Control over goods is crucial test for classification under ‘Storage & Warehousing Services.’

PJ/CASE LAW/2015-16/2732

Case:-INOX AIR PRODUCTS LTD. VERSUSCOMMISSIONER OF CENTRAL EXCISE, RAIGAD

Citation:-2015 (38) S.T.R. 179 (Tri. - Mumbai)

Brief facts:-The appellants are in appeals against the impugned order wherein Service Tax demand has been confirmed against them for the period 16-8-2002 till March 2012 under the category of Storage and Warehousing Services.
The brief facts of the case are that the appellant is engaged in the manufacture and sale of liquid, oxygen, nitrogen, argon etc. which is to be stored in temperature of Minus(-) 269°C. Therefore, the customers who are using these gases are not having the storage facilities. The appellant is providing storage tank to their customers for storage of gas. The appellant is charging rent for usage of the storage tank, the appellant is also maintaining these storage tank i.e. wear and tear of these tanks are ensured by the appellant. The appellant is paying Central Excise duty as well as VAT on the rent portion charged from the customers. Revenue is of the view that the rent charged by the appellant for renting out the storage tank to their customer fall under the category of ‘Storage and Warehousing Services’ as per Section 65(102) of the Finance Act, 1994 therefore, impugned proceedings were initiated against the appellant and impugned demands have been confirmed by way of the impugned orders. The appellant is in challenge against the said orders before Tribunal.

Appellant’s contention:-The ld. Chartered Accountant appearing on behalf of the appellant submits that the appellant is merely renting storage tank and they are not storage and warehousing keeper. The control of the storage tank is with the buyer only. As per the taxability under Section 65(105) of the Finance Act, 1994, the appellant should provide storage and warehousing facility to their customer and the essential test is that they should provide the security of goods, tracking, loading and unloading of the goods in storage area. He, further submits that as the goods are not in their control, they are not maintaining any inventory of the said goods, therefore, they are not liable to pay Service Tax under the category of ‘Storage and Warehousing Services’. It is further contented that as the appellant has taken into consideration the rent charge on storage tank in the assessable value of the excisable goods. Therefore, double levy of duty cannot be imposed on them. In these circumstances, it is prayed that impugned orders to be set aside. He also took the support of the decision of this Tribunal in the case of Indian Oil Corporation Ltd.v. Commissioner of Central Excised, Goa - 2014-TIOL-729-CESTAT-MUM = 2014 (35)S.T.R.431 (Tri. - Mumbai).

Respondent’s contention:-Ld. A.R. opposed the contention of the ld. Chartered Accountant and submits that in this case the storage tank is well within the control of the appellant, as they are responsible for wear and tear of the storage tank and they have insured the storage tank therefore, storage tank is in control of the appellant. In these circumstances, they are covered under the category of Storage and Warehousing Services as defined under Section 65(102) of the Finance Act, 1994. In these circumstances, they are required to pay service on their activity.

Reasoning of judgement:-In this case to decide the taxability of service, the real test is that, when the goods have been passed on to the customer. From the facts of the case, it is emerging that the gas in the storage tank installed at the place of buyer and the goods transferred to the buyer. Therefore, there is no control of the appellant on the goods in storage tank, after gas is stored in the tank the whole responsibility of the goods is with the buyer only. In these circumstances, as the appellant is not having any control over the goods and they are not responsible for the security of the goods, the appellant is not covered under the category of Storage and Warehousing Services as defined under Section 65(102) of the Finance Act, 1994.
With these observations, they set aside the impugned orders and allow the appeals with consequential relief if any.

Decision:-Appeals allowed.

Comment:- The analogy of the case is that mere collection of rent of storage tanks without effective control over the goods is not taxable under the category of ‘Storage and Warehousing Services’. Assessee had no control on gas stored in storage tank, and it was whole responsibility of buyer only. As assessee was not responsible for security of goods, they were not liable to Service Tax under category of Storage and Warehousing Services. Hence assessee is not liable to pay service tax.

Prepared by:- Monika Tak

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PJ/CASE LAW/2015-16/2732

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