Tribunal dismisses Service Tax demand on tangible goods, diesel, and mining machines

The Tribunal upheld the dropping of Service Tax demand for 'Supply of Tangible Goods' for 2009-10 and 2010-11 due to VAT payment on deemed sale under the lease agreement. The demand for Service Tax on the value of diesel supplied was dismissed based on precedent excluding free supplies from taxable consideration. Additionally, the demand for Service Tax on machines supplied for mining activities in 2006-07 and 2007-08 was rejected as the taxable activity commenced after May 16, 2008. The Tribunal affirmed the Order-in-Original and dismissed the Revenue's appeal.

---

---

Issues:
- Dropping of Service Tax demand under the category of 'Supply of Tangible Goods' for the period 2009-10 and 2010-11.
- Dropping of demand for Service Tax on the value of diesel supplied by the service recipient.
- Demand for Service Tax on machines supplied for mining activities during 2006-07 and 2007-08.

Analysis:

1. Issue 1 - Dropping of Service Tax Demand for 'Supply of Tangible Goods' (2009-10 and 2010-11):
The Adjudicating Authority dropped the demand for Service Tax under the category of 'Supply of Tangible Goods' for the mentioned period as the terms of the lease agreement with M/s ASI amounted to a deemed sale on which VAT had already been paid. The Tribunal upheld this decision, stating that the leasing of goods did not fall under the ambit of Supply of Tangible Goods Service due to the nature of the lease agreement.

2. Issue 2 - Demand for Service Tax on Value of Diesel Supplied:
The appeal raised concerns about including the value of diesel in the lease charges for the machines supplied. However, the Tribunal referred to a precedent where it was established that the value of free supplies, such as diesel, is not to be included in the gross consideration received by the service provider for taxable service. Therefore, the demand related to the value of diesel was deemed unsustainable.

3. Issue 3 - Demand for Service Tax on Machines Supplied for Mining Activities (2006-07 and 2007-08):
Regarding the demand for Service Tax on machines supplied for mining activities during 2006-07 and 2007-08, the Revenue argued that the charges should be included under 'Site Preparation' services. However, the Tribunal noted that the activity of Supply of Tangible Goods became taxable only from May 16, 2008. As a result, the demand for Service Tax on the machines supplied for mining activities before this date was dismissed, as the activity was not taxable under the relevant category at that time.

In conclusion, the Tribunal upheld the Order-in-Original and rejected the appeal filed by the Revenue after considering and addressing each issue raised by both parties in detail.

---