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of <h1>Tribunal deems lease of ISO Tankers as sale, exempt from service tax</h1> <h3>M/s SRF LTD. (Chemical Business) Versus Commissioner LTU, New Delhi</h3> M/s SRF LTD. (Chemical Business) Versus Commissioner LTU, New Delhi - [2023] 109 G S.T.R. 379 (CESTAT - Del) Issues Involved:1. Whether the supply of ISO Tankers on lease to the appellant by foreign suppliers amounts to 'Supply of Tangible Goods for Use' (STGU) service.2. Whether the transaction qualifies as a 'deemed sale' under Article 366(29A) of the Constitution.3. Applicability of service tax under Section 65(105)(zzzzj) of the Finance Act, 1994.4. Whether the extended period of limitation could be invoked.5. Eligibility for cum-tax benefit under Section 67(2) of the Finance Act.6. Imposition of penalty and eligibility for waiver under Section 80 of the Finance Act.Detailed Analysis:1. Supply of ISO Tankers as STGU Service:The core issue was whether the lease of ISO Tankers from foreign suppliers to the appellant constituted an STGU service. The Commissioner confirmed the demand for service tax, stating that the effective control and possession over the tankers remained with the foreign suppliers, thus qualifying the transaction as an STGU service under Section 65(105)(zzzzj) of the Finance Act, 1994. The Tribunal, however, found that the appellant had effective control and possession of the tankers, which were used exclusively by the appellant, thereby negating the classification as an STGU service.2. Deemed Sale under Article 366(29A) of the Constitution:The appellant argued that the transaction should be considered a 'deemed sale' as per Article 366(29A) of the Constitution, which would exempt it from service tax. The Tribunal agreed, noting that the appellant had exclusive control and possession of the ISO Tankers during the lease period. The Tribunal cited several judgments, including Bharat Sanchar Nigam Ltd. vs. Union of India, to establish that the transfer of right to use goods with effective control and possession qualifies as a deemed sale.3. Applicability of Service Tax:The Tribunal analyzed the statutory provisions and concluded that for a transaction to be taxable as a service under Section 65(105)(zzzzj), the right of possession and effective control must not pass to the transferee. Since the appellant had both possession and effective control over the ISO Tankers, the transaction did not meet the criteria for service tax under the said section.4. Extended Period of Limitation:Given the Tribunal's decision on the primary issues, it found it unnecessary to address the contention regarding the invocation of the extended period of limitation.5. Eligibility for Cum-Tax Benefit:The appellant's eligibility for cum-tax benefit under Section 67(2) of the Finance Act was not specifically addressed in the Tribunal's final decision, as the primary issues resolved the matter in the appellant's favor.6. Imposition of Penalty and Waiver:The Tribunal did not find it necessary to delve into the issues of penalty imposition and waiver under Section 80 of the Finance Act, given the resolution of the primary issues in favor of the appellant.Conclusion:The Tribunal set aside the order dated 29.07.2016 passed by the Commissioner, holding that the supply of ISO Tankers on lease by foreign suppliers to the appellant amounted to a deemed sale under Article 366(29A) of the Constitution. Consequently, the transaction was not subject to service tax. The appeal was allowed, and the impugned order was quashed.
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