Tankers hired to a goods transport agency qualified for service tax exemption; extended limitation could not be invoked.

Hiring of tankers to a goods transport agency was treated as a lease for use, but the arrangement did not transfer effective possession and control so as to constitute a taxable transfer of right to use tangible goods. The applicable service tax exemption notifications therefore covered the supply, and no service tax was payable on the transaction. On limitation, the demand could not rely on the extended period because audit had already noticed the issue and the show cause notice was issued after more than two years without adequate justification. The impugned order was set aside.

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Issues: (i) Whether hiring of tankers to a goods transport agency amounted to a taxable supply of tangible goods service or was an exempt transaction not liable to service tax; (ii) Whether the extended period of limitation could be invoked for the demand.

Issue (i): Whether hiring of tankers to a goods transport agency amounted to a taxable supply of tangible goods service or was an exempt transaction not liable to service tax.

Analysis: The agreement showed a lease for a specified period, with return of the tankers in good condition and responsibility for breakage and day-to-day use resting with the lessee. The arrangement did not transfer possession and effective control in the manner required for a transfer of the right to use. The transaction was treated as giving tankers on hire for use by a goods transport agency, and the relevant exemption notifications covered such supply to a goods transport agency for the period in question.

Conclusion: The transaction was exempt and no service tax was payable on the hiring of tankers to the goods transport agency.

Issue (ii): Whether the extended period of limitation could be invoked for the demand.

Analysis: The objection was already noticed by audit, yet the show cause notice was issued after the lapse of more than two years. On the facts, the demand did not justify invocation of the extended limitation period.

Conclusion: The extended period of limitation was not invocable.

Final Conclusion: The order in appeal was unsustainable and was set aside on the issues raised before the Tribunal, resulting in success for the appellant.

Ratio Decidendi: Where tankers are hired to a goods transport agency without transfer of effective possession and control, the arrangement falls within the exempt category under the relevant service tax notifications, and a demand raised beyond the normal limitation period cannot be sustained by invoking the extended period without proper justification.

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