Supply of tangible goods requires independent use by another; freight concessions for private wagons are not taxable consideration.

Procurement of privately owned railway wagons under the Liberalized Wagon Investment Scheme did not constitute a taxable supply of tangible goods for use to the Railways where the wagons were acquired at the assessee's cost, dedicated to its own traffic, and unavailable for the Railways' independent commercial exploitation. A taxable service requires an identifiable service rendered to another person for consideration. The Railways provided transportation to the assessee, while the concessional freight was a policy incentive linked to capital investment rather than consideration for wagon use. The arrangement could not be split into transportation and wagon-supply transactions; consequently, the service-tax demand, interest and penalties were unsustainable.

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Issues: Whether procurement of privately owned railway wagons under the Liberalized Wagon Investment Scheme and receipt of freight concession constituted a taxable supply of tangible goods for use service to the Railways.

Analysis: Service tax requires an identifiable service rendered by one person to another for consideration. The wagons were procured by the assessee at its own cost for transportation of its own goods, remained dedicated to its traffic, and were not made available to the Railways for independent commercial exploitation. The transportation service flowed from the Railways to the assessee, which paid freight at concessional rates. The freight concession was a policy incentive and reduction in freight linked to capital investment, not consideration flowing for any independent service. The arrangement could not be artificially divided into separate transportation and wagon-supply transactions; nor could self-facilitation of logistics amount to provision of service to another.

Conclusion: The assessee did not render taxable supply of tangible goods for use service to the Railways, and the freight concession was not taxable consideration. The service-tax demand, interest and penalties were unsustainable.

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