CESTAT Rules Leasing of ISO Tank Containers from Overseas Suppliers as Deemed Sale, Not Taxable Service [Read Order]

The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that the leasing of ISO tank containers from overseas suppliers amounted to a transfer of the right to use goods, which is treated as a deemed sale, and not a taxable service.

Transpek Industries Ltd., the appellant, had entered into agreements with foreign suppliers for the lease of ISO tank containers to transport chemicals. The department treated the arrangement as a service under the category of “Supply of Tangible Goods Service” and demanded service tax under the reverse charge mechanism.

The appellant’s counsel argued that the lease agreements transferred effective control and possession of the ISO tanks to the appellant. They explained that during the lease period the appellant had exclusive rights to use, maintain, and operate the tanks, and bore the related risks and responsibilities.

The counsel relied on the decision in SRF Ltd. v. Commissioner, LTU, New Delhi, where similar transactions were held to be a deemed sale and not liable to service tax.

The revenue counsel supported the findings in the impugned order but did not strongly oppose since the issue was already decided in the SRF Ltd. case.

The two-member bench comprising Ramesh Nair (Judicial Member) and Raju (Technical Member) considered the agreements and arguments. The tribunal observed that the clauses of the agreements showed transfer of possession and control of the ISO tanks to the appellant.

The tribunal explained that such conditions were substantively the same as those in the SRF Ltd. case, where the transaction was held to be a deemed sale.

The tribunal pointed out that since the appellant had effective possession and control, the leasing of ISO tanks could not be treated as a service. It ruled that the transaction was a deemed sale and thus not liable to service tax under “Supply of Tangible Goods Service.”

The tribunal set aside the impugned orders and allowed the appeals with consequential relief.

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