Tribunal relieves appellant from Service Tax liability on railway wagon lease rent under exclusionary clause

The Tribunal allowed the appeal by the appellant, setting aside the previous order and relieving the appellant from the Service Tax liability on the lease rent for railway wagons under the Own Your Wagon Scheme. The Tribunal concluded that long-term agreements for movable property fell within the exclusionary clause of the relevant tax provision, as the taxable event occurred upon agreement and delivery of the wagons, not on a daily basis. The appellant was found not liable for Service Tax due to the wagons not being located in India throughout the lease period.

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Issues:
Interpretation of Service Tax liability on lease rent for railway wagons under the Own Your Wagon Scheme.

Analysis:
The appellant, engaged in cement manufacturing, used private railway sidings to dispatch cement to railway wagons. In 1992, the railways introduced the Own Your Wagon Scheme, allowing the appellant to purchase and lease wagons to railways for 20 years. The wagons merged into the railway pool under railway control. The Finance Act, 1994, brought the lease rent under Service Tax as "Supply of Tangible Goods." The department issued a show cause notice demanding Service Tax under Section 65(105)(zzzzj), alleging lease rent as "Supply of Tangible Goods."

During the hearing, it was noted that the amendment in the Finance Act came into effect in 2008, while the agreement was executed in 1997. The appellant's counsel mentioned that the 20-year period had passed, and the railway did not provide information about the wagons, which were now untraceable. Referring to a similar case, the Tribunal observed that the taxable event occurred upon agreement and delivery of the wagons, not on a daily basis. The Tribunal concluded that long-term agreements for movable property fell within the exclusionary clause of Section 65(105)(zzzzj), making the appellant not liable for Service Tax due to the wagons not being located in India throughout the lease period.

Based on the precedent set by earlier orders, the Tribunal found no justification to uphold the impugned order demanding Service Tax. Therefore, the appeal by the appellant was allowed, setting aside the previous order and relieving the appellant from the Service Tax liability on the lease rent for railway wagons under the Own Your Wagon Scheme.

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