Tribunal rules storage tank rental not subject to service tax. Appeal rejected due to timing and lack of evidence.

The Tribunal held that the respondents were not liable to pay service tax under the category of "Storage and Warehousing Service." The Department's appeal was rejected as the respondents only rented out storage tanks and did not directly provide storage and warehousing services. The Tribunal found that the show-cause notice issued by the Department was beyond the normal limitation period and based on insufficient grounds, leading to the rejection of the Department's appeal.

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Issues Involved:
1. Classification of services provided by the respondents.
2. Liability of the respondents to pay service tax.
3. Relationship between the respondents and M/s. Adept Agencies Pvt. Ltd.
4. Applicability of the Board’s Circular B/11/01/2002 TRU dated 01.08.2002.
5. Bar of limitation for issuing the show-cause notice.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Respondents:
The respondents are engaged in renting out liquid storage tanks and have an agreement with M/s. Adept Agencies Pvt. Ltd. for handling cargo, loading, unloading, and other related services. The Department contends that the services fall under "Storage and Warehousing Service" as defined under Section 65(102) and Section 65(105)(zza) of the Finance Act 1994. However, the Commissioner (Appeals) found that the respondents only rent out storage tanks and do not provide storage and warehousing services directly. The respondents argue that their activity does not satisfy the definition of "Storage or Warehousing Service," as they only charge rent based on tank capacity and do not receive remuneration for any additional services.

2. Liability of the Respondents to Pay Service Tax:
The Department issued a show-cause notice demanding service tax and educational cess from the respondents, claiming that they are responsible for providing storage and warehousing services. The respondents counter that M/s. Adept Agencies Pvt. Ltd. provides these services independently and pays the applicable service tax. The Commissioner (Appeals) supported this view, stating that the respondents are not liable for service tax as they do not provide the services themselves.

3. Relationship Between the Respondents and M/s. Adept Agencies Pvt. Ltd.:
The Department argues that the relationship between the respondents and M/s. Adept Agencies Pvt. Ltd. is that of a principal and agent, making the respondents liable for service tax. However, the agreement between the parties indicates a principal-to-principal relationship. The Tribunal found no evidence that M/s. Adept Agencies Pvt. Ltd. was created to evade tax, and the services provided by them are independent of the respondents.

4. Applicability of the Board’s Circular B/11/01/2002 TRU dated 01.08.2002:
The Department cited the Board’s Circular to argue that the respondents are liable for service tax as they provide security, stacking, loading/unloading, and other services. However, the Tribunal noted that the respondents only rent out storage tanks, and all other services are provided by M/s. Adept Agencies Pvt. Ltd. The Circular clarifies that mere renting of space does not constitute storage or warehousing services, and the essential test is whether the storage keeper provides additional services, which the respondents do not.

5. Bar of Limitation for Issuing the Show-Cause Notice:
The respondents received their service tax registration on 21.11.2000, and the Department issued the show-cause notice on 11.05.2005, beyond the normal period. The Tribunal found that the Department had knowledge of the agreement between the respondents and M/s. Adept Agencies Pvt. Ltd. as early as 21.11.2002. Therefore, issuing the show-cause notice for an extended period based solely on the agreement is not acceptable, making the demand barred by limitation.

Conclusion:
The Tribunal concluded that the respondents are not liable to pay service tax under the category of "Storage and Warehousing Service." The appeal filed by the Department does not survive on merits or limitation grounds. The order of the Commissioner (Appeals) was upheld, and the Department's appeal was rejected.

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