Case Law Details
Universal Dredging and Reclamation Corporation Ltd. Vs Commissioner of CGST & Central Excise (CESTAT Chennai)
Transfer of goods by way of hiring vessel is not a Declared Service & hence No Service Tax applicable
The issue under consideration is whether the transfer of goods by way of hiring the charter vessel is taxable under Service Tax as declared service?
In the present case, the appellants were awarded dredging activity in the dock basin of Tuticorin Port by M/s.VOC Port Trust, Tuticorin. To carry out such dredging activity, they entered into agreement with M/s.Codralux S.A., Luxemberg and hired the charter vessel i.e. Cutter Suction Dredger for dredging activity. Referring to various clauses in the agreement, the department was of the view that the appellants are liable to pay service tax under reverse charge mechanism on the consideration paid to foreign company for hiring the vessel, being a ‘declared service’ under Section 66E (f) of the Finance Act, 1994 w.e.f. 1.7.2012.
CESTAT state that since the appellant retained the registration and the flag of the vessel, there is no transfer of effective control over the vessel. The vessel is registered in Luxemberg. It may not be practical to change the registration of the vessel in each case of charter agreement. In the present case, there is no change in ownership. If that be the case, it would be a sales simplicitor. Change of Registration and change of flag is necessary only when there is change in ownership. From the discussions made above, CESTAT are of the considered opinion that the transaction in the present case is identical to the transaction analysed by the Tribunal in the case of International Seaport Dredging (supra) as well as Petronet LNG Ltd. (supra). The transaction is nothing but transfer of right to use the goods and does not fall within the ‘declared services’ as alleged by The Demand therefore cannot sustain.
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