TaxTMI 
TaxTMI 
2021 (2) TMI 83
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....der service provided to Special Economic Zone. Thus, the remaining demand to the extent of Rs. 9,32,504/- is sought to be assailed in this appeal. 2. The Appellant is engaged in providing scheduled and unscheduled maintenance service in respect of steam turbines and generators, engineering services and repair services. An audit was conducted in respect of the operation of the Appellant under rule 5A of the Service Tax Rules, 1994. It culminated in issuance of two show cause notices. The period of dispute is from 2009-10 and 2011-12. The details of the demands proposed in the two show cause notices and the findings in the impugned order are tabulated below: Show Cause Notice dated 18.04.2013 Issue Period Taxable Value (Rs.) Service Tax/Credit Amount(Rs.) Finding in Impugned Order Availment of CENVAT credit on invoices issued on premises other than registered premises October 2007 to March 2012 - 3,34,35,238 Demand dropped Provision of tool kits to associated companies. As per the notice, the Appellant is liable to pay service tax under the category of "supply of tangible goods for use".(STGU) 2011-12 59....
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....e goods‟) because such a transaction is chargeable to VAT, as sale of goods. In the present case, there is no factual dispute that against the provision of kits, the Appellant was raising VAT invoices on the associated companies and was discharging VAT; (iv) Payment of VAT on supply goods is also a factor to determine whether the transaction is that of sale. In this regard, reliance has been placed on the clarification issued by the Department on February 29, 2008, wherein the taxable category of "supply of tangible goods for use" was clarified and its distinction with deemed sale under sales tax was brought out; and (v) On import of "Baking Oven‟ from its foreign associated company, the Appellant discharged Customs Duty and paid the freight charges. The order has confirmed the demand of the service tax on the entire amount paid by the Appellant, including the freight charges. The only finding in the impugned order is that the ownership of the baking ovens continued to be with foreign supplier, on account of which the transaction qualifies as a service involving STGU. The Department has not established as to why the possession and control over the baki....
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.... appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances." 10. It would be seen from the aforesaid definition that the following criteria is required to be fulfilled for a transaction to qualify as STGU service: (i) There must be a supply of tangible goods, including machinery/ equipment/ appliance; (ii) The supply must be for use; (iii) The right of possession and effective control over such goods must not have been passed on to the transferee. 11. There is no dispute with the regard to the first two conditions. The dispute revolves around the third condition, namely whether the transaction between the Appellant and the associated companies involves transfer of right of possession and effective control. This is for the reason that any transaction involving transfer of "right to use‟ would result in a "deemed sale", which would be beyond the purview of service tax. 12. In this connection it would be pertinent to refer to article 366 (29A) of the Constitution. This article deals with tax on the sale or purchase of goods. It provides:- "(29A) tax on the sale or pu....
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....there is a transfer of possession and effective control in goods, while for levy of service tax there is no transfer of possession and effective control. 17. According to the Appellant, it provided tool kits to its associated companies and during the period tool kits were in possession of the associated companies, the legal right to use the kits was with such companies and it was to the exclusion of the Appellant. The Appellant further claims that it could not pass this right to any other person. Thus, according to the Appellant, the transaction between the Appellant and the associated companies would qualify as "transfer of right to use goods", which would not be exigible to service tax. 18. It is seen from order of the Principal Commissioner that the demand has been confirmed only on the basis that the ownership of the kits was not transferred. This is not a factor that has to be examined for levy of service tax. For a "deemed sale‟ there is a transfer of possession and effective control and this what is also contemplated in article 366 (29A)(d) of the Constitution. If a specific transaction involves transfer of ownership/title, there can possibly be no requirement to....
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....that clarifies that the payment of VAT/Sales Tax on a transaction has to be treated as sales of goods and levy of service tax on such transaction would not arise. The relevant portion reproduced below: Reference Code Issue Clarification (1) (2) (3) 036.03/ 23-8-07 Whether spare parts sold by a service station during the servicing of vehicles is liable to payment of service tax? Whether exemption can be claimed on the cost of consumables that get consumed during the course of providing service? Service tax is not leviable on a transaction treated as sale of goods and subjected to levy of sales tax/VAT. Whether a given transaction between the service station and the customer is a sale or not, is to be determined taking into account the real nature and material facts of the transaction. Payment of VAT/sales tax on a transaction indicates that the said transaction is treated as sale of goods. (emphasis supplied) 21. The submission of the appellant that tool kits were in possession of the associated companies with the right to use the kits to the exclusion of appellant and the appellant could also not have passed the right to any other person has not be ....