Cash van rental with maintenance obligations ruled as service tax liability, not deemed sale

CESTAT Ahmedabad held that cash van rental services constitute "supply of tangible goods service" under service tax, not deemed sale. The appellant provided specially designed cash vans to banks with obligations including alternate vehicle provision during breakdowns, driver arrangements, and maintenance responsibilities. The tribunal distinguished this from transfer of right to use goods, finding it constituted permissive use only. Citing K P Mozika v. ONGC, where similar contractor obligations for crane replacement and maintenance were analyzed, the court determined the arrangement fell under service tax liability. Extended limitation period was upheld as appellant failed to disclose services, obtain registration, or file ST-3 returns, preventing department knowledge of activities. No evidence of VAT payment treating transactions as deemed sale was produced. Appeal was partly allowed through remand for further proceedings.

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ISSUES:

Whether the provision of "Cash Van" with driver to banks constitutes "Supply of Tangible Goods Service" under Section 65(105)(zzzzj) of the Finance Act, 1994.Whether the service provided by the appellant falls under "transportation of cash" service or "supply of tangible goods" service.Whether the possession and effective control of the cash van is transferred to the bank, thereby constituting a "deemed sale" attracting Sales Tax/VAT instead of Service Tax.Whether the extended period of limitation for demand of service tax is invocable due to suppression of facts by the appellant.Whether the appellant is entitled to cum-duty benefit while quantifying service tax liability.

RULINGS / HOLDINGS:

The provision of cash vans with drivers does not amount to transfer of right to use goods but amounts to a permissive use; hence, the service falls under "Supply of Tangible Goods Service" as per Section 65(105)(zzzzj) of the Finance Act, 1994.The appellant's contention that the service is "transportation of cash" is rejected as the contract and facts show that the control over the cash van remains with the owner, who bears all running expenses and liabilities, and the bank does not have effective control.The possession and effective control of the cash van is not transferred to the bank; therefore, the transaction is not a "deemed sale" attracting Sales Tax/VAT but a taxable service under Service Tax law.The extended period of limitation is invocable since the appellant suppressed the provision of cash van services and failed to obtain service tax registration or file returns, thereby justifying the demand beyond the normal limitation period.The appellant is entitled to cum-duty benefit as the contract explicitly states "no service tax will be paid," indicating that the consideration includes service tax; hence, the matter is remanded for fresh quantification of service tax liability with cum-duty benefit.

RATIONALE:

The Court applied the legal framework under Section 65(105)(zzzzj) of the Finance Act, 1994, and relied on the Supreme Court's test for transfer of right to use goods as expounded in Bharat Sanchar Nigam Limited case, which requires satisfaction of five attributes including transfer of possession and effective control.The Court distinguished the present contract from cases involving transfer of right to use by emphasizing that the vehicle owner retains control, bears expenses, provides driver and standby driver, and is responsible for maintenance and insurance, thus constituting permissive use rather than transfer of right to use.The Court referred to the Supreme Court decision in K P Mozika Vs. ONGC, which held that where the user does not face legal consequences of using goods and control remains with the supplier, the transaction is a service and not a deemed sale.The Court rejected reliance on judgments concerning classification of security services with cash vans, noting that those cases dealt with different issues and that the present case concerns classification under "Supply of Tangible Goods Service."The extended limitation period was upheld based on the principle that suppression of facts and failure to register or file returns justifies invoking extended period under the Finance Act.The Court allowed the cum-duty benefit plea based on contractual terms explicitly including service tax in the consideration, directing remand for recalculation of tax, interest, and penalty accordingly.

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