Chargeability of service tax on services not actually rendered

[BipadBhanjan dixit]

A company has owned a Railway Wagon under a 'Wagon Investment Scheme' (in short WIS) proposed by the Indian Railways and handover to Indian Railway which runs in a general pool of wagons for 10 years as per agreement made between company and Railways. As per the agreement, the company will get the monthly guaranteed wagons for transporting of goods with 10 % freight rebate on use from Railway. No carry forward for non-use of guaranteed wagons to next month if it is a faults of the assessee,

In order to avoid the lapses of guarantee in a month, the company accepts the offer from other companies who are in need of wagons for transportation of their goods. The freight is paid by the company who transport of goods actually with 10 % freight rebate, For endorsing such guaranteed entitlement, the owner of wagons receive the consideration form the ultimate user both for benefiting 10% freight rebate and for shifting the right of entitlement on behalf of ultimate transporter.

Query-1 In this case whether the service tax is chargeable on consideration received?

Query-2 Where the company has made an agreement with the third party that irrespective of use or non-use of wagons, the transferee will have to pay the fixed agreed sum of money to the owner of wagons. In that case whether the service tax is applicable for a sum received from the transferee without actually using the wagons offered by the owner/investor?

If so. than under which catagory such tax is chargeable? ( Supply of tangible service OR Business Auxiliary service)?

Please guide me for overcoming this issue.

Thanks.

Regards,

B.DIXIT.

AI Summary

Service Tax Applicability on Wagon Usage Payments in Investment Scheme: Finance Act, 1994 Considerations and Contract Details A company participating in a 'Wagon Investment Scheme' with Indian Railways queries about the applicability of service tax on consideration received for transferring wagon usage rights to third parties. The company receives payment from other companies for the use of wagons and the associated 10% freight rebate. The query asks if service tax applies when the company receives payment without actual wagon usage. The response indicates that service tax applicability depends on the contract details and various provisions of the Finance Act, 1994, noting changes in service classification with the introduction of a negative list of services.