Case Note & Summary
The Commissioner of CGST, ST & Central Excise filed an appeal under Section 35G of the Central Excise Act, 1944, challenging the order dated 05/04/2017 passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), West Zonal Bench, Mumbai. The respondent, Rashtriya Chemicals & Fertilizers Ltd., a public limited company and an assessee under the Finance Act, 1994, had entered into an agreement with the Central Railways on 12/06/2009 to lease 416 wagons for 20 years. The assessee informed the Railways about receiving Rs. 13,04,29,833/- as lease rentals from financial year 2008-09 to 2011-12. The Revenue contended that this activity was liable to service tax under the category 'supply of tangible goods services' under Section 65(105)(zzzzj) of the Finance Act, 1994. A show cause notice was issued on 02/04/2012 for recovery of service tax of Rs. 1,53,50,737/- along with interest and penalty. The assessee filed a reply contesting the notice. The Commissioner confirmed the demand via order-in-original dated 16/03/2015. The assessee appealed to CESTAT, which allowed the appeal and set aside the demand. The Revenue then appealed to the High Court. The High Court framed the question of law: whether the leasing of wagons amounts to 'supply of tangible goods services'. The Court noted that the definition under Section 65(105)(zzzzj) includes any transfer of right to use tangible goods without transferring ownership, and the leasing of wagons falls within this ambit. The Court held that the CESTAT erred in holding that the activity is not a service, and thus allowed the Revenue's appeal, setting aside the CESTAT order and restoring the Commissioner's order.
Headnote
A) Service Tax - Supply of Tangible Goods Services - Leasing of Wagons - Section 65(105)(zzzzj) of Finance Act, 1994 - The issue was whether leasing of wagons to Railways constitutes 'supply of tangible goods services' - The Court held that the leasing of wagons is a service and the Assessee is liable to pay service tax on the lease rentals - The CESTAT's order setting aside the demand was set aside (Paras 1-12).
Issue of Consideration
Whether the leasing of wagons by the Assessee to the Railways amounts to 'supply of tangible goods services' under Section 65(105)(zzzzj) of the Finance Act, 1994, and whether the Assessee is liable to pay service tax on the lease rentals received.
Final Decision
Appeal allowed. Impugned order of CESTAT dated 05/04/2017 set aside. Order-in-original dated 16/03/2015 restored.
Law Points
- Leasing of wagons to Railways constitutes 'supply of tangible goods services' under Section 65(105)(zzzzj) of Finance Act
- 1994
- Service tax liability arises on such leasing activity
- CESTAT erred in holding that leasing of wagons is not a service
