CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

NEW DELHI

PRINCIPAL BENCH - COURT NO. 1

SERVICE TAX APPEAL NO. 52932 OF 2016

(Arising out of Order-in-Original No. Commissioner/LTU(AUDIT)/02/2016 dated

29.07.2016 under C. No. LTU/SRF/ST/ADJ/440/2015/2974 passed by the

Commissioner LTU (AUDIT), New Delhi)

M/s SRF LTD. (Chemical Business)

…Appellant

G-1-22, RIICO Industrial Area,

Bindayaka, Jaipur

VERSUS

Commissioner LTU, New Delhi

…Respondent

APPEARANCE:

Shri B.L. Narasimhan & Ms. Shagun Arora, Advocate for the Appellant

Shri Ravi Kapoor, Authorized Representative of the Department

CORAM:

HON‟BLE MR. JUSTICE DILIP GUPTA, PRESIDENT

HON‟BLE MR. P.V. SUBBA RAO, MEMBER (TECHNICAL)

Date of Hearing: 15.12.2022

Date of Decision: 03.01.2023

FINAL ORDER NO. 50001/2023

JUSTICE DILIP GUPTA:

M/s SRF Ltd. (Chemical Business)¹ seeks to assail the order

dated 29.07.2016 passed by the Commissioner LTU (Audit), New

Delhi², confirming the demand of service tax with interest and penalty

for the reason that the appellant had received „supply of tangible

goods for use‟³ service from foreign suppliers, for which service tax

was to be paid by the appellant under reverse charge mechanism.

2.

The appellant is engaged in the manufacture of refrigerant

gases and other chemicals. During the relevant period from

1.

the appellant

2.

the Commissioner

3.

STGU

2

ST/52932/2016

16.05.2008 to 30.06.2012, the appellant entered into contracts with

foreign suppliers for obtaining ISO tankers on lease/ rental basis,

which were used by the appellant for transportation of refrigerant

gases via sea route. The appellant claims that during the lease

period, it had effective control and possession over the ISO tankers

and so the entire transaction would qualify as a „deemed sale‟ under

article 366(29A) of the Constitution, as a result of which no service

tax liability would arise.

3.

However, a show cause notice dated 29.05.2013 was issued to

the appellant alleging that the appellant had received services in the

nature of STGU from the foreign suppliers, which would be taxable

under section 65(105)(zzzzj) of the Finance Act, 1994⁴and leviable

to service tax at the hand of the appellant in terms of section 66A of

the Finance Act read with rule 2(1)(d)(iv) of the Service Tax Rules,

1994⁵ and rule 3(iii)(c) of the Taxation of Services (Provided from

Outside India and Received in India) Rules, 2006⁶.

4.

The appellant filed a reply to the show cause notice but the

Commissioner, by an order dated 29.07.2016, confirmed the demand

of service tax. The Commissioner noted the following facts before

determining the issues.

“11.6 I find that there is no dispute to the fact

that the noticee has taken the ISO Container on

lease/rental

basis

and

amount

of

Rs.4,60,67,566/- has been paid by them to

foreign based supplier, who is not having office in

India for supply of containers. I have perused the

copies of sample contract supplied by the noticee.

4. the Finance Act

5. 1994 Rules

6. 2006 Service Rules

3

ST/52932/2016

Noticee has emphasized on various condition laid down

in the Lessor Contract related to maintenance of the

containers, transportation of goods, use of containers

by the lessee and the noticee's responsibility for the

declaration and payment of duties and taxes concerning

the circulation of merchandise.”

(emphasis supplied)

5.

After referring to clauses 9 and 18 of the lease agreement

executed between the appellant and Tankspan Leasing Limited, the

Commissioner observed:

“11.9 From the above, it can be concluded that

though the containers were given to the noticee for

operation

and

use

of

the

containers for

the

transportation of refrigerant gases, but right of

possession and effective control of the containers

was never shifted to noticee as the containers were

never sold to them.

11.10 Further, attention is invited to instruction is