department to allege any suppression of facts. Hence, the entire demand is barred by normal period of limitation of one year. (xix) In the case of CCE Vs. Hindustan Cables Ltd. reported in 2022 (382) ELT 188 (Cal) it is held by the Hon'ble Calcutta High Court that when the entire allegation is framed on the basis of accounts of the assessee and no new material is brought on record by the Department, extended period of limitation cannot be invoked. (xx) The dispute relates to pure interpretation of statute and the ingredients visualized under proviso to Section 73(1) is completely absent. (xxi) In the case of International Merchandising Company, LLC, Vs. CST, reported in 2022 (12) TMI 556 SC, the Hon'ble Supreme Court has held that when the dispute relates to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the wagons were leased to the Indian Railways and the assessee was also receiving leasing charges directly from the Indian Railways; however, in the present case, the appellant are giving the right to use the rakes / wagons received by them from India Railways, to other clients and receiving consideration in the form of 10% rebate and/or premium charges from the clients. Thus, it is his submission that the facts and circumstances of the present case is different from the case-law relied upon by the appellant and hence not applicable to the instant case. 7.2. Accordingly, the Ld. Departmental Representative prayed for rejecting the appeal filed by the appellant. 8. Heard both sides and perused the appeal documents. 9. We observe that the appellant has entered into an Agreement dated 21.02.2007 with Indian Railways and invested in 6 numbers of 'Railway Rakes' of BOXN Wagons, under the Wagon Investment Scheme (WIS). In lieu of this investment and supply of six wagons to India railways, the appellant was guaranteed six rakes with 10% freight rebate and two bonus rakes, without freight rebate, for transportation of their goods. When the appellant uses these rakes for transporta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d stand transferred to the Indian Railways [Clause 5.6], (iv) the wagon supplied under the WIS will merge and operate in the general pool wagon of Indian Railway [Clause 4.1], (v) The Indian Railways would decide the manner, method andmodality of use of the wagons without any interference by theAppellant [Clause 4.1], (vi) The Indian Railway will be at liberty to make necessary modification/changes on the wagon. [Clause 10.0], (vii) Maintenance of wagon/Rakes will be borne by Indian Railway for maintenance of the wagons/Rakes, Indian Railway will not collect any charges from the Appellant [Clause 9.0], (viii) If wagons get condemned as a result of accident for no fault of the Appellant, the benefit of freight rebate/guaranteed rakes/Bonus Rakes will continue to be available to the Appellant [Clause 11.0], (ix) the investor/Appellant is entitled to six nos. of guaranteed rakes per month with freight rebate of 10% for 10 years [Clauses 2.5, 5.0, 5.1, 5.2], (x) the investor/Appellant will get two nos. of bonus rakes per months in addition to normal rakes without any freight rebate [Clause 5.4], (xi) In case the investor/Appellant is not able to use the monthly guaranteed/bonus rakes a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he WIS agreement. As per the agreement the Noticee are the owners of the wagons and the ownership would be transferred to Indian Railways after 10 years of the agreement. 4.9 Perusal of the debit notes raised by the Noticee for collection of wagon facilitation charges reveal that no VAT has been charged on the transactions. It also appears that no VAT has been paid on the amount charged by the Noticee from the customers. Also as per the agreement, the ownership of the wagons vested with the Noticee during the material period, which they have supplied to their customers. It appears that the railways placed the wagons with the Noticee customers under its advice/direction. This is only possible when they have the right of possession and control of the wagons. Thus all elements of the service appear to be satisfied in the instant case for classification of the transaction under Supply of Tangible Goods Service. As admitted by the noticee that their clients who transport the goods in the said rakes pay the freight directly to the Indian Railways and thus in respect of six rakes the said clients/customers initially avail freight rebate of 10%. The Noticee thereupon raises their Debit Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e considered that the rakes supplied by the appellant have been utilized by the appellant for Transportation of Goods By Rail Services and the consideration received by the appellant is towards this service. However, we observe that there is no demand of Service Tax under the said category in the impugned order. The impugned order demands Service Tax from the appellant only under the category of supply of tangible goods service on the ground that effective control and possession of the rakes / wagons supplied are with the appellant and they have the ownership of the rakes for a ten-year period. From the Clauses of the Agreement reproduced above, we observe that possession and effective control of the wagons. When the control and possession of the Railway Rakes were with the Indian Railway, question of Supply of Tangible Goods