Supreme Court Affirms Auction Proceeds Cannot Be Taxed as Storage/Warehousing Services, Rejects Revenue Review [Read Judgement]
The Supreme Court held that auction proceeds of abandoned cargo are not taxable as storage or warehousing services and dismissed the Revenue’s review petition
In a recent ruling, the Supreme Court of India affirmed that auction proceeds from abandoned or unclaimed cargo cannot be taxed as storage or warehousing services, and it rejected the Revenue’s review petition against Container Corporation of India Ltd. on the ground of delay as well as on merits.
The case began when the department issued a show cause notice to Container Corporation of India Ltd., alleging non-payment of service tax of over ₹5.12 crore on auction proceeds of abandoned cargo for the period 2010 to 2015.
The department argued that such amounts, retained by the company under Section 150(2)(d) of the Customs Act, 1962, were in the nature of storage and warehousing charges and thus taxable.
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The Adjudicating Authority dropped the demand, and on appeal by the Revenue, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) upheld that view. The tribunal observed that in the case of auctioned abandoned cargo, there was no service recipient and no taxable service could be said to have been provided.
The tribunal explained that auction proceeds were sale consideration, subject to sales tax or VAT, and not a payment for storage or warehousing. The tribunal relied on its earlier decisions, including Balmer Lawrie & Co. Ltd. and India Gateway Terminal (P) Ltd., which had consistently held that service tax could not be levied on such auction proceeds.
Aggrieved by the dismissal of its appeal by CESTAT, the revenue approached the Supreme Court. On 6 January 2025, the Supreme Court had already dismissed the Revenue’s civil appeal for being time-barred, though it left the question of law open.
The revenue then filed a review petition with a delay of 127 days, seeking reconsideration of that order. The Bench comprising Justice J.B. Pardiwala and Justice R. Mahadevan observed that the delay had not been satisfactorily explained. After going through the earlier order and the record, the court explained that no case for review was made out.
The Supreme Court dismissed the review petition both on the ground of delay and on merits, making it clear that no interference was warranted with the dismissal of the Revenue’s appeal.
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