Commissioner of Central Excise And Service Tax (LTU) , Mumbai Versus The Shipping Corporation of India Ltd. - 2016 (8) TMI 852 - CESTAT MUMBAI

The issue though has been discussed in the context of Service Tax but has far reaching implications.

One of the reasons given by the Hon'ble tribunal (third member) while ascertaining the nature of transaction for the purpose of service tax is,

"29 Not to be overlooked also is the performance of service on goods or equipment with ‘goods’ having the specific import supra. It may not be entirely correct in describing a ship or vessel as equipment though equipment may be fitted on board rendering the ascertainment thereof by the original authority to be that much more complex. It is also moot whether a ship or vessel may, with some degree of accuracy, be described as ‘goods.’ During the relevant period, taxability was limited to repair, maintenance or servicing of goods which were restricted to moveable property; this itself is defined in the General Clauses Act as all property excluding immoveable property which does not, per se, enable resolution of the dilemma of being so described. Land is, undoubtedly, immoveable property. Definition of ‘goods’ in the Sale of Goods Act, 1930 is, however, attracted to certain appendages of land to the extent that they can be separated from land before sale as part of contract of sale. Hence, structures that can be detached from the land are considered to be moveable. Logically, the oceans and the seas are equivalences of land and the inextricability of a vessel or ship from the waters should bring them within the ambit of immoveable. Ships before launch and for breaking up are goods but vessels or ships that are afloat are not goods except for the time that they are the subject of a sale agreement. That ships, vessels and motor vehicles need not exclusively be goods is also apparent in section 2 of Customs Act, 1962; they could also be conveyances.As conveyances, ships/vessels and motor vehicles move easily on water or land but, not being goods that are amenable to severance from land/water, are not distinguishable from immoveable property. Consequently, the legislative intent to tax repairs or maintenance of conveyance under section 65(105)(zzg) of Finance Act, 1994 may not be so apparent.  Motor vehicles were specifically excluded from its purview owing to existence of another taxable entry on 1st July 2003. Exclusion may not have been considered to be necessary for ships/vessels because the taxable entry came into effect on a much later date."

Accordingly, tribunal has stated in clear terms that, "As conveyances, ships/vessels and motor vehicles move easily on water or land but, not being goods that are amenable to severance from land/water, are not distinguishable from immoveable property."

 

Now a question of millions comes into one's mind that whether GST would be applicable on the sale  (or to say supply in terms of GST concept that is involving) of floating vessels or ships?

It is a fact that GST would be levied only on supply of goods and services, immovable property within the exclusive domain of State for the purpose of tax as per the Schedule VII of the Constitution of India, and therefore immovable property shall not be liable to Goods and Services Tax (GST).

Therefore, it is to be seen that, to what extent and limits the above decision of the tribunal [2016 (8) TMI 852 - CESTAT MUMBAI] will hold good. Indeed, it is subject to the scrutiny by the higher courts in times to come.

Classification of floating vessels as immovable property may exclude their sale from GST law taxation. The tribunal held that ships and vessels afloat are not 'goods' but are akin to immovable property because they cannot be severed from the waters; ships are goods only before launch, during breaking up, or when specifically the subject of a sale. As immovable property lies outside the GST domain under the constitutional allocation, this classification raises the question whether GST would apply to sale or supply of floating vessels-a point pending higher judicial scrutiny.