CESTAT set aside the order passed by the Commissioner (Appeals) which upheld the demand for service tax along with interest and penalty from the appellant for providing services in the nature of supply of tangible goods and observed that the service tax is not payable on FFC for providing liquid nitrogen storage tanks.

Brief Facts:

The appellant, engaged in the manufacture of Liquid Nitrogen and Liquid Oxygen and transporting them by trucks in special transport tanks and delivering them to customers as per requirements entered into agreements with various customers for the supply of goods as well as for providing fixed facilities in the nature of Vacuum Insulated Storage Tanks at the customer’s site. On verification of agreements entered between the appellant and their customers, it was found that the appellant installed the said tanks at the customer’s premises for a continuous supply of nitrogen liquid. On verification of these agreements, it was found that the appellant installed the said tanks at the customer’s premises for a continuous supply of nitrogen liquid. The customers were required to provide space for installing the said tanks and free access was given to the appellant for supply of liquid nitrogen gas and the appellant was receiving fixed facility charges (FFC) from their customers for providing such storage tanks. A show cause notice was issued to the appellant demanding service tax along with interest and for imposing penalties as it appeared to the department that the appellant was providing services like supply of tangible goods. The original authority confirmed the order and the same was upheld by the Commissioner (Appeals).

Contentions of the Applicant:

The learned counsel appearing for the appellant argued that the appellant raises a separate central excise invoice for collecting the amount for providing storage tanks as ‘Fixed Facility Charges’ (FFC) and the appellant had paid Excise Duty on the same and had also paid VAT on the FFC and the demand now was made alleging that the FFC collected by the appellant is a consideration for supplying tangible goods service. It was argued that the appellant having discharged excise duty and paid VAT on the said FFC collected from the customers, the appellant cannot be further burdened with the levy of service tax of the same amount.

Observations of the Court:

The tribunal stated that Section 65(zzzzj) defines “supply of tangible goods” as s “any service provided or to be provided to any person, by any other person about the supply of tangible goods including machinery, equipment and appliances for use, without transferring the right of possession and effective control of such machinery, equipment and appliances”. It was stated that in the present case, the appellant has to supply tanks before the supply of liquid gases to the customers and thus the assessee is required to include the value of FFC and MOTP in the transaction value of the gases for discharging the Central Excise duty.

It was further stated that the appellant had been discharging excise duty on the FFC which was not disputed by the department and it had also not been clarified by the board that the said charges have to be included in the transaction value for payment of excise duty and thus there is no reason to hold that FFC charges are like consideration received by the appellant for supplying tangible goods.

The decision of the Court:

The appeal was allowed and the impugned order was set aside.

Case Title: M/s Inox Air Products Ltd. vs. The Commissioner of GST & Central Excise

Coram: Hon’ble Ms. Sulekha Beevi C.S Member (Judicial) and Hon’ble Mr. Ajit Kumar, Member (Technical)

Case No.: Service Tax Appeal No. 41124 of 2013

Advocate for the Applicant: Mr. Joseph Prabakar

Advocate for the Respondent: Mr. M. Ambe

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