By TIOL News Service

HYDERABAD, SEPT 03, 2018: THE appellant was appointed as a custodian under the Customs Act, 1962 and had rented/leased out their storage tanks in Kakinada for storage of imported edible oils. By an agreement, the appellant appointed M/s AAL to provide cargo handling services in the storage area directly to the users/importers.

The jurisdictional authorities entertained a view that the appellant is required to discharge Service Tax on the amounts received by them from AAL under the category of 'Storage and Warehousing services'.

SCN was issued for the demand of service tax along with interest and for imposition of penalties.

The demand was confirmed and so an appeal came to be filed before the CESTAT.

The appellant submitted that they were only undertaking the responsibility of safe custody of the goods (and hence are not providing any ‘storage and warehousing services') whereas the entire activity of loading and unloading of cargo from the vessel/tankers, pumping the cargo to storage tanks, heating the same, if required, making the deliveries of the cargo, loading of cargo into tankers/railway rakes, keeping records of cargo and co-ordinating with surveyors, cleaning the tanks, pipeline and pigging operations were entirely the responsibility of M/s AAL.

They rely on the decision of Tribunal in Finolex Industries Ltd 2007-TIOL-790-CESTAT-MUM and INOX Air Products Ltd 2014-TIOL-1394-CESTAT-MUM in support.

The CESTAT adverted to the CBEC circular B/11/1/2002-TRU dated 01.08.2002 where it is clarified thus -

"5. It has been stated that in some case a storage owner only rents the storage premises. He does not provide any service such as loading/unloading, stacking, security etc. A point has been raised as to whether service tax would be leviable in such cases. It is clarified that mere renting of space cannot be said to be in the nature of service provided for storage or warehousing of goods. Essential test is whether the storage keeper provides for security of goods, stacking, loading/unloading of goods in the storage area."

It was, therefore, observed -

++ Appellant was charging an amount as tank rental charges from M/s AAL.

++ There is nothing on record to show that appellant had besides collecting rental charges from M/s AAL had rendered other services and collected any further amount. In absence of any such findings, we have no hesitation to hold that the amount collected by appellant would not qualify for taxing under 'storage and warehousing services'.

The impugned order was set aside and the appeal was allowed.

(See 2018-TIOL-2705-CESTAT-HYD)