2006 (12) TMI 473 - AT - Service Tax

Tribunal rules in favor of aerated water manufacturers in service tax dispute

The Tribunal ruled in favor of the appellants, manufacturers of aerated waters, in a case concerning the imposition of service tax on charges labeled as ... - Issues:Waiver of pre-deposit and stay of recovery in relation to service tax, education cess, and penalties imposed under the Finance Act, 1994 for the year 2004.Detailed Analysis:The appellants, who are manufacturers of aerated waters, were found to have collected charges labeled as 'transferring of right to use' on glass bottles and crates during a specific period. The impugned order held that as the appellants were rendering 'equipment leasing services' to their distributors, they were liable to pay service tax on the collected charges. The appellants argued that they were not engaged in rendering 'financial services' and that the crates and bottles did not qualify as 'equipments' for equipment leasing services. They relied on various circulars issued by the Board to support their case.The circulars clarified that banking and other financial services provided by certain entities are liable to service tax. The appellants contended that they did not fall within the definition of 'other body corporate' as they were not providing financial services. They also argued that the crates and bottles did not meet the criteria to be considered as 'equipments' for leasing services. Additionally, they highlighted that sales tax had already been paid on the charges collected, citing a Supreme Court judgment.After considering the arguments, the Tribunal found merit in the appellants' case. The Tribunal referred to the Board's circular dated July 4, 2006, which clarified the interpretation of the expression 'any other person' in the context of banking and financial services. It was noted that the appellants did not fall under the category of 'non-banking financial company,' and the argument regarding the definition of 'equipment' was deemed convincing. Moreover, the payment of sales tax on the charges collected further supported the appellants' position.Consequently, the Tribunal ruled in favor of the appellants, stating that they were not required to make any pre-deposit under the Central Excise Act, 1944. The Tribunal granted a waiver of pre-deposit and stay of recovery concerning the tax amounts and penalties, based on the arguments presented and the legal interpretations provided.This detailed analysis of the judgment showcases the issues raised, the arguments presented by both sides, the relevant legal provisions and circulars, and the ultimate decision reached by the Tribunal in granting relief to the appellants regarding the service tax, education cess, and penalties imposed.