The Mumbai bench of the Customs Excise and Service Tax Appellate Tribunal ( CESTAT ) ruled that there is no merit in the Commissioner (Appeals) and determined that storage and warehouse services are exempted from service tax.
The appellant, Total Oil India Pvt. Ltd, were engaged in the import and distribution of Liquefied Petroleum Gas (LPG) to various customers. To meet their continuous supply needs, customers request the installation of storage tanks, commonly referred to as ‘bullets,’ on their premises. The appellants bear the costs associated with the storage tanks and their installation, retaining ownership of the bullets. In return, the appellants charge lease rentals for the tanks.
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The department interpreted this arrangement as providing taxable services under the category of ‘storage and warehouse services’ from October 2005 to June 2012, and subsequently categorized these activities as taxable services liable for service tax. Consequently, show-cause proceedings were initiated against the appellants to confirm the service tax demand for these services.
The matter was adjudicated by the Additional Commissioner of Service Tax, Mumbai, who ruled on March 9, 2016, to drop the proposals against the appellants. The adjudicating authority reasoned that the appellants did not qualify as ‘storage and warehouse keepers’ prior to June 2012 and clarified that after July 1, 2012, the definition of ‘service’ under Section 65B(44) of the Finance Act, 1994 excludes delivery or supply of goods, which is considered a sale per Article 366(29A) of the Constitution of India. Following this decision, the department reviewed the order and filed appeals with the Commissioner (Appeals), who overturned the initial ruling on October 20, 2016, determining that the appellants indeed operated as storage and warehouse keepers and lacked evidence to support a transfer of rights regarding the storage tanks.
Mr. S.S. Gupta representing the appellant argued that the appellants did not fall under the purview of storage and warehousing services, referencing the contract terms and clarifications from the CBEC that excluded them from such categorizations. Furthermore, he highlighted that the current dispute had already been addressed in earlier final orders, namely 40418/2019 and 40719/2023, which favored the appellants.
The tribunal reviewed the sample contract dated February 11, 2000, between the appellants (formerly known as M/s. EFL Gas India Ltd.) and M/s. Super Spinning Mills Ltd. The bench noted that the contract stipulated that customers were responsible for connecting from the tap-off point to their equipment and that the appellants had no control over the LPG stored in the tanks. The responsibility for the LPG rested entirely with the customers.
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In concluding their review, the bench acknowledged that the issue at hand was no longer a matter of contention, as established by prior final orders. It noted that the earlier order (40418/2019) had not been appealed by the revenue, thus solidifying the finality of the matter. Consequently, the tribunal determined that the service tax demands confirmed against the appellants were unfounded.
The two-member bench, consisting of S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member), found no merit in the October 20, 2016, order from the Commissioner (Appeals). The Tribunal ultimately set aside the impugned order and ruled in favor of the appellants, allowing their appeal.
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