https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=769418 https://www.taxtmi.com/caselaws?id=769418 Levy of service tax - inclusion of value of banker/fuel and water delivered, while supplying the vessel by the appellants to their charterers, in determining the assessable value for discharging service tax under Supply of Tangible Goods for Use (STGU) service - period covered in the SCN is from October, 2009 to September, 2014 - HELD THAT:- The service tax is liable to be paid in respect of taxable services provided by one person i.e., service provider to the other person i.e., service receiver. It is not in dispute that the appellants-vessel owner is the service provider and their customer-charterers are the service receiver, in respect of the taxable service. Further, it also transpires that for the period relating to the pre-negative list regime i.e., prior to 1-7-2012, the taxability of service tax was determined in terms of coverage of an activity under the service tax net by defining taxable services under section 65(105) ibid, which enumerated each of the specified services. For the period post-negative list regime, the category of services hitherto defined under the erstwhile regime were merged under a common phrase i.e., 'service' as defined under section 65B(44) ibid, which was brought into effect from 1-7-2012. The relevant entry of the specific taxable service in the present case is 65(105)(zzzzj) ibid. Subsequent to introduction of Negative list regime from 01.07.2022, the services that are subject to levy of service tax have been explained in Section 66B ibid. In the agreement entered into by the appellants, it clearly states that the services provided are for hiring of the vessel for carrying petroleum products by the vessel, and such services shall start from the time of delivery of the vessel. It is also brought out clearly in the above agreement that the charterer pays for the fuel, water during the period of hiring of the vessel and the charges paid for the services of hiring of vessel include these. Since the vessel has to be moved to the place of delivery as agreed between the parties, after its last charter period is completed, the cost of fuel/bunker contained therein and water during the period of making the vessel ready for delivery for starting of service is required to be incurred by the appellants, which is separately reimbursed by charterers at actuals. It is clearly brought out that such activity of delivering the vessel is not part of the services, and therefore the fuel/bunker and water charges, incurred by the appellants, prior to the delivery of the vessel, in no case would become part of the services agreed upon between the parties. Therefore, the value of the bunker/fuel and water, which do not form part of the taxable services cannot be added to the taxable value of the services. The issue involved in this appeal was decided in an identical facts of the case by the Co-ordinate Bench of the Tribunal in the case of Express Engineers & Spares Private Limited [2022 (1) TMI 564 - CESTAT ALLAHABAD] by holding that supply of goods to customers would not amount to STGU for the period prior to 30.06.2012, or a declared service from 01.07.2012 to attract levy of service tax. It is not in dispute that the appellants have paid VAT on the bunker/fuel and there is no VAT on water. As these goods are supplied during the process of delivery of the vessel to the charterers, distinct from the fuel and water supplied during the charter period, such supply of the goods for enabling the delivery of the vessel cannot be brought under the purview of the service contract entered into between the appellants and their customers-charterers. Therefore, on the facts and circumstances of the present case, these cannot be brought under the scope of the supply of STGU services by the appellants. Conclusion - The reimbursement of bunker/fuel and water charges, which constitute supply of goods with payment of VAT, cannot be included in the taxable value of service under STGU service. Appeal allowed. Case-Laws Service Tax Tue, 22 Apr 2025 00:00:00 +0530