2024 (6) TMI 501 - AT - Service Tax

Tribunal Rules: Appellant's Equipment Rentals Exempt from Service Tax, Effective Control with Recipients.

M/s. Computer Exchange Private Limited Versus Commissioner of Service Tax Service Tax-II Commissionerate, Kolkata

The Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal. It determined that the appellant's activity did ... Classification of service - supply of tangible goods service or not - whether the supply of computers, monitors, laptops and other IT equipment by the appellant to its customers on rental basis would tantamount to ‘supply of tangible goods’ service or a ‘deemed sale’ as per Article 366(29A) of the Constitution of India read with the definition of ‘sale’ as per the WBVAT Act, 2003? - HELD THAT:- A similar issue came up before the Tribunal, Chennai in the case of M/S. LINDSTROM SERVICES P. LTD. VERSUS PRINCIPAL COMMISSIONER OF GST & CENTRAL EXCISE [2020 (11) TMI 14 - CESTAT CHENNAI] wherein the Tribunal examined this issue and held that 'In case of termination of the contract, customers / clients shall redeem from the assesse, the work wear that have been in the use.' As the issue has already been settled that if the appellant is paying VAT on the rentals, which is deemed sale, in terms of Article 366(29A) of the Constitution of India, the appellant is not liable to pay Service Tax under the category of ‘supply of tangible goods’ service, therefore, relying upon the decision of the Tribunal, it is held that the appellant is not liable to pay Service Tax. The impugned order set aside - appeal allowed. Issues involved: The issue involved in this case is whether the activity undertaken by the appellant falls under the category of 'supply of tangible goods' service or not.Facts of the case: The appellant was registered with the Service Tax authorities under the category of 'maintenance or repair service' and was paying Service Tax under reverse charge mechanism for 'manpower supply service', 'rent-a-cab service', etc. An investigation was conducted, and a Show Cause Notice was issued to the appellant for the period from 2011-12 to 2014-15, alleging that the activity of rental of assets on which VAT is being paid by the appellant is liable to Service Tax under the category of 'supply of tangible goods' service. The demand of Service Tax was confirmed, leading the appellant to challenge the impugned order.Appellant's submission: The appellant argued that the supply of computers, monitors, laptops, and other IT equipment by them to customers on a rental basis does not amount to 'supply of tangible goods' service. They contended that they have already paid VAT on the rental income, and the effective control and possession of the assets remain with the customers. The appellant cited a previous Tribunal case to support their argument.Revenue's argument: The Ld. Authorized Representative for the Revenue relied on the findings in the impugned order.Tribunal's decision: The Tribunal examined whether the effective control of the equipment was with the appellant or the service recipient. It was noted that the effective control of the equipment was with the service recipient, and the appellant was paying appropriate VAT on the rentals. Citing previous decisions, the Tribunal held that the appellant was not liable to pay Service Tax under the category of 'supply of tangible goods' service. The impugned order was set aside, and the appeal was allowed.This judgment highlights the dispute regarding the classification of the appellant's activity under the 'supply of tangible goods' service for Service Tax purposes. The Tribunal ultimately ruled in favor of the appellant, emphasizing that the effective control of the equipment lay with the service recipients, and the appellant's payment of VAT on the rentals exempted them from Service Tax liability in this regard.