Vedanta Ltd. Vs Commissioner of GST and Central Excise (CESTAT Chennai)
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai allowed the appeal filed by the appellant and set aside the service tax demand, interest and penalties confirmed under the category of “Supply of Tangible Goods for Use Service.” The dispute related to voyage charter agreements entered into with foreign vessel owners during the period from 16 May 2008 to 31 August 2009 for transportation of coastal goods. The Department had alleged that payments made to foreign vessel owners were liable to service tax under the reverse charge mechanism as supply of tangible goods for use service.
The appellant contended that the agreements were voyage charters for transportation of goods and not contracts for hiring vessels. It submitted that possession and effective control of the vessels always remained with the foreign vessel owners, who provided the crew, retained operational control, and were responsible for navigation and management. The consideration was paid as freight based on the quantity of cargo transported and not as charges for use of the vessels. The appellant also argued that the Department had accepted the same activity as transportation of coastal goods in the subsequent period and that the issue was interpretational, making the extended period of limitation inapplicable.
