TaxTMI 
TaxTMI 
2023 (9) TMI 868
X X X X Extracts X X X X
X X X X Extracts X X X X
....plied by the appellant is for definite no temporary period. The responsibility to provide infrastructure, installation, cabling, fitting etc. was upon the client. The client was responsible for commissioning and installation of DG Set in their own plant/ premises. The client was to make proper arrangement for safe custody and space for DG Set. The client was to adjust power requirements and utilize power generated by DG Set. It is the client who was to decide the operating environment and level of activity of DG Set according to its requirements. The client only was to bear cost of consumables such as diesel according to its requirement. The DG Set was permanently attached to the premises of the client by losing its mobility for the period of agreement. The client was to hand over possession and custody of DG Set back to the appellant upon termination of the agreement which signifies that during the tenure of agreement, the possession and custody of the DG Set was with the client. As per this undisputed fact, the appellant has lawfully transferred the rights under the agreement which inter alia includes right of use, right of possession and effective control unto the client and cli....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that the demand is also hit by limitation. In support of his submission, he placed reliance on the following decisions and Circulars: Circular No. 334/1/2008-TRU dated 29.02.2008 Circular No. 198/8/2016-ST dated 17.08.2016 Quippo Energy Ltd. A/11873-11875/2022 CST vs UFO Moviez India Ltd. 2022-VIL-07-ST-ST Subhash Light House 2022-VIL-106-CESTAT-CEST-ST Express Engineers & Spares Pvt Ltd. 2022(1) TMI 564-CESTAT You Broadband & Cable India Ltd. 2020 (2) TMI 187 - CESTAT Amd GIMMCO Ltd 2017 (48) STR 476 (T) Imagic Creative Pvt ltd. 2008 (9) STR 337 (SC) 3. Shri R.K. Agarwal and Shri Anup Kumar Mudvel learned Superintendents appearing on behalf of the Revenue reiterates the findings of the impugned order. 4. We have carefully considered the submissions made by both the sides and perused the records. We find that the fact is not under dispute that the appellant have provided the DG Set on rental basis under an agreement to their clients. The issue to be decided is that whether such supply of DG Set on rent is classifiable under "Supply of Tangible Goods Service" defined in clause 65(105)(zzzzj) of Fi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n contention to classify their service under "Supply of Tangible Goods Service" is that since the appellant have provided the operator to operate the DG Set and also the repair maintenance is under the obligation of the appellant, the right to use, possession and effective control has not been transferred to their client, therefore, the supply of tangible goods clearly falls under the definition of "Supply of Tangible Goods Service" as per the clause 65(105)(zzzzj) of the Finance Act. We find that merely because the appellant have provided the operator and undertaken the repair and maintenance, the status that the right to use, possession and effective control has been transferred to the client is not affected. The providing of operator and repair and maintenance is undertaken by the appellant only because of their technical expertise. However the use of the generator set accordingly to the requirement of the client is completely the prerogative of the client. Therefore, in the given arrangement of supply of DG Set to the client, we are of the view that the right to use, possession and effective control has been clearly transferred to the client. Therefore, such supply does not fal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ds, including machinery, equipment and appliances, for use, with no legal right of possession or effective control. Supply of tangible goods for use and leviable to VAT/sales tax as deemed sale of goods, is not covered under the scope of the proposed service. Whether a transaction involves transfer of possession and control is a question of facts and is to be decided based on the terms of the contract and other material facts. This could be ascertainable from the fact whether or not VAT is payable or paid." From the above clarification, it is unambiguous that when on supply of tangible goods, the sales tax is payable or paid the same transaction will not be subject to payment of service tax, for the reason that as per Article 366 (29A) of Constitution of India, the supply of tangible goods is considered as deemed sale and any sale transaction will not be a domain of service. The identical issue has been considered by this Tribunal in the case of Quippo Energy Private Limited vide Order No. 11873-11875 of 2022 wherein following order was passed: "4. Heard both the sides and perused the records. To appreciate the rival contentions, it would be appropriate to first reprodu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lant cannot trespass that right of the lessees/ customers. The Lessees fix the pattern in which the plant is to be used and the time when it will function. All the permission to be obtained from the statutory authorities to be obtained such as Electrical, Pollution, CCR have to be taken by the Customers, the lessee shall ensure the safety of the plant in a manner similar to its own plant. Customers have to provide fuel, Jacket water & feed water, the site and other facilities. Further, as per clauses of lease agreements, the customers will also indemnify the Lessor against the loss or damage arising to or in connection with plant for the reason other than Lessor"s personnel. We also find that the clause 8.6 of agreement between the Appellant and Shah Pulp & Paper Mills Ltd. (Customer) provide as under : - " 8.6 By virtue of the agreement, the lessee shall be considered to have possession of the plant and shall have the right to use the plant for the purpose for which it is leased to him." In view of such conditions, the effective control of the gas genset are purely in the hands of customers of the Appellant, as the customers is at his liberty to use the equipment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lant have complied with all the tests as laid down in the above case to hold that there is transfer of right to use gas genset. Thus the activity is not in the nature of "service" under the Finance Act in both during the period prior to negative list regime and thereafter as held in the impugned orders. 4.6 We find that the adjudicating authority has held that since as per contract the equipment will remain sole property of equipment provider and skilled manpower supplied by the Appellant are responsible for maintenance operations of gas genset/plant, it is clear that the legal right and effective controls rests with the appellant. We find that except the above findings the Commissioner has not dwelled upon any of the submission and facts made by the appellant. The terms and condition of the agreement are its essence and is deciding factor for determination of nature of contract/agreement. As per agreement the equipment is delivered to the customers ; in terms of Clauses ofagreements as discussed above customers are required to get all permissions for installation of equipments; Clause of agreements also provide that customers shall be responsible for all injuries, losses ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....k (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, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made;" In view of the Article 366(29A) (d) of the constitution, 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, has to be considered as deemed sale or purchase of goods. It is clear that a tax on the sale or purchase of goods includes a tax for transfer of right to use goods as that is deemed sale. 4.8 It is observed that the appellant have been paying VAT on such leasing of equipments since year 2007-08. We also find that DOF No. 334/1/2008- TRU, dated 29-2-2008 Circular in Para 4.4 also states that "Supply of tangiblegoods for use and leviable to VAT/Sales tax as deemed sale of goods, is not covered under the scope of the proposed service. Whether a transaction involves transfer of possession and cont....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to deliver the digital content in movie theaters and to monitor the number of shows exhibited. The appellant track the number of show with the help of smart card inserted into the DCE as part of the service to distributors. The theatre owner in order to receive the digital content and exhibit cinema require Digital Cinema Equipments which are either owned by them or are taken on lease by them. The appