Service Tax : Bunker/Fuel/Water and Its Treatment For Tax Purposes

 Service Tax : Bunker/Fuel/Water and Its Treatment For Tax Purposes

In a recent case, the dispute was that the value of banker/fuel and water delivered, while supplying the vessel by the appellants to their charterers, have not been included in determining the assessable value for discharging service tax under ‘Supply of Tangible Goods for Use (STGU)’ service and the disputed period covered in the SCN is from October, 2009 to September, 2014. 

It was held in Shipping Corporation of India Ltd v. CCE & ST [2025] GCtR 1272 (CESTAT, Mumbai) that from plain reading of the legal provisions, it transpires that service tax is liable to be paid in respect of taxable services provided by one person i.e., service provider to the other person i.e., service receiver. It is not in dispute that the appellants-vessel owner is the service provider and their customer-charterers are the service receiver, in respect of the taxable service. Further, it also transpired that for the period relating to the pre-negative list regime i.e., prior to 1-7-2012, the taxability of service tax was determined in terms of coverage of an activity under the service tax net by defining taxable services under section 65(105) of the Finance Act, 1994, which enumerated each of the specified services. For the period post-negative list regime, the category of services hitherto defined under the erstwhile regime were merged under a common phrase i.e., 'service' as defined under section 65B(44) of Finance Act, 1994, which was brought into effect from 1-7-2012. The relevant entry of the specific taxable service in the present case is 65(105)(zzzzj). Subsequent to introduction of Negative list regime from 01.07.2022, the services that are subject to levy of service tax have been explained in Section 66B of Finance Act, 1994

It was clearly brought out that such activity of delivering the vessel is not part of the services, and therefore the fuel/bunker and water charges, incurred by the appellants, prior to the delivery of the vessel, in no case would become part of the services agreed upon between the parties. Therefore, the value of the bunker/fuel and water, which do not form part of the taxable services cannot be added to the taxable value of the services.