Per-trip provision of vehicles fitted with skids is not “supply of tangible goods” service.

Universal Distributors supplied trucks fitted with Hydrogen Cylinder Skids to M/s Raj & Company under an MOU.

The arrangement provided for charges per trip for the trucks and separate skid rent calculated on a per-NM³ basis; the customer was responsible for using and maintaining the vehicles during the rental period.

The Department classified the activity as “supply of tangible goods service” under Section 65(105)(zzzzj) of the Finance Act, 1994, alleging that the appellant had supplied the vehicles without transferring the right of possession and effective control.

A show-cause notice for October 2016 to June 2017 demanded service tax of ₹8,44,162, along with interest, penalties and late fee.

The adjudicating authority confirmed the demand, and the Commissioner (Appeals) upheld it.

In earlier proceedings concerning prior periods, the Tribunal had held that charging on a per-trip basis prima facie indicated transportation rather than renting and remanded the matters for examination under the category of Goods Transport Agency (“GTA”) service.

On remand, the Additional Commissioner dropped the demand, holding that the appellant was neither providing supply of tangible goods service nor acting as a GTA, but was providing means of transport to a GTA, an activity covered by the applicable exemption.

1. Whether the appellant’s provision of trucks fitted with Hydrogen Cylinder Skids to Raj & Company, for charges calculated on a per-trip basis, constituted “supply of tangible goods service” under Section 65(105)(zzzzj) of the Finance Act, 1994.

2. Whether the activity was more appropriately classifiable as GTA service, or as provision of means of transport to a GTA, so as to attract service-tax liability.

Section 65(105)(zzzzj) of the Finance Act, 1994 treated as taxable the supply of tangible goods, including machinery, equipment and appliances, for use without transferring the right of possession and effective control over them.

The Tribunal applied the principle that a transaction charged on a per-trip basis ordinarily indicates transportation of goods rather than conventional renting of a vehicle for a fixed periodic or lump-sum consideration.

It relied on its earlier orders in the appellant’s own cases, which required examination of whether the activity fell under GTA service, and on the remand order dated 25 September 2025, which held that the appellant was neither a provider of supply of tangible goods service nor a GTA, but a provider of means of transport to a GTA covered by the relevant exemption.

The Tribunal also referred to the principles considered in Kinetic Communications Ltd. v. CCE, Pune-I, 2017-TIOL-762-CESTAT-MUM, relied upon by the appellant.

The Tribunal treated the per-trip charging mechanism as decisive prima facie evidence that the arrangement was transportation-oriented, rather than a simple rental of tangible goods for a fixed monthly or lump-sum consideration.

Accordingly, the activity did not fall within “supply of tangible goods service” merely because trucks and Hydrogen Cylinder Skids were made available to the customer.

The earlier remand proceedings had already required examination of the alternative GTA classification, and the competent adjudicating authority subsequently found that the appellant did not satisfy the criteria of a GTA and was instead providing means of transport to a GTA, an exempt activity.

Since that order had been accepted by the Department on monetary grounds and had not been challenged, the Tribunal followed the consistent view taken in the appellant’s prior-period proceedings and held that the impugned demand under the supply of tangible goods category could not survive.

Following its earlier decisions and the accepted remand adjudication order, it set aside the service-tax demand of ₹8,44,162, along with the consequential interest, penalties and late fee imposed under the impugned order.

The appeal was allowed.