1. This appeal is directed against the Order-in-Appeal No. 11/2007 (V-II) dated 08.10.2007.
2. The relevant facts that arise for consideration are the appellants are manufacturers of refined edible oils, vanaspathi and related by-products. In additions to the above, appellants had been appointed as custodian of imported edible oils under Customs Act, 1962 and had rented/leased out their storage tanks in Kakinada for storage of the imported edible oils to those importers who availed the facility of storing imported oils in these storage tanks. By agreement dated 01.08.2002 and 31.07.2004, appellant appointed M/s. Adept Agencies Ltd. (AAL) to provide cargo handling services in the storage area directly to the users/importers using the tanks at storage terminal located at Kakinada as well as different ports/places. Appellant were paid a fixed sum by M/s. AAL in terms of the agreement. Lower authorities were of the view that the appellant is required to discharge the Service Tax on the amounts received by them from AAL under the category 'storage and warehousing services' during the period 16.08.2002 to 30.06.2005. after recording the statements of various persons, the show cause notice dated 29.07.2005 was issued for the demand of service tax liability along with interest and for imposition of penalties. Appellant agitated the show cause notice on the ground that they are only renting out their storage facilities and is not covered under 'storage and warehousing services' as per CBEC circular B/11/1/2002-TRU dated 01.08.2002. After following due process of law, the adjudicating authority confirmed the demands raised along with interest and imposed penalties. The appeal preferred against the said Order-in-Original was rejected by the first appellate authority.
3. Learned counsel draws our attention to the agreements entered by the appellant with M/s. AAL and submits that the entire activity of loading and unloading of cargo from the vessel/tankers, pumping the cargo to storage tanks, heating the same, if required, making the deliveries of the cargo, loading of cargo into tankers/railway rakes, keeping records of cargo and coordinating with surveyors, cleaning the tanks, pipeline and pigging operations were entire responsibility of M/s. AAL. It is also pointed out that M/s. AAL will pay a sum of Rs. 1,00,000/- for only renting out the premises. It is his submission that the adjudicating authority as well as the first appellate authority had only relied upon the fact that appellant is a custodian of goods under Customs Act and has to provide security of the goods stored in such tanks, hence, fall under 'storage and warehousing services', while totally ignoring the fact that other co-related work which is required under definition of 'storage and warehousing services' is not done by the appellant. He would submit that the reliance placed on the Board circular dated 01.08.2002 is correct and because they are undertaking responsibility of safe custody of goods does not mean that they are rendering any services which would get covered under 'storage and warehousing services'. He would rely upon the decision of the Tribunal in the case of Finolex Industries Ltd : 2007 (7) STR 408] and INOX Air Products Ltd : 2014 (36) STR 391] as also : 2015 (38) STR 179].
4. Learned Commissioner (AR) submits that appellants are custodian of imported edible oils under the Customs Act and are providing their storage tanks to certain customers for storage; the services of storage and warehousing are jointly provided by appellant and M/s. AAL as is evident from the agreement and appellant were raising invoices towards tank rental charges though it is in respect of various services rendered by them. It is her submission that when the appellants have undertaken for safe storage of the material imported, to the Customs Department, it would clearly mean that appellant had provided security services which is the important factor to come to conclusion that the services rendered by them would get covered under 'storage and warehousing services'. It is her submission that the decision of Finolex Industries Ltd. and INOX Air Products Ltd. are distinguishable as decision of Finolex is on an amount of rent collected from BPCL, while the case in hand, the rent is collected from the importers and users of tanks. It is her submission that the order of the first appellate authority is correct and needs to be upheld.
5. We have considered the submissions made by both sides and perused the records. The entire issue involved in this case is whether during the relevant period in question, the appellant is required to discharge service tax on the amounts received by them from M/s. AAL.
6. The appellant herein has stated that the amounts collected by them are nothing but rental charges as per the agreement entered with M/s. AAL in support of which agreements were produced and invoices raised by appellant on M/s. AAL were also produced. It was also pointed out from the statement of Senior Manager of the appellant as to the exact functioning of the entire storage activity.
