TaxTMI 
TaxTMI 
2018 (10) TMI 217
X X X X Extracts X X X X
X X X X Extracts X X X X
....red into an agreement with Usha Martin Ltd. (UML) and Usha Alloys and Steels Division, a division of Usha Beltron Ltd, over a period of time. 2. The Revenue contended that the appellants are engaged in banking and other financial services, management maintenance or repair service, storage and warehousing service. Initially, a show-cause notice dated 6.2.2007 was issued to the appellants covering the period August 2005 to August 2006 and demand of service tax raised therein were confirmed. Subsequently, show-cause notices were issued for further periods and the demands were confirmed by the adjudicating authorities along with interest and penalties. Details of orders passed, amounts demanded and appeals preferred by the appellants are as follows: Appeal No OIO /OIA No. /Date Period Amounts demanded under various Heads (INR) Banking & Other Financial Services Management& Maintenance or Repair Services Storage and warehousing Services ST/496/2008 15/2007 9.10.2007 August 2005 to August 2006 32,40,622 20,18,865 72,452 ST/973/2009 90/2009 25.8.2009 August 2007 to September 2008 1,00,13,752 26,01,609 2,20,626 ST/1874/2010 39/2010 20.05.2010 September 2006 to July 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....06 also had similar clauses as mentioned in the agreement dated 11.7.2001 except for the fact that lease rent per month was revised. 3.1.1 The learned counsel submitted that the Ld. Commissioner has observed that the equipment is whether operational or financial are covered under 'Banking and Other Financial Services' and therefore, taxable. Ld. counsel has brought the attention of the Bench to Accounting Standards AS-19 to distinguish between a 'finance lease' and 'operating lease'. "A Finance Lease is a lease that transfers substantially all the risks and rewards incident to ownership of an asset." "An operating Lease is a lease other than a finance lease." "A lease is classified as a finance lease, if it transfers substantially all the risk and rewards incident to ownership. Title may or may not eventually be transferred. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incident to ownership." 3.1.2 The Ld. counsel also referred to the circular DOF No.334/1/2007-TRU dt.28.2.2007 in which the finance lease as given by International Accounting Standards Committee has been quoted as: "Lease that transfers substant....
X X X X Extracts X X X X
X X X X Extracts X X X X
....x is leviable in terms of Section 65(105) (zm) of the Finance Act, 1994. 3.2 Ld. Counsel submitted regarding demand of service tax on Management, Maintenance and Repair services is concerned, the appellant entered into a separate agreement dated 30.12.2006 for operation and maintenance of the oxygen plant set up by them and owned by them. As per para 2 of the agreement, the appellants will maintain the oxygen plant themselves and M/s. UML shall pay the appellants the operations and maintenance charges at the rate of Rs. 15,40,000/- per month during the first year, Rs. 10,00,000/- per month during the second year and from third year onwards Rs. 13,40,000/- per month. The appellants being the owners of the oxygen plant set up and they only undertake managing, maintenance and repair services. Thus, they are providing services to themselves and not to any other person. Therefore, no service tax is leviable under this Heading. 3.3 With reference to the demand of warehousing and storage services, the learned counsel for the appellant submitted that the appellants have entered into an agreement dated 1.8.1999 with M/s. UML to deliver liquid oxygen into appellant's storage installations ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ded that the stamp paper on which the said agreement was made was purchased on 4.9.2001 as per the endorsement on the reverse side of the stamp paper. He contended that therefore, by any stretch of imagination, the agreement could not have been concluded before 16.7.2001 and that Shri Asith Gangopadhyaya in his statement dated10.8.2005 has admitted that the agreement was not signed on 11.7.2001. The appellants contended that it is not denied that the stamp paper was purchased on 4.9.2001, however, the agreement dated 13.7.2001 superseded an earlier agreement entered in the year 2000. The Ld. Commissioner was under the assumption that there does not exist any oral or written agreement. The Indian Contract Act recognizes both written and oral contracts. The appellants have submitted the following documents along with written submissions to substantiate their argument that the contract was effectively before 16.7.2001. * Acknowledgment from Entrepreneurial Assistance Unit of Ministry Commerce and Industry dated 9.6.2000. * Chartered Engineer's Certificate dated 9.8.2000 for one oxygen compressor for oxygen plant for UML. * Letter dated 10.8.2000 from Praxair to Ministry of Indu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or leasing of the plant to M/s. UML. 5.1.3. The counsel for the appellants has also taken a plea that the services rendered by them was only for leasing of the equipment and was not a financial lease. Therefore, they cannot be categorized under 'Banking and Other Financial Institutions'. They have tried to differentiate between finance lease and operating lease by taking recourse to Accounting Standards AS19 as cited above. We find that the Tribunal in the case of G.E. India, Industries Ltd.: 2008 (12) STR 609 in a similar situation where extrusion material was given on lease to Jain Irrigation, the Tribunal after looking into the terms and conditions of the agreement which are similar to the present agreement, set aside the demand. The Tribunal held as under: - 4. Since the Finance Act, 1994 does not define what is financial leasing, the Commissioner (Appeals) has relied upon the Accounting Standard published by ICAI. According to the accounting standards, the leasing is classified as a financial leasing if the ownership of the assets on lease is transferred to lessee by the end of the lease term and this opinion is created at the inception of the lease itself. In the instant ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e service and Service Tax is payable on this value. Accordingly, it is clarified that Service Tax in the case of financial leasing including equipment leasing and hire purchase will be leviable only on the lease management fee/processing fee/documentation charges (recovered at the time of entering into the agreement) and on the finance/interest charges (recovered in equated monthly installments) and not on the principal amount." 5.1.4 On going through the agreement, for establishment of VPSA based oxygen plant between M/s. Usha Beltron Ltd. (M/s. UML) and the appellants, we find at para 1.7 that subject to other provisions of this agreement, title to all oxygen plant equipment will remain vested in Praxair. Praxair shall remain at all times the sole and absolute owner thereof and no right, ownership, title or interest therein (save and accept for the lease hold rights aforesaid) shall pass to USAD. Praxair shall be entitled to put its name plates or markings on any part of the oxygen plant or oxygen plant equipment indicating Praxair's title and interest therein. USAD shall at no time contest or challenge Praxair's sole and exclusive ownership of the oxygen plant equipment or any ....