Order Date – 15 June 2023

Parties: M/s. Core Minerals Vs The Commissioner of Service Tax

Facts – 

• The Appellant, M/s. Core Minerals entered an agreement with M/s Archean Granites Private Limited s for the carriage of cobblestone from Chennai to Newark on voyage charter basis, for a specified amount of freight. These were lent to their group company, viz., M/s. Good Earth Maritime Ltd. on time charter basis.
• A show cause notice was issued proposing a demand of Service Tax alleged activity of the appellant, of providing vessels to the group company for export of goods, during the period 2008-09 and 2009-10 under Supply of Tangible Goods Service (STGS) and on the security deposit received by the appellant during January 2008 for renting of their property along interest and penalty.

Issue – 

• Whether the appellant is liable to pay Service Tax under STGS on both voyage charter and time charter and the security deposit?

Order –

• The Tribunal observed that what is provided for in the Fixture Notes is only a contract for carriage of cobblestone from Chennai to Newark for a freight and though the contract is said to be on a voyage charter basis, the Tribunal does not find any clauses to the effect that it involves transfer of right to use of the vessel. Therefore, when the contract itself is not for transfer of right to use the vessels, there cannot be any levy of Service Tax under the head “supply of tangible goods for use”.
• Regarding the service tax on time charter there are no allegations other than that the appellant did not disclose or that but for the investigation, the non-payment would not have come to light, lacks merit. Nor any merit in the allegation about the appellant having any intention to evade payment of tax. Thus, there are no justifiable reasons to sustain penalty under Section 78 ibid.
• The lease deed clearly identifies the lessor and the lessee and hence, the lessor-lessee relationship between the appellant and M/s. Good Earth Maritime Ltd. is undisputed. The above document requires payment of monthly rental apart from a one-time security deposit which is refundable. In view of the above, the demand of Service Tax with interest cannot sustain on the security deposit and consequently, the same is set aside.
• Though the allegation in the Show Cause Notice is only as to suppression of facts, but the “intent to evade tax” is conspicuously missing, which by itself makes it clear that even the Revenue did not have any justifiable reason to allege suppression of facts with an intent to evade tax.
• In view of the above discussion, there cannot be any demand other than for the normal period, but there can never be any penalty under Section 78 ibid., even for those which we have confirmed by this order.