Service tax on Imported Lease goods, Service Tax

[Chetan Pawar]

Dear All,

We have import storage tanks on lease under Concessional rate of import duty when re-exported after use under Tariff custom notification No. 27/2002 [Cus] 1-3-2002. as we were paid the Custom duty under concessional rate. Every month the Party has given invoices in foreign currencies for lease/rent of this tanks and we have paid the same.

So my question is the same transaction are liable to pay service tax under reverse charge as in respect of any taxable services provided or agreed to be provided by any person who is located in a non-taxable territory and received by any person located in the taxable territory

Can anyone tell me as weather we have to pay service tax or not under reverse charge, if yes then please give me the all legal correspondence for the same.

Posts / Replies

[PAWAN KUMAR]

Dear Sir,

As per my view, You have to pay the service tax under reverse charge on the rent amount paid to your foreign service provider as per partial reverse charge notification no.30/2012-ST dated 20.06.2012 (S.No.10).

As per the PPOS Rules, The place of provision of service is generally the location of the service receiver as per rule 3, which is your location, taxable territory and as per S.No.10 of notification, taxable service provided by the person located in the non-taxable territory and received in taxable territory, in such case, service recipient is liable for 100% service tax.

[Chetan Pawar]

Ok, Sir, agree with your statement

but my concession regarding the custom duty paid against import. what will about the custom duty? can get back to 100 % refund, if not then we will have to pay double tax on same transaction.

So please advise

[PAWAN KUMAR]

You may claim refund of customs duty.

[YAGAY AND SUN]

Dear Chetan,

No service tax would be applicable in this matter. if you have no effective possession and Control on the storage Tanks. Following judgment may be useful for you. Please check the material facts at your end.

In case you need a written opinion then please do contact us.

Regards,

YAGAY and SUN

(Management, Business and Indirect Tax Consultants)

ST - Appellant manufacturing liquid gases - as customers do not have cryogenic tanks for storage, appellant leases same and charges rent - appellant also maintains such tanks - no ST payable under category of Storage services as appellant has no control on goods in storage tank: CESTAT
By TIOL News Service
MUMBAI, DEC 18, 2014: THE appellant is engaged in the manufacture and sale of liquid oxygen, nitrogen, argon etc. which is to be stored at a temperature of Minus (-) 269 0 C. As the customers who are using these gases are not having the storage facilities, the appellant is providing such storage tanks.
The appellant is charging rent for usage of the storage tank & is also maintaining these storage tanks i.e. wear and tear of these tanks is monitored by the appellant. The appellant is paying Central Excise duty as well as VAT on the rent portion charged from the customers. Revenue is of the view that the rent charged by the appellant for leasing out the storage tanks to their customers fell under the category of ‘Storage and Warehousing Services' as per Section 65(102) of the Finance Act, 1994.Proceedings were initiated and demands were confirmed.
In one of the applications filed for stay, the CESTAT observed -
"4. Considering the submissions made by both the sides, we find in this case, that the storage tanks have been leased out by the applicant to their customers for storage of gases. Prima facie, we are of the view that the leasing out of the storage tanks does not fall under the category of 'Storage and Warehousing Services'. Therefore, the applicant has made out a case for 100% waiver of pre-deposit. Accordingly, we waive the requirement of pre-deposit of the service tax, interest and penalties and stay recovery thereof during the pendency of the appeal."
We reported this as INOX AIR PRODUCTS LTD Versus COMMISSIONER OF CENTRAL EXCISE. RAIGAD (2012 (12) TMI 38 - CESTAT, MUMBAI). A similar stay was granted in another matter of the same appellant relying upon the aforesaid decision. See INOX AIR PRODUCTS LTD Versus COMMISSIONER OF CENTRAL EXCISE (2014 (1) TMI 94 - CESTAT MUMBAI).
The period involved is 16.8.2002 till March 2012.
The appeals were heard recently.
The appellant submitted that they were merely renting the storage tank and they were not a storage and warehouse keeper and the control of the goods in storage tank is with the buyer only. Furthermore, as per the taxability under Section 65(105) of the Finance Act, 1994, the appellant should provide storage and warehousing facility to their customer and the essential test is that they should provide the security of goods, tracking, loading and unloading of the goods in storage area. Inasmuch as the goods are not in their control, they are not maintaining any inventory of the said goods therefore they are not liable to pay service tax under the category of ‘Storage and Warehousing Services'. It is further submitted that as the appellant has taken into consideration the rent charge on storage tank in the assessable value of the excisable goods, therefore, double levy of duty cannot be imposed on them. Support is also taken of the decision in Indian Oil Corporation Ltd. vs. Commissioner of Central Excise, Goa - (2014 (6) TMI 348 - CESTAT MUMBAI)
The AR submitted that since the appellant is responsible for wear and tear of the storage tank and they have insured the storage tank, therefore, storage tank is in control of the appellant; hence the demand has been correctly raised under the category of Storage and Warehousing Services.
The Bench observed -
"6. In this case to decide the taxability of service, the real test is that, when the goods have been passed on to the customer. From the facts of the case, it is emerging that the gas in the storage tank installed at the place of buyer and the goods transferred to the buyer. Therefore, there is no control of the appellant on the goods in storage tank, after gas is stored in the tank the whole responsibility of the goods is with the buyer only. In these circumstances, as the appellant is not having any control over the goods and they are not responsible for the security of the goods, the appellant is not covered under the category of Storage and Warehousing Services as defined under Section 65(102) of the Finance Act, 1994."
The orders were set aside and the appeals were allowed with consequential relief.
(See INOX AIR PRODUCTS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, RAIGAD 2015 (1) TMI 460 - CESTAT MUMBAI)

[Yash Goyal]

Dear Chetan,

I agree with the view expressed by Yagay & Sun. Please note the relevant provisions in this regard.

The entry no 6 of declared services would be relevant which reads as "transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods".

As I understand from the above facts and as per the general business practise, the tanks would be under your control during the lease period. Assuming control of the tanks would be there with you, the activity of leasing will not get covered under the definition of service and hence there is no need to pay service tax on reverse charge mechanism.

Trust the above meets requirements.

Thanks & Regards

Yash Goyal

[JSW CEMENT LIMITED]

Dear Mr. Chetan,

Renting of storage tanks is neither specified as a exempted service in the negative list nor in the mega exemption list with effect from 01.07.2012, as such renting of storage tank is taxable and you need to pay service under reverse charge. The case law referred covers the period prior to introduction of negative list.

V.Venkat Raman

[Yash Goyal]

Dear Mr. Venkat,

Leasing of goods is deemed sale as per the constitution of India. So in my view leasing of goods will get covered under the negative list entry for trading of goods.

Though it must be mentioned that for tanks to be classified as goods, they should be movable. Hence depending on the movability of tanks in the present case, the service tax implication will have to be examined.

Thanks & Regards

Yash Goyal