2013 (8) TMI 881 - AT - Service Tax

Tribunal rules appellants not liable for Service Tax on leased storage tanks

INOX AIR PRODUCTS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, NAGPUR

INOX AIR PRODUCTS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, NAGPUR - 2015 (38) S.T.R. 191 (Tri. - Mumbai) Issues:- Whether the appellants are liable to pay Service Tax for providing banking and other financial services through leasing vacuum insulated storage tanks.Analysis:1. Background: The appellants, engaged in manufacturing industrial gases, also lease vacuum insulated storage tanks to customers. The Revenue issued show cause notices demanding Service Tax, claiming the appellants provide banking and financial services.2. Contention: The appellants argued they are not a banking or financial institution, citing a Board Circular and a Tribunal decision supporting their position.3. Revenue's Argument: The Revenue contended that the lease of storage tanks constitutes equipment leasing, making the appellants liable for Service Tax as providers of banking and financial services.4. Agreement Analysis: The terms of the lease agreement state that the tanks remain the property of the appellants and are only loaned for use to customers, who cannot sell, mortgage, or pledge the tanks.5. Legal Provisions: Section 65 of the Finance Act defines banking and financial services provided by banking companies, financial institutions, or other corporate bodies. The Board's circular clarifies the scope of financial leasing and hire-purchase services.6. Judgment: The Tribunal found merit in the appellants' argument, as they are not a banking company or financial institution. Referring to a similar case, the Tribunal highlighted that ownership and control of assets remained with the appellants, not the lessees, indicating no transfer of ownership.7. Precedent: The Tribunal cited a case where the lease agreement did not transfer ownership of assets to lessees, aligning with the appellants' situation. The Board's circular further clarified the distinction between principal amount and finance charges in financial leasing.8. Decision: The impugned order demanding Service Tax was set aside, and the appeals of the appellants were allowed based on the analysis of the lease agreement terms, legal provisions, and relevant precedents.This detailed analysis of the judgment highlights the key arguments, legal provisions, agreement terms, and precedents considered in determining the liability of the appellants for Service Tax related to leasing storage tanks.