Service by the Appellant for use to their clients does not arise. Further, we observe that the wagon/rakes were allotted by the Indian Railways to the Appellant under the Agreement from the common pool and it was not the same rakes/wagons supplied by the Appellant to the Indian Railways. Accordingly, we hold that the activity under taken by the appellant in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emaining period of the contract. Any minor modification of the wagons shall be carried out by the Railways at its own cost. 23. The reference order, as noticed above, makes reference to some documents explaining the Liberalized Wagon Investment Scheme, 2008 and Freight Marketing Circular of 2019 for the purpose of determining whether the supply of wagons to Railways would be a supply of tangible goods service but neither the show cause notice nor the impugned order make reference to the said documents. In fact, the show cause notice and the order passed by the Commissioner have placed reliance only on the relevant clauses of the Agreement dated 12.06.2009, which alone was required to be examined for determining whether the lease of the wagons by the appellant to the Railways would be a taxable service under section 65(105)(zzzzj) of the Finance Act. It is this Agreement that was referred to in the show cause notice to allege that the lease of wagons by the appellant to the Railways would amount to supply of tangible goods and it is this Agreement which has also been considered by the Commissioner to arrive at a conclusion that the appellant provided supply of tangible goods service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case Rashtriya Chemicals Fertilisers Ltd. (supra), after analysing the agreement, which is almost similar to the agreement in the present case on hand, the Tribunal held that leasing out the wagons to Railways would not fall under the category of taxable service of ' Supply of Tangible goods'. The relevant extract from the decision of Tribunal, Mumbai are reproduced below: - 45. The basic terms and conditions contained in the Agreement in the matter of MSPL and in a matter of the appellant are almost identical. As in the case of the Agreement executed between the appellant and the Railways, the Agreement entered into between MSPL and the Railways also mentions that the Railways took on lease 60 wagons from MSPL subject to the terms and conditions stipulated in the Agreement; the lease charges under the Agreement which was for a period of 20 years were required to be paid by the Railways to the appellant at the rate of Rs. 40/- per thousand per quarter for the primary period of 10 years and at the rate of Rs. 10/- per year for the secondary lease period of 10 years; the freight charges were required to be paid by MSPL to the Railways at the normal tariff rate of the Rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inevitable conclusion that flows from the aforesaid discussion is that the wagons which were given on lease by the appellant to the Railways on terms and conditions set out in the Agreement dated 12.06.2009 were in the possession and effective control of the Railways. 50. As noticed above, the show cause notice dated 02.04.2012 calls upon the appellant to show cause as to why service tax should not be demanded from the appellant with interest and penalty in view of the terms and the conditions contained in the Agreement dated 12.06.2009 entered into between the appellant and the Railways. The Schemes referred to in the reference order have not been relied upon in the show cause notice nor the order passed by the Commissioner makes any reference to them. The show cause notice and the order of the Commissioner refer to the aforesaid Agreement dated 12.06.2009 entered into between the appellant and the Railways only. Thus, what has to be determined is whether the appellant had transferred the right of possession and effective control to the Railways in terms of the conditions set out in the Agreement dated 12.06.2009 when providing wagons on lease to the Railways. 51. In view of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r this category. 10.4. We observe that the impugned order has confirmed the demand under the category of supply of tangible goods service on the allegation that the appellant have the effective control and possession of the rakes supplied by them to the Indian Railways. In view of the discussions in the foregoing paras, we observe that the appellant did not have the effective control and possession of the rakes supplied by them to the Indian Railways and hence, they have not rendered any supply of tangible goods service to this effect. We observe that the ratio of the decision in the case of M/s. Rashtriya Chemicals Fertilisers Ltd. (supra) is squarely applicable to this case and by following the said ratio, we hold that the demand of Service Tax confirmed in the impugned order under the category of supply of tangible goods service is not sustainable. Since the demand itself is not sustainable, the question of demanding any interest and imposing any penalties does not arise. 11. The appellant also contested the demand confirmed in the impugned order on the ground of limitation. They contended that the entire demand is barred by normal period of limitation. Accordingly, they contend ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
