Voyage charter contracts treated as transportation of goods, not supply of tangible goods for use, with no extended limitation.

Voyage charter arrangements for carriage of goods through foreign vessel owners were treated as transportation of goods, not as supply of tangible goods for use, because the vessel owners retained possession, navigation, operational control, crew, and seaworthiness responsibility, while the charterer received carriage services on freight terms. Standard maritime clauses did not alter the essential character of the contracts. The document also states that extended limitation was unavailable because the transactions were recorded in the books, known through audits, and involved an interpretational dispute rather than suppression or intent to evade. On that basis, the demand, penalties, and related tax consequences were not sustained.

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Issues: (i) Whether voyage charter arrangements for carriage of goods through foreign vessel owners are classifiable as "Supply of Tangible Goods for Use Service" or as transportation of goods. (ii) Whether the demand is sustainable on limitation and whether penalties are imposable.

Issue (i): Whether voyage charter arrangements for carriage of goods through foreign vessel owners are classifiable as "Supply of Tangible Goods for Use Service" or as transportation of goods.

Analysis: The taxable entry of supply of tangible goods for use applies only where tangible goods are made available for use without transfer of possession and effective control. The agreements in question were voyage charters for carriage of cargo on agreed freight, with the vessel owners retaining command, navigation, operational control, crew, and responsibility for seaworthiness. Bills of lading and freight-based consideration showed carriage of goods, not hiring of vessels. The contractual clauses relied upon by the Revenue were held to be standard maritime terms that did not alter the essential character of the contracts. Binding precedent on voyage chartering supported the view that such arrangements are contracts of carriage and not supply of the vessel for use.

Conclusion: The activity was not taxable as "Supply of Tangible Goods for Use Service" and was correctly classifiable as transportation of goods, in favour of the assessee.

Issue (ii): Whether the demand is sustainable on limitation and whether penalties are imposable.

Analysis: Extended limitation required proof of suppression, wilful misstatement, fraud, or intent to evade tax. The transactions were entered into in the ordinary course of business, recorded in the books, and had been within departmental knowledge through repeated audits. The dispute was interpretational on classification, and no deliberate suppression or intent to evade was established. As the extended period could not be invoked, the demand also failed on limitation, and the penalties under the Act could not survive.

Conclusion: The invocation of the extended period was unsustainable and the penalties were not leviable, in favour of the assessee.

Final Conclusion: The demand of service tax, interest, and penalties could not be sustained either on merits or on limitation, and the impugned order was set aside.

Ratio Decidendi: A voyage charter for carriage of goods, where the vessel owner retains possession and effective control and the charterer receives only transportation services, does not fall within the taxable category of supply of tangible goods for use; extended limitation cannot be invoked absent suppression or wilful misstatement in an interpretational dispute.

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