Effluent couldn't be regarded as goods; its transportation through pipeline not liable to service tax

Movable property in general trade parlance is considered as a property in goods which can fetch certain price; hence, effluent waste, which is not being purchased by any person, cannot be regarded as 'goods' and transport thereof through pipeline cannot be charged to service tax.

Assessee was providing services of transportation/disposal of 'effluent waste' through its pipeline or conduit on certain consideration. Department demanded service tax thereon under Section 65(105)(zzz).

Section 65(105)(zzz) reads as under:

'Taxable service' means any service provided or to be provided to any person by any other person, in relation to transportation of goods other than water, through pipeline or other conduct.

Assessee argued that effluent waste is not goods; hence, service is not taxable.

Tribunal held in favour of assessee as under:

As per definition of 'goods' given in Section 65(50) of the Finance Act, 1994 the meaning of 'goods' for the purpose of Service Tax law has to be as assigned in Clause (7) of Section 2 of the Sale of Goods Act, 1930.

As per the provisions of Section 2(7) of Sale of Goods Act, 1930 the goods has to be a category of 'movable property'. Movable property in general trade parlance is considered as a property in goods which can fetch certain price.

In the present facts and circumstances of the case the effluent discharge facility is for disposal of a waste which is not being purchased by any person but is only being disposed of by utilizing the services of the appellant. As the relevant facilities/services of transportation provided by appellant are not for the 'goods' as defined in Section 2(7) of the Sale of Goods Act, 1930, the same cannot be considered as a service provided for transportation of goods, hence not taxable - Gujarat State Fertilizers And Chemicals Ltd. v. Commissioner of Central Excise, Vadodara [2015] 56 taxmann.com 448 (Ahmedabad - CESTAT).

Editor's note:

Under present law, if waste is not 'goods', transport thereof is taxable because negative list contains transport of 'goods' only.

Payments of commission for services rendered in relation to securities are out of ambit of sec. 194H; no TDS

Services rendered in relation to securities are excluded from express definition of 'brokerage or commission' and, thus, excluded from purview of section 194H.

Facts

a)The assessee received certain amount from Mutual fund houses and paid commission to TPL on account of brokerage for motivating potential investors to invest through the assessee in Mutual funds. According to agreement entered into by the assessee, TPL canvassed and marketed various Mutual fund schemes to potential investors after collecting details from the assessee.

b)The Joint Commissioner passed an order under section 144A directing disallowance of the commission paid to TPL.

c)The Assessing Officer disallowed the commission paid by the assessee to TPL under section 40(a)(ia) on the ground that tax was liable to be deducted at source under section 194H, but had not been deducted.

d)On appeal, the CIT(A) set aside the disallowance holding that services rendered in relation to securities are excluded from the express definition of 'brokerage or commission' and, thus, excluded from the purview of section 194H. Further, the Tribunal upheld the order of the CIT(A). The aggrieved- revenue filed the instant appeal.

The High Court held in favour of assessee:

1)The Joint Commissioner was in error in holding that while TPL had motivated investors to subscribe to Mutual Funds, it had no connection whatsoever with 'securities' as defined in Explanation to section 194-H. Explanation (iii) to section 194-H specifically states that the expression 'securities' will have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulations) Act, 1956.

2)Once it was an admitted position that TPL had motivated potential investors to invest through the assessee in Mutual Funds, it had to be held that these services were rendered in relation to a transaction in 'securities' and would be excluded from the definition of 'brokerage or commission' under section 194-H.

3)The CIT(A) was justified in coming to the conclusion that the services were rendered by TPL were in relation to 'securities'. Consequently, the disallowance under section 40(a)(ia) was not warranted.

4) Thus, there was no reason to hold that the Tribunal was in error. The appeal by the revenue had not given rise to a substantial question of law - CIT V. TANDON & MAHENDRA [2014] 45 taxmann.com 183 (Allahabad)