Work-wear leasing constitutes service not deemed sale under service tax law

CESTAT Chandigarh held that leasing work-wear constitutes service, not deemed sale. The appellant, a subsidiary of Finnish company, leased work-wear to clients under agreements where possession and effective control remained with customers. The Tribunal followed previous decisions in appellant's favor for earlier periods and relied on Chennai CESTAT ruling that work-wear rental doesn't amount to supply of tangible goods attracting service tax. SC dismissed Revenue's appeals as without merit, finally settling the issue in appellant's favor. Appeal allowed.

---

---

Issues involved:
The judgment involves the confirmation of demands by the Commissioner for specific periods, the issue of whether the transaction between the appellant and customers is a deemed sale liable to VAT or service tax, and the sustainability of the impugned order.

Confirmation of Demands:
The appeals were directed against the common impugned order confirming demands of Rs.1,41,95,265/- for one period and Rs.2,35,06,488/- for another period. The issue in both appeals is identical, and thus, both were taken up together for discussion and disposal.

Nature of Transaction:
The appellant, registered under Service Tax u/s 69 of the Finance Act, 1994, provides/receives various services. The appellant, a subsidiary of Lindstrom OY Finland, leases work-wear to clients based on agreements. The issue arose when a Show-Cause Notice was issued for a specific period, alleging service tax liability. The appellant contended that the transaction was a deemed sale subject to VAT, not service tax. The Tribunal had previously allowed the appeal for an earlier period, setting aside the Order-in-Original. Subsequent Show-Cause Notices were issued and adjudicated against the appellant.

Sustainability of Impugned Order:
The appellant argued that the impugned order was unsustainable as it did not properly appreciate facts and law. Referring to previous Tribunal decisions in the appellant's favor, the appellant contended that the issue had been settled in their favor. The Authorized Representative for the Department reiterated the findings of the impugned order. The Tribunal considered previous decisions in the appellant's favor and held that the impugned orders were not sustainable in law. The Tribunal set aside the orders, allowing the appeals with consequential relief, if any.

Final Settlement by Supreme Court:
The Tribunal noted that various Benches had ruled in favor of the appellant in similar cases. The issue was also considered by the Chennai Bench, which held in favor of the appellant. The Hon'ble Supreme Court dismissed appeals by the Revenue, confirming the settlement of the issue in favor of the appellant. Consequently, the Tribunal set aside the impugned orders, following the Supreme Court's decisions.

---