Transfer of right to use goods excludes equipment hiring from service tax as supply of tangible goods service.

Hiring out equipment was treated as a transfer of the right to use goods where possession and effective control passed to the hirer. Because the transaction was supported by VAT payment and fell within the category of deemed sale, it was outside the service tax net as supply of tangible goods service. The Tribunal relied on the contractual terms, its earlier decision in the assessee's own case, and the Board circular to conclude that the service tax demand was not sustainable.

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Issues: Whether the activity of hiring out equipment with VAT paid on the transaction was liable to service tax as supply of tangible goods service.

Analysis: The Tribunal applied the contractual terms and the earlier decision in the appellant's own case to hold that possession and effective control of the equipment had passed to the hirer. It also relied on the Board circular clarifying that a transaction involving transfer of right to use goods, ascertainable from the liability or payment of VAT, falls outside the service tax net. On the facts, the hiring arrangement was treated as a transfer of right to use goods and therefore a deemed sale, not a taxable service.

Conclusion: The demand of service tax was not sustainable and the assessee succeeded on merits.

Ratio Decidendi: Where a hiring transaction transfers possession and effective control of goods to the hirer and is treated as a deemed sale on which VAT is payable or paid, it is not taxable as supply of tangible goods service.

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