Tribunal rules leasing storage tanks not taxable, possession key in service tax cases

The tribunal ruled in favor of the appellant, finding that the leasing of vacuum insulated storage tanks did not amount to the supply of tangible goods subject to service tax liability. The possession and effective control of the tanks remained with the customer as per the agreements, indicating that the appellant was not liable for service tax. The tribunal emphasized the importance of analyzing possession and effective control in determining tax liability for services related to the supply of tangible goods without transferring possession. The appellant was granted a waiver of pre-deposit of dues and a stay against recovery for 180 days.

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Issues:
1. Whether the activity of leasing vacuum insulated storage tanks amounts to the supply of tangible goods subject to service tax liability.

Analysis:
The case involved the appellant engaged in the manufacturing and selling of industrial gases, leasing vacuum insulated storage tanks to customers without storage facilities for the gases. The dispute arose when service tax was demanded from the appellant for the period from April 2011 to June 2012, amounting to Rs. 13,05,334, claiming the activity as the supply of tangible goods.

The appellant argued that possession and effective control of the tanks remain with the customer as per the terms of the agreements, thus not falling under the definition of 'supply of tangible goods service.' On the other hand, the Revenue contended that the facility fee collected indicated the supply of tangible goods, emphasizing the need for the buyer to ensure the equipment against risks.

The definition of taxable service under consideration included services related to the supply of tangible goods without transferring possession and effective control. The tribunal analyzed the submissions and found merit in the appellant's argument. It was noted that the possession not being transferred meant the liability for any damage would be on the supplier, indicating that the possession and effective control were not with the appellant. Additionally, the clause allowing the appellant free access to the equipment at the buyer's premises supported the view that effective control was not transferred.

The tribunal concluded that the appellant had made a prima facie case on merit, leading to the waiver of pre-deposit of the adjudged dues and a stay against recovery for 180 days. The decision highlighted the importance of analyzing possession and effective control in determining the liability for service tax in cases involving the supply of tangible goods, such as equipment like storage tanks.

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