Case Law Details
MSPL Ltd Vs Commissioner of Central Excise and Customs (CESTAT Bangalore)
Briefly stated the facts of the case are that the appellants are engaged in mining and sale/export of iron ore and are registered with service tax department. The appellants have availed ‘own your wagon scheme’ introduced by Indian Railways by purchasing and leasing out six rakes of railway wagons under agreements dated 23.2007 and 8.3.2007 to M/s. South Western Railway, Hubli; the dry leaves of wagons was initially for a primary period of 10 years extendable to secondary period of up to 20 years. Central Excise department proposed demand of service tax on the lease/rental charges received on lease of wagons as above under the category ‘Supply of Tangible Goods’ as per Section 65(105)(zzzzj) of Finance Act, 1994. The department alleged that (i) the appellant-lessor is the absolute owner of the wagon; (ii) the cost of repairs and modification of the wagons have to be borne by the appellant-lessor; (iii) the lessor has got the right to terminate the agreement under certain circumstances; (iv) the appellants have insured the wagons; and that (v) the appellants have not paid VAT/sales tax on the transaction of the lease.
From the agreement it appears that though the wagons are purchased and provided by the appellants, the effective control of the wagons is with the Indian Railways. From the clauses of the agreement, it shows that the lessor-appellant need not pay for the standard maintenance; Indian Railways will be at liberty to make the necessary modifications/changes on the leased wagons and that Indian Railways are free to deploy the wagons as per their schedule and not necessarily only to the appellants. A combined reading of the same goes to prove that during the leased period, the effective control of the wagons is with the Railways.
In the impugned case, the appellants have transferred the right of possession and effective control of the wagons leased out by them to the South Western Railways. The appellants have also discharged applicable VAT / Sales Tax on such transaction, therefore, the activity undertaken by the appellants does not constitute a taxable service of Supply of Tangible Goods.
FULL TEXT OF THE CESTAT BANGALORE ORDER
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Will I get a quotation of your wagons for rental. best regards
Kapend kaludi yves.