TaxTMI 
TaxTMI 
2018 (2) TMI 1415
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....deration and (iii) actual transfer of title in goods were absent; that all through agreement period, equipment was in the possession and control of the owner. It also appeared that insurance, maintenance, repairs and damages charges pertaining to diesel generators for the purpose of analysis/testing were also borne by the owner. Department therefore took the view that the said services rendered by appellants to their customers i.e. supply of diesel generators are classifiable under the category of "supply of tangible goods" and that appellants are liable for payment of service tax on the consideration received for such services from 16-05-2008 onwards. 2.2) Accordingly, following show cause notices were issued to PMI, inter-alia seeking demand of service tax liability with interest thereon as follows: S.No. S.C.N. O.R. No. & Date Service Tax involved in Rs. Period covered 1. 05/2012-Adjn(ST)(Comnr), dated 18.01.2012 2,52,61,016/- 05/2008 to 03/2011 2. 135/2012 Adjn (ST) Commr dt. 16.10.2012 1,12,52,789/- 04/2011 to 03/2012 3. 22/2014-Adjn(ST) (Commr) dated 11.03.2014 46,62,024/- 04/2012 to 06/2012 4. 1....
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....een 05/2008 to 11/2013 were issued as under: S.No. S.C.N. O.R. No. & Date Service Tax involved in Rs. Period covered 1. 04/2012-Adjn(ST)(Comnr), dated 18.01.2012 91,02,472/- 05/2008 to 03/2011 2. 136/2012 Adjn (ST) (Commr) dt. 16.10.2012 5,13,506/- 04/2011 to 03/2012 3. 21/2014-Adjn(ST) (Commr) dated 11.03.2014 1,18,409/- 04/2012 to 06/2012 4. 117/2014-Adjn(ST) (Commr), dated 8.8.2014 3,27,344/- 07/2012 to 03/2013 5. 210/2014-Adjn(ST)(Commr) dated 8.8.2014 1,85,029/- 04/2013 to 11/2013 3.3) These Show Cause Notices were adjudicated by a common order O1-0 No.HYD-EXCUS-002-COM-38-14-15, dated 20-1 1-2014 (impugned order) where the adjudicating authority has ordered as follows: A) In respect of Show Cause Notice dated 18-01-2012, confirmed the service tax demand limited to Rs. 78,66,699/- for the period May 2008 to March 2011 with interest. Rest of the demand proposed in show cause notice dropped. Penalties proposed waived. B) In respect of Show Cause Notice dated 16-10-2012, service tax demand confirmed but limited to Rs. 4,61,958/- for the period April 2011 to March 2012. Rest of the demands propo....
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....y technicians supplied by appellant, the hirers get it operated only as per their requirement, Transaction between appellants and the hirers is only "transfer of the right to use any goods involving transfer of both possession and control of the goods to the users", which is a deemed sale and is leviable the sales tax/VAT as deemed sale of goods. The definition of 'sale' under section 2(g) of Central Sales Tax Rules 1956 includes a transfer of right to use any goods for any purpose (whether or not for specified period) for cash, deferred payment or other valuable consideration. Similarly sub section 8 of section 4 of Andhra Pradesh Value Added Tax Act (APVAT Act) provides for tax on transfer of right to use goods, hence the transaction entered into by appellants is deemed sale of VAT which is payable on such transaction. 4.6) Appellant PMPL had filed application and sought clarification on advance ruling under section 67 of APVAT Act 2005 read with rule 66(2) (1) of APVAT Rules 2005 on the following: a) Whether hiring of generators is covered by the clause "levy" of tax on transfer of right to use goods under APVAT Act or not? b) Whether the hire charge....
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....gam Ltd [2013 (31) S.T.R 513 (S.C.)] wherein the Hon'ble Apex Court has held that "Where the assessee had supplied sophisticated machinery to contractor and received hire charges, the transactions do not involve transfer of right to the use of machinery in favour of the contractors and hence the hire Charges were not exigible to sales tax. With regard to the appellant's contention that they have been paying VAT on the transaction as "deemed sale", Ld. AR submits that they may very well have been discharging VAT by mistake instead of service tax but the transaction is such that service tax is also very much payable. 6.1) Heard both sides and have gone through the facts. In our opinion, the controversy in these appeals is in a narrow compass, namely, whether the transaction entered into by the appellants with the hirers of DG sets would be in the nature of a transaction involving transfer of possession and control of goods to the users or is only one that allows the other users to use the goods without giving legal right of possession and effective control. If the transaction falls in the first category, that would be considered as "deemed sale of goods" and exigible to sa....
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.... (a) a tax on the transfer, otherwise than in pursuance of a contact, of property in any goods for cash, deferred payment or other valuable consideration; (b) a tax on the transfer of property in goods (whether as goods or in some other form) invoked in the execution of a works contract; (c) a tax on the delivery of goods on hire purchase or any system of payment by instalments; (d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, del....