7. It is seen from the records, the agreement entered by appellant with M/s. AAL specifically considers about the loading and unloading of cargo, pumping the cargo to storage tanks, heating the cargo, if required, making deliveries of the cargo, weighment of cargo, loading of cargo into tankers/railway rakes, keeping records of the cargo, deliveries, security of the cargo, co-ordination with surveyors, cleaning of the tanks, pipeline and pigging operation would lie with M/s. AAL and they are free to charge consideration for these services rendered by them to the importers of edible oils; who are using the facility of storage of oils in the Kakinada area. The said agreements also provide that M/s. AAL will pay a fixed sum of Rs. 1,00,000/- to the appellant as per the agreements. On perusal of agreement and invoices raised by the appellant on M/s. AAL, it is noticed that appellant was charging an amount as tank rental charges from M/s. AAL. It is also seen from the records that M/s. AAL have charged cargo handling charges from the appellant for storing and handling their consignments of edible oils which are stored in the said tanks. We also note that in the statement of Shri S.N.K. Maheswari, Senior Manager, recorded on 30.06.2005, specifically states that the security of the cargo of importers and users of tanks are to the account of M/s. AAL, which is as per agreement entered by appellant with M/s. AAL, hence security of the cargo as to the account of M/s. AAL, remains undisputed. There is nothing on record to show that appellant herein had besides collecting rental charges from M/s. AAL had rendered other services and collected any further amount. In the absence of any such findings, keeping in mind the factual position in this case, we have no hesitation to hold that the amount collected by the appellant herein would not qualify for taxing under 'storage and warehousing services'. We refer to the clarification given by the Board on this point in circular dated 01.08.2002 which we reproduce.
"3. Storage and warehousing service for all kinds of goods are provided by public warehouses, private warehouses, by agencies such as the Central Ware Housing corporation, Air Port Authorities, Railways, Inland Container Deport, Container Freight Stations, storage godown and tankers operated by private individuals etc. The storage and warehousing service provider normally make arrangement for space to keep the goods, loading, unloading and stacking of goods in the storage area, keeps inventory of goods, makes security arrangements and provide insurance cover etc. Service provided in ports has already been covered under the category of port service.
5. It has been stated that in some case a storage owner only rents the storage premises. He does not provide any service such as loading/unloading, stacking, security etc. A point has been raised as to whether service tax would be leviable in such cases. It is clarified that mere renting of space cannot be said to be in the nature of service provided for storage or warehousing of goods. Essential test is whether the storage keeper provides for security of goods, stacking, loading/unloading of goods in the storage area."
8. We also find similar issue came up before the Tribunal in the case of Finolex Industries Ltd. (supra) (wherein, one of us, M.V. Ravindran was a member) has held that mere collection of an amount for leasing of the tanks for the usage of storage tanks cannot be considered as providing of storage and warehousing services. In that case, M/s. BPCL had leased two tanks from Finolex Industries Ltd. and stored their LPG. Of the other activities related to loading and unloading, the logistical arrangement of the LPG was handled by M/s. BPCL, fixed amount paid by M/s. BPCL to Finolex Industries Ltd. was sought to be taxed under 'storage and warehousing services'. After reproducing the definition of storage and warehousing services, the Bench reiterated the clarification given by the Board i
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n circular dated 01.08.2002 and held that since Finolex Industries Ltd. did not provide any other services other than renting of the LPG tanks, services would not be covered under 'storage and warehousing services'. In the case in hand, the appellant herein is on further firm footing, in as much the agreement with M/s. AAL clearly provides for rendering various services to the importers by M/s. AAL including the security services. The said decision of the Tribunal was sought to be distinguished by the Learned Commissioner on the ground that M/s. BPCL is user of the tanks, hence, the facts are different. In our view, such distinguishing factor may not carry the case of the Revenue any further. 9. Accordingly, in the facts and circumstances of the case, and the judicial interpretation of the definition of 'storage and warehousing services', we hold that the impugned order is unsustainable and liable to be set aside and we do so. 10. The impugned order is set aside and the appeal is allowed.