TaxTMI 
TaxTMI 
2026 (7) TMI 1783
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....ing out of Orders-in-Appeal, whereby, the Commissioner (Appeals) upheld the Orders-in-Original confirming the demand of service tax together with interest and penalties under section 76, 77 & 78 of the Finance Act, 1994, against M/s Ultratech Cement Ltd (hereinafter referred to as the appellant) on the allegation that the appellant had supplied its privately owned railway wagons to the Indian Railways under the Liberalized Wagon Investment Scheme (LWIS) and received consideration in the form of freight concession. According to the department, such activity amounts to taxable service under the category of 'Supply of Tangible Goods for use service'. 2. The facts, in brief, are that the appellant is engaged in the manufacture of cement and ....
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....ntial ingredients of a taxable service are completely absent. There is neither any service provider-service recipient relationship nor any identifiable service rendered by the appellant to the Railways. The appellant merely invested in wagons for their own business requirement. Such investment cannot be artificially converted into a taxable service. 6. Learned Counsel has also submitted that the freight concession is nothing but a reduction in freight payable by the appellant and cannot be equated with consideration under section 67 of the Finance Act, 1994. Reliance has been placed upon several judicial pronouncements as under: a) All India Federation of Tax Practitioners Vs UOI [2007 (7) STR 625 (SC)] b) Man Trucks In....
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....ifiable activity for another person for consideration. Thus, existence of a service provider, a service recipient, a taxable activity and consideration flowing for such activity are indispensably pre-requisites. 11. On examination of the agreement entered into between the appellant and the Railways, we find that the appellant procured wagons entirely at its own cost only for facilitating transportation of its own goods. The Railways neither hired these wagons for independent commercial exploitation nor acquired any unrestricted right to use them. The wagons remained dedicated to the appellant's traffic and could not be deployed by the Railways for third-party transportation except in accordance with the terms of the scheme. 12. We fur....
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....l held that mere price adjustment cannot be treated as consideration for a taxable service. The relevant paras are cited below for ease of reference. "12. The impugned order of the Principal Commissioner has made reference to sub-clause (vi), which is regarding provision of service on behalf of the client. The Principal Commissioner has in the impugned order stated that for the period of 1 April 2009 to 30 June 2012, it was clear from the clauses of the Agreement that the Appellant had shifted its responsibility of providing after sale service to MAN Germany, for which it reduced the sale price by 500 Euros. Thus, it was this amount that was paid to MAN Germany for carrying out after sale service on behalf of the Appellant and this....
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....le has subsequently been reiterated in the case of Bharti Airtel Ltd Vs CCGST, Gurugram (supra) and in the case of CCGST & CE, Mumbai East Vs Edelweiss Financial Services Ltd (supra), wherein it has been categorically held that in the absence of consideration flowing for a service, no service tax liability can arise. The relevant para in the case of Bharti Airtel Ltd Vs CCGST, Gurugram (supra) is cited below. "32. In view of the above discussion, we find the following: (i) Service tax cannot be levied when there is no consideration received. Free allowance given to the employees by the appellant is in the nature of discount/ concession and as the same has not accrued to the service provider-appellant, the same cannot form ....
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....cannot be treated as provision of service to another. 19. The department has proceeded to assume that because the Railways physically operate the wagons, the appellant must necessarily be supplying tangible goods for use. This reasoning overlooks the true legal relationship between the parties. Operation control exercised by the Railways while transporting the appellant's goods does not convert the transportation contract into a contract of hiring of wagons. 20. We further find that the freight concession granted under LWIS is inseparably linked with the capital investment in railway infrastructure and assured freight movement. It is not linked with any activity allegedly performed by the appellant for the Railways. Consequently, such....