2012 (4) TMI 232 - AT - Service Tax

Ownership & Control: Appellant's Equipment Provision Deemed Taxable Service

The Tribunal concluded that the appellant's provision of measuring equipment constituted a taxable service under the Finance Act, 1994. It was determined ... Levy of Service Tax- providing taxable services under the category ‘Transportation of goods through pipelines’ – AO found income collected for supply of pipes, measuring equipments etc. at the time of providing new gas connection thus appellant should have paid the Service Tax treating the service as 'Supply of tangible goods' – assessee contented that merely supplying, installing, maintaining the measuring equipment to facilitate determination of quantum of gas there is no service element involved in this supply – assessee stated that the ownership of equipment remains with the appellant at all time and used the equipment for their own purpose – Held that:- the customer never has a right of possession since it would never become his own property at all - the Company has the right to repossess the meter and other equipment at any time and whenever it is disconnected, the meter will become the property of the Company - therefore, the supply of goods is without transfer of right of possession - the customer cannot also obtain meter and other equipment from any other source -there is no doubt that the customer also has a use of measuring equipment - the conclusion is that the appellants have provided the service and are liable to Service Tax - appellants have not been able to make prima facie case in their favour hence should deposit 25% of the Service Tax demanded in the impugned order within 8 weeks of Order date – against assessee. Issues:1. Whether the appellant should have paid Service Tax for gas connection charges.2. Whether the supply, installation, and maintenance of measuring equipment amount to a taxable service.3. Whether the supply of tangible goods is without transferring the right of possession.Analysis:Issue 1:The appellant received income under Gas Connection Charges, leading to the initiation of proceedings for Service Tax payment. Two Show Cause Notices were issued, demanding Service Tax for specific periods. The impugned orders confirmed the Service Tax demand with interest and imposed penalties under the Finance Act, 1994.Issue 2:The appellant argued that no service element was involved in supplying, installing, and maintaining measuring equipment for gas supply. They claimed the equipment was for their use, not the customers', and no service was provided. The appellant highlighted ownership, maintenance rights, and lack of customer usage to support their stance. The Commissioner's conclusion on the right of possession transfer was challenged, emphasizing customer possession and control over the equipment.Issue 3:The Department classified the service of supplying measuring equipment as a service of tangible goods. It was noted that the equipment always remained under the appellant's ownership, with limited refunds for disconnected customers. The possession, maintenance, and repair rights were solely with the appellant, indicating compliance with tangible goods service conditions.Conclusion:The Tribunal analyzed the Finance Act, 1994's definition of taxable service related to tangible goods supply. It concluded that the appellant's provision of measuring equipment constituted a service element benefiting both parties. The possession transfer issue was addressed, highlighting the appellant's continuous ownership and control over the equipment. Prima facie, it was determined that the appellant provided a taxable service, warranting Service Tax payment. A pre-deposit requirement was imposed, with a stay on further payments pending compliance. The detailed analysis emphasized statutory definitions, ownership dynamics, and service elements, indicating the appellant's liability for Service Tax.