Old records, files of clients, discharged cheques, books of accounts etc. are not goods and so their storage is not liable to service tax.

PJ/Case Laws/2012-13/1420

Case:- COMMISSIONER OF SERVICE TAX, MUMBAI Versus P. N. WRITER & CO. LTD.

Citation:- 2012 (28) S.T.R. 264 (Tri. – Mumbai)

Brief Facts:-The facts arising for consideration in these appeals are as follows. The appellant is registered with the department for service tax purposes under the category of 'Business Auxiliary Service.' They submitted an application for centralised registration for payment of service tax. During the pendency of the application for centralised registration, the anti evasion wing at Bangalore initiated investigation against the branch office of the appellant at Bangalore for evasion of service tax. It was noticed that the appellants were raising bills on their clients for (a) segregation and packing charges (b) storage charges and (c) retrieval charges, on which they were not discharging any service tax liability. It was submitted by them that the said activity was undertaken by them for storage and retrieval of records of banks and corporate houses and the records consisted of discharged cheques, vouchers, agreements, books of accounts etc., which were not intended for sale and were not having any commercial value. The same were only maintained to comply with the statutory provisions for discharging any obligation/contract with customers for legal purposes. For rendering these services they raised bills on their clients towards (1) segregation, labelling and marking of records; (2) transportation of records; (3) storage of records at the premises; and (4) retrieval/recall services.

The department was of the view that the activities undertaken by the appellant comes under the category of taxable service of "storage and warehousing" as defined in Section 65(102) of the Finance Act, 1994 and therefore, they are liable to pay service tax on the said activity under Section 65(105)(zza) of the said Finance Act. Accordingly, a show-cause notice was issued to the appellant demanding service tax for the services rendered during the period from 16-8-2002 to 30-9-2004. Another show- cause notice was issued demanding service tax for the period October 2004 to September 2005. Both these show-cause notices were adjudicated by the Commissioner of Central Excise (Adjudication), Mumbai order wherein the Commissioner came to the conclusion that the storage and warehousing services rendered under Section 165(108)(zza) relates to storage and warehousing of "goods"; in the instant case, the storage and warehousing has been rendered in respect of old files and records which are not goods and therefore he dropped the proceedings initiated against the appellant. Aggrieved by the said order, the revenue is in appeal before us.

In the meanwhile, another show-cause notice was issued demanding Service tax for the period from 1-10-2005 to 30-9-2006 as the same formed as in the previous notice and the case was assigned to Commissioner of Central Excise, Thane I for adjudication. The same was adjudicated vide order-in-original confirming the service tax demand classifying the service rendered by the appellant under storage and warehousing services along with interest thereon and also imposing a penalty under Sections 76 and 78 of the Finance Act, 1994. The appellants are also against the said order.

Appellant Contentions:-The Revenue submits that the activity undertaken by the appellant would come under the purview of storage and warehousing services as defined in Sections 65(102) and 65(105)(zza) of the Finance Act, 1994. According to the ld. AR, the definition of goods under the Sale of Goods Act, 1930 includes every type of movable property and records, files etc. are movable property, and hence they are covered under the definition of 'goods'. The condition of sale is not necessary for levy of service tax. Therefore, he prays for setting aside the order and upholding the order confirming the demand of service tax.

Respondent Contentions:-The Assessee submits that the provisions relating to storage and warehousing under Sections 65(102) and 65(105)(zza) of the Finance Act applies only in respect of goods as defined in the Sale of Goods Act, 1930. Section 2 of Sale of Goods Act, 1930 defines - "goods" means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale. The Hon'ble Apex Court in the case of R.D. Saxena v.- Balram Prasad Sharma [AIR 2000 SC 912] had held that to constitute goods, the same should be marketable. Since files, records etc. cannot be sold to a third party, they cannot be considered as goods. In view of the above, the service rendered by them in respect of storage and warehousing of old files, records etc. does not come under the category of "storage and warehousing services" as defined in the Finance Act, 1994. In view of the above, he prays for setting aside the order confirming the demand of service tax and upholding the order wherein the demand for service tax has been dropped based on the above judgment.

Reasoning of Judgment:-The Tribunal has carefully considered the rival submissions. The short question for consideration is whether the records such as discharged cheques, vouchers, deeds, agreements, books of accounts of banks and corporate houses would come under the category of 'goods' as per the provisions of Section 2(7) of the Sale of Goods Act, 1930 or not. Section 65(102) of the Finance Act defines storage and warehousing as - "storage and warehousing" includes storage and warehousing services for goods including liquids and gases but does not include any service provided for storage of agricultural produce or any service provided by a cold storage." The taxable services in relation to storage and warehousing has been defined in Section 65(105)(zza) of Finance Act as "any service provided to any person by a storage and warehouse keeper in relation to storage and warehousing of goods. Section 65(50) defines goods as "Goods" has the meaning assigned to it in clause (7) of Section (2) of the Sale of Goods Act, 1930 (3 of 1930). Section 2(7) of Sale of Goods Act, 1930 defines goods as - "goods" means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale." From the above definition, it is clear that to constitute goods, saleability is an essential criteria. If "Saleability" was not a relevant criterion, there was no necessity to refer to the definition of goods, under the Sale of Goods Act, 1930. Sale of Goods Act governs sale and purchase of goods. Therefore, the very reference to the definition of goods under the Sale of Goods Act implies that "Saleability" is a necessary condition to consider something as 'goods'. Even in common parlance, it has been held in a number of judgments by the Hon'ble Apex Court that goods are something which can come into the market for being bought and sold. The Hon’ble Apex Court in R.D. Saxena v. Balram Prasad Sharma (supra) has clearly held that the case files maintained by a bank pertaining to their clients cannot be equated with goods as they are not saleable goods and they do not have any marketability. In the said case, the respondent bank retained the appellant (Advocate) to represent the bank in cases where the bank was a party. Later, the bank terminated the retainership and asked him to return all case files. The appellant advocate sent a bill for remuneration and informed the bank that the case files would be returned only after the dues were settled. The issue before the Hon’ble Apex Court was whether the advocate had a lien on the litigation papers entrusted to him by his client. The appellant contended that he had a right of lien over the goods under Section 171 of the Indian Contract Act. It was held by the Hon'ble Apex Court that files containing copies of the records cannot be equated with the "goods" mentioned in that section. "Goods" under Section 171 should have marketability and "goods" refers to saleable goods as defined in Section 2(7) of the Sale of Goods Act, 1930. Even though the said judgment was passed in the context of Section 171 of the Contract Act, wherein also the goods were defined as per the Sale of Goods Act, 1930, the ratio of the judgment squarely applies to the facts of the case. Therefore, in the instant case also, the various old records such as discharged cheques, vouchers, books of accounts, in respect of which the service was rendered by the appellant to his clients such as banks and corporate houses for management of the records, cannot be considered as storage and warehousing of 'goods' as defined in the Finance Act, 1994 read with Section 2(7) of the Sale of Goods Act, 1930. In view of the above, we hold that the appellants are not liable to pay any service tax in respect of the activity undertaken by them relating to the storage and warehousing of old records of their clients. Accordingly, we allow the appeal filed by the appellant and dismiss the appeal filed by the revenue.

Decision:-Appeal Dismissed.

Comment:-The essence of this case is that as various old records such as discharged cheques, vouchers, books of accounts etc. cannot be equated with “goods”, service of storage and warehousing for them cannot be leviable to service tax as only the service of storage and warehouse of goods is liable to service tax.

Comments

PJ/Case Laws/2012-13/1420

Post a Comment

Query