CESTAT Rules Reusable Packaging Not 'Tangible Goods Service': Volvo Logistics Case Decided [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai Bench, has ruled that the leasing of reusable packaging material by Volvo Logistics to Rolltec Engineering does not constitute a “supply of tangible goods service” under Section 65(105)(zzzzj) of the Finance Act, 1994. The Tribunal found that the appellant had full possession and effective control over the goods, which removed the transaction from the scope of the taxable service.

The appellant, Rolltec Engineering, a 100% Export Oriented Unit of Brakes India Ltd., had entered into an arrangement with Volvo Logistics for the supply of reusable V-Emb packaging material such as wooden pallets, frames, lids, and plastic containers. These containers were provided on a stock hire basis, and the appellant was allowed to use the material free of charge for three weeks, after which rental charges would apply.

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The dispute arose after the department raised a demand treating the transaction as a taxable service under the category of “supply of tangible goods” on the ground that the goods were made available to the appellant without transferring ownership. The department argued that Volvo retained control over the packaging material through an online data system that tracked the real-time status and location of the goods.

The Tribunal, however, found that the data system merely provided logistical information and did not amount to Volvo retaining effective control or possession. Once the packaging material was delivered to the appellant, the latter was free to use it for transporting goods as deemed fit, without any restriction on its mode of use. The appellant was also liable for any damage to the material, further indicating possession and control.

The Bench also relied on a prior decision in Caravel Logistics Pvt. Ltd. v. CGST & CE (2024), where a similar arrangement involving containers was held not to fall within the definition of a service due to the transfer of effective control and possession. The Tribunal distinguished the Revenue’s reliance on CST Ahmedabad V. Adani Gas Ltd. (2020), noting that the Supreme Court in that case had acknowledged that there was no dispute regarding lack of transfer of possession, unlike the present case.

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The order was passed by Member (Judicial) P. Dinesha and Member (Technical) M. Ajit Kumar on 8 January 2025. The Tribunal allowed the appeals filed by Rolltec Engineering and Brakes India Limited, setting aside the impugned order and service tax demand, along with consequential relief.

To Read the full text of the Order CLICK HERE

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