2011 (12) TMI 412 - AT - Service Tax

Appellant's Rental Activity Taxable as Supply of Goods; Pre-Deposit Required

Air Liquide North India (P.) Ltd. Versus Commissioner of Central Excise, Jaipur

The Tribunal ruled that the appellant's activity of renting storage tanks and machinery does not constitute 'Business Support Service' but falls under ... Application for stay - Waiver of pre-deposit - Supply of Tangible Goods Service - The appellant have supplied and installed storage tanks, vaporizing coils, and plant & machinery for generation of gases at the premises of their customers for which rentals are being charged. According to the department this activity of the appellant is 'Infrastructure Support Service' as defined in Explanation to section 65 (104c) of the Finance Act, 1994, and, therefore, is covered by the definition of 'Business Support Service' as defined under section 65(105)(zzzq) - Held that: the expression 'support service of business or commerce' would cover only the services of supporting nature for the main business, manufacture, trading or services like services relating to marketing, customer relationship, distribution and logistics, accounting and transaction processing, office infrastructure, etc. and would not include service of renting of machinery and equipment for production or manufacture which being services relating to manufacturing activity are of altogether different nature The appellants' activity, however, prima facie became taxable w.e.f. 1.4.2008 under supply of 'Tangible Goods Service' as defined under section 65 (105)(zzzzj). But, even if the appellants activity is treated as taxable as 'Supply of Tangible Goods Service' under section 65(105)(zzzzj) the service tax demand of Rs. 18,65,646/- for the period from 1.4.2008 to 31.3.2009 would be sustainable - Decided in favor of the assessee by way of direction to deposit Rs. 12 lakhs Issues Involved:1. Classification of the appellant's activity as 'Business Support Service' or 'Supply of Tangible Goods Service.'2. Justification for invoking the extended period under section 73(1) of the Finance Act, 1994.3. Applicability of service tax on the appellant's activities for the period from 1.5.2006 to 31.3.2008 and 1.4.2008 to 31.3.2009.4. Requirement for pre-deposit for hearing the appeal.Issue-wise Detailed Analysis:1. Classification of the Appellant's Activity:The primary issue was whether the appellant's activity of supplying and installing storage tanks and machinery, for which they charged rentals, should be classified as 'Business Support Service' or 'Supply of Tangible Goods Service.' The department classified this activity as 'Infrastructure Support Service' under Section 65(104C) of the Finance Act, 1994, which falls under 'Business Support Service' as defined in Section 65(105)(zzzq). The appellant contended that their activity could only be classified as 'Supply of Tangible Goods Service,' which became taxable from 1.4.2008.The Tribunal examined the definitions and concluded that the appellant's activity of providing storage tanks and machinery for rentals does not fit within the definition of 'Support Service of Business or Commerce' as outlined in Section 65(104C). The Tribunal noted that the definition covers services related to business operations such as marketing, customer relationship, logistics, and office infrastructure, and not the renting of machinery for production, which is a different nature of service.2. Justification for Invoking Extended Period:The appellant argued that the demand for the period from 1.5.2006 to 31.3.2008 was time-barred as there was no justification for invoking the extended period under section 73(1) of the Finance Act, 1994. The Tribunal did not provide a detailed analysis on this point in the summarized judgment but implied that there was no willful suppression of facts or intent to evade tax by the appellant.3. Applicability of Service Tax:The Tribunal held that while the appellant's activity does not fall under 'Business Support Service,' it became taxable under 'Supply of Tangible Goods Service' from 1.4.2008. Therefore, the service tax demand for the period from 1.4.2008 to 31.3.2009 amounting to Rs. 18,65,646/- was deemed sustainable.4. Requirement for Pre-deposit:Considering the prima facie case, the Tribunal directed the appellant to make a pre-deposit of Rs. 12 lakhs within eight weeks. Upon compliance, the requirement for pre-deposit of the balance amount of service tax, interest, and penalty would be waived, and the recovery thereof would be stayed until the disposal of the appeal.Conclusion:The Tribunal concluded that the appellant's activity of renting storage tanks and machinery does not qualify as 'Business Support Service' but falls under 'Supply of Tangible Goods Service' taxable from 1.4.2008. The demand for the period before this date was not justified. The appellant was required to make a partial pre-deposit to proceed with the appeal.