Freight Concession Under LWIS Not Taxable as Supply of Tangible Goods Service: CESTAT Hyderabad

UltraTech Cement Ltd Vs Commissioner of Central Tax (CESTAT Hyderabad)

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad, allowed six appeals filed by UltraTech Cement Ltd against Orders-in-Appeal that had upheld Orders-in-Original confirming service tax demands, interest, and penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The demands were raised on the allegation that the appellant had supplied its privately owned railway wagons to the Indian Railways under the Liberalized Wagon Investment Scheme (LWIS) and received freight concession as consideration for the taxable service of “Supply of Tangible Goods for use service.”

The appellant, engaged in the manufacture of cement and clinker, had procured BCCW railway wagons under the LWIS introduced by the Ministry of Railways. Under the scheme, private investors procure wagons at their own cost for transportation of their own goods and receive freight concession for a specified period. Ownership of the wagons remains with the investor, and the wagons are utilized only against indents placed by the investor.

According to the department, by permitting the Railways to attach these wagons to railway engines for transportation, the appellant supplied tangible goods for use to the Railways, while the freight concession constituted consideration for such taxable service. The department also invoked the extended period on the ground that the appellant had failed to discharge service tax liability.