By TIOL News Service

MUMBAI, SEPT 18, 2013: THE appellant imported helium gas which is supplied in reusable and returnable containers and have to be returned to the supplier. However, during the period the containers remained in the possession of the importer, they are charged rentals for the use of the containers. The department was of the view that the renting of containers falls within the taxable service category of "Supply of goods for tangible use" and the recipient of the service in India has to discharge service tax liability on the rent which he paid to the foreign supplier.

Accordingly, a SCN came to be issued for recovery of ST of Rs.41,97,248/-for the period September 2008 to March 2010. Another SCN seeking recovery of ST of Rs.28,56,680/- for the period May 2008 to May 2010 was also issued in respect of similar rentals paid to another foreign supplier.

Both these notices were adjudicated vide common order wherein the service tax demand was confirmed along with interest and penalties. As the appeals filed by the importer were dismissed by the Commissioner (A), the appellant is before the CESTAT.

It is submitted that the physical possession and control of the cylinders remains with the appellant during the period of usage and, therefore, the supply of cylinders does not constitute supply of tangible goods and hence it is not taxable.

The Revenue representative reiterated the findings of the lower appellate authority and submitted that in DO letter dated 01/03/2008 of the Jt. Secretary (TRU), it has been clarified that transaction of allowing another person to use the goods, without giving legal right of possession and effective control, not being treated as sale of goods is treated as service and hence service tax is payable.

The Bench observed -

"5.1 In the instant case, the transaction does not involve in supply of tangible goods for use at all. The appellant imported helium gas and the helium gas has to be filled in reusable and returnable containers. The supply of cylinders is part of sale of gas and it is not a separate activity in itself and therefore, the rental charges for the cylinders form part of the value of the goods sold. In view of the above, the clarification given by Joint Secretary (TRU) does not apply. Accordingly, we prima facie view that the appellants has made out a strong case in their favour for grant of stay…."

In fine, the Bench granted unconditional waiver from pre-deposit of adjudged dues and stayed the recovery.

In passing: s. 65(105)(zzzzj) of FA, 1994 reads "taxable service" means any service provided or to be provided, - to any person, by any other person in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances ;

(See 2013-TIOL-1378-CESTAT-MUM)