2018 (5) TMI 1420 - AT - Service Tax

Tribunal rules in favor of appellant on Service Tax liability for crane rentals

The Tribunal ruled in favor of the appellant in a case concerning the liability of Service Tax on the consideration received for renting heavy-duty ... Supply of Tangible Goods Service - transfer of right of possession and effective control - deemed sale of goods under Article 366(29A)(d) of the Constitution - mutual exclusivity of service tax and VAT on transactionsSupply of Tangible Goods Service - transfer of right of possession and effective control - deemed sale of goods under Article 366(29A)(d) of the Constitution - mutual exclusivity of service tax and VAT on transactions - Whether the appellant's hiring out of cranes with operators for construction work amounted to a taxable Supply of Tangible Goods Service or constituted a deemed sale of goods - HELD THAT: - The tribunal examined the statutory definition of the taxable service introduced w.e.f. 16.05.2008 which taxes supply of tangible goods for use only where there is no transfer of the right of possession and effective control. The CBEC circular (29.02.2008) was held to be instructive: transfer of the right to use involving transfer of both possession and control is leviable to VAT as a deemed sale and transactions where legal right of possession and effective control are not transferred may attract service tax. On the facts the appellant supplied cranes on hire along with operators, the contract and conduct established that the customer had possession and effective control of the machinery for its operations, and the appellant had treated the receipts as taxable to VAT/treated as deemed sale. The tribunal followed the earlier decision in Chhattisgarh Earthmovers where similar facts led to exclusion from the service entry. Applying the foregoing, the tribunal concluded that the exclusion in the service definition operates and the transaction was not taxable as Supply of Tangible Goods Service. [Paras 8, 9, 10, 11]Impugned order confirming service-tax demand set aside; the hiring of cranes with operators is to be treated as a deemed sale (VAT) and not as Supply of Tangible Goods Service.Final Conclusion: Appeal allowed; impugned Order-in-Original set aside and demand of service tax discharged insofar as the transactions for 2008-09 to 2012-13 are held to be deemed sales rather than taxable Supply of Tangible Goods Service, with consequential relief. Issues:- Whether the consideration received by the appellant for renting out heavy-duty cranes is liable to Service Tax.- Whether the activity falls under the category of 'Supply of Tangible Goods Service.'- Whether the possession and control of the equipment were effectively transferred to the customers.- Whether the case laws cited by the appellant support their argument.- Whether the impugned order justifying the demand for Service Tax is valid.- Whether the circulars and definitions provided by the CBEC are applicable to the case.- Whether the appellant's payment of VAT/ST on the consideration received indicates a deemed sale of goods.- Whether the decision in the case of Chhattisgarh Earthmovers is applicable to the present case.Analysis:The appeal in this case was against an Order-in-Original regarding the liability of Service Tax on the consideration received by the appellant for renting out heavy-duty cranes for construction activities. The department contended that the activity falls under the category of 'Supply of Tangible Goods Service' under the Finance Act, 1994. The appellant argued that they transferred the right of possession and control of the equipment to the customers, making it a deemed sale of goods. The appellant also cited case laws supporting their position, emphasizing the transfer of possession and control to the users.The Circular by the CBEC clarified the scope of levy of the Tangible Goods Service, emphasizing the transfer of possession and control for the levy of Service Tax. The appellant's payment of VAT/ST on the consideration received indicated a deemed sale of goods. The Tribunal referred to the case of Chhattisgarh Earthmovers, where it was observed that absolute possession over the machinery by the client, despite the operator supplied, does not dilute the transfer of possession and control. The Tribunal set aside the impugned order, following the decision in the Chhattisgarh Earthmovers case, and allowed the appeal with consequential relief.In conclusion, the Tribunal ruled in favor of the appellant, emphasizing the transfer of possession and control of the equipment to the customers, which aligned with the definition of a deemed sale of goods. The decision was based on the interpretation of the relevant provisions and case laws, ultimately setting aside the demand for Service Tax.