FFC Charges are not Consideration Received for Providing Supply of Tangible Goods: CESTAT quashes Service Tax Demand [Read Order]

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed service tax demand and held that Fixed Facility Charges (FFC) are not consideration received for providing the supply of tangible goods.

On verification of agreements entered between the appellant, M/s.Inox Air Products Ltd and their customers, it was found that the appellant installed the said tanks at the customer’s premises for the continuous supply of nitrogen liquid. The customers are required to provide space for installing the said tanks and free access is given to the appellant for supply of liquid nitrogen gas. The appellant was receiving fixed facility charges (FFC) from their customers for providing such storage tanks.

It, therefore, appeared to the department that the appellant is providing services in the nature of ‘supply of tangible goods. Show cause notice was issued to the appellant demanding service tax along with interest and imposing penalties. After due process of law, the original authority confirmed the demand, interest and imposed penalty.

The Counsel for the appellant contended that the appellant paid Excise Duty on the same. Moreover, the appellant has also paid VAT @ 4 % on the Fixed Facility Charges being the transfer of right to use/deemed sale, under the Puducherry Value Added Tax Act, 2007. 

The Counsel further contended that the appellant having discharged excise duty and paid VAT on the said FFC collected from the customers, the appellant cannot be further burdened with the levy of service tax of the same amount.

A Two-Member Bench of the Tribunal comprising Sulekha Beevi CS, Judicial Member and M Ajit Kumar, Technical Member held that “Since it is clarified by the Board in the appellant’s own case that the said charges have to be included in the transaction value for payment of excise duty, we find no reason to hold that FFC charges are in the nature of consideration received by the appellant for providing supply of tangible goods. Relevant Board circular is binding on the department.”

To Read the full text of the Order CLICK HERE

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