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.... Having transferred, the owner cannot again transfer the same right to others. It was also advised that whether a transaction amounts to transfer of right or not cannot be determined with reference to a particular word or clause in the agreement. The agreement has to be read as a whole, to determine the nature of the transaction. In para 6.6.2, CBEC gave examples of transactions to clarify whether such transaction involve transfer of right to use or otherwise. However, it was also advised therein that the list was only illustrative of how Courts have interpreted terms and conditions of various types of contracts, to see if a transaction involves transfer of right to use goods. The CBEC also advised t e nature of each transaction has to be examined in totality keeping in view all the terms and conditions of an agreement relating to such transaction. 6.6) The take away from the combined reading of all the above reproduced legal provisions and the CBEC circular are that there cannot be "one-size-fix-all" method to determine whether a transaction is supply of tangible is "deemed sale" or "service". On the other hand, each transaction having its own unique entities and conditio....
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....essee as to the identity of the goods. The hirers very much have legal right to use the goods. In fact, the agreements clearly lay down that the lessee shall render/operate the DG set for his exclusive use and that lessor has transferred the right to use the DG set. It is also not in dispute that as long as goods are with the hirer, appellants do not have any legal right to use the goods themselves. It is also not in dispute that appellants have transferred the right only to one hirer at a time. 6.9) With this background, we are unable to fathom how the adjudicating authority has concluded that effective possession and control of the impugned DG sets remains with the appellants and not with the hirers. The authority has held that since hirer is not permitted to run the DG set in the absence of technician provided by the appellant, the hirer is not free to use the DG set and that this indicates control of the appellant over the DG set. He has also found fault with the condition that power should not be withdrawn "more than 72% of 288 KV/ 500 Amps at 8 PF on standard load 40% - 60% etc." We find that these objections have been adequately countered by the appellants in the grounds ....
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.... received. 6.11) We also find that the Advance Ruling Authority, Commercial Tax Department, Government of Andhra Pradesh in response to clarification sought by PMPL on whether the hiring of generators is covered by the clause "levy of tax on transfer of right to use goods under APVAT or not" vide an order dated 30-06-2006, had given the following ruling: 'V. The issue has been examined with reference to the provisions of the APVAT Act Rules and HSN Codes notified by Government vide G.O.Ms.No:398, Revenue (CT.II) Department dated 31.03.2005 and G.O.Ms.No.490, Revenue (CT-Il), Dated 27.08.2005 and in G.O.Ms.No.1615, Revenue (CT-Il), Dept. Dated 31.08.2005 and the ruling is given as under: VI. As per subsection (8) of Section 4 of APVAT Act, every VAT dealer who transfers the right to use goods taxable under the Act is liable to pay a tax for such pods at the rate specified in the schedules on the total amount realized or realizable on such transfer of right to use goods. As seen from the agreement between the owner and the hirer clause (2) of Terms and conditions it is clearly mentioned that APGST @ 8% of the invoice amount will be charged extra as per Sec. 5E of APGS....
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....dy discussed, Hon'ble Apex Court had laid down certain tests to determine whether the transaction involves transfer of right to use goods which aspect has already been analysed supra. These tests have already been applied by us in para 6.8 and we found that the transactions of appellant are very much in the nature of a transfer to the hirer of the right to use the goods with full possession and control, rendering the transaction as "deemed sale" with liability to discharge sales tax only. ii) In the case of G.S. Lamba & Sons Vs. State of Andhra Pradesh [2015(324) ELT 316 (A.P), the Hon'ble High Court of Andhra Pradesh, which is the jurisdictional High Court for this Forum, the issue therein concern the liability of sales tax on the assessee who had provided Transit Mixers to the manufacturers of ready mix concrete, 24 hours and every day of the week as instructed by manufacturer while considering the issue, the Hon'ble High Court held as follows: "30. From the judicial decisions, the settled essential requirement of a transaction for transfer of the right to use goods are : (i) it is not the transfer of the property in goods, but it is the right to use prope....
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....he hirer shall be solely responsible and liable to handle any dispute entered with any third party in relation to the use and operation of the equipment. Further Cl. 14 dealing with title and ownership specifically provides that equipment is offered by GMMCO Ltd. only on rights to usebasis. Cl. 15 relating to damages provides for compensation to be paid by the hirer to the assessee in case of damage to the equipment during the period of use. These responsibilities cast on the hirer clearly show that the right of possession and effective control of the equipment rest with the hirer; otherwise the hirer cannot be held responsible for misuse/abuse, safe custody/security, liability to settle disputes with third parties in relation to use etc. Further Cl. 4.3 of the agreement provides for charging of VAT at 12.5% on the monthly invoice value which shall be payable by the hirer. These terms and conditions stipulated in the agreement, lead to the conclusion that the transaction envisaged in the agreement is one of transfer of right to use which is a deemed sale under Section 2(24) of the Maharashtra Value Added Tax Act, 2002. The Finance Ministers speech and the budget instructions issued....