Service Tax Not Payable On Fixed Facility Charges For Providing Liquid Gas Storage Tanks: CESTAT

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that service tax is not payable on fixed facility charges (FFC) for providing liquid nitrogen gas storage tanks.

The bench of Sulekha Beevi (Judicial Member) and M. Ajit Kumar (Technical Member) has observed that FFC are not in the nature of consideration received by the appellant for providing the supply of tangible goods.

The appellant/assessee is in the business of manufacturing Liquid Nitrogen and Liquid Oxygen. The goods are supplied to various customers. The liquid gases are transported by trucks in special vehicle transport tanks and delivered to the customers as per their requirements.

The appellant had entered into agreements with various customers for the supply of goods (gases) as well as for providing fixed facilities in the nature of vacuum-insulated storage tanks at the customer’s site.

On verification of agreements entered into between the appellant and their customers, it was found that the appellant installed the tanks at the customer’s premises for a continuous supply of nitrogen liquid.

The customers are required to provide space for installing the tanks, and free access is given to the appellant for the supply of liquid nitrogen gas. The appellant was receiving fixed facility charges (FFC) from their customers for providing such storage tanks.

The ownership, control, maintenance, and insurance are undertaken by the appellant, and the customers were restricted from using the tanks for storage of the products purchased from the appellant alone.

The department noted that the appellant is providing services in the nature of ‘supply of tangible goods’. The show cause notice was issued to the appellant, demanding service tax along with interest and imposing penalties. The original authority confirmed the demand, interest, and imposed penalty, which was upheld by the Commissioner (Appeals).

The appellant contended that, having discharged excise duty and paid VAT on the FFC collected from the customers, the appellant cannot be further burdened with the levy of service tax of the same amount.

The tribunal noted that Section 65 (zzzzj) defines "supply of tangible goods". It states that any service provided or to be provided to any person by any other person in relation to the supply of tangible goods, including machinery, equipment, and appliances for use, without transferring the right of possession and effective control of such machinery, equipment, and appliances".

"We find no reason to hold that FFC charges are in the nature of consideration received by the appellant for providing supply of tangible goods," the CESTAT said.

Case Title: M/s.Inox Air Products Ltd. Versus The Commissioner of GST & Central Excise

Case No.: Service Tax Appeal No.41124 Of 2013

Date: 20.06.2023

Counsel For Appellant: Joseph Prabakar

Counsel For Respondent: M. Ambe

Click Here To Read The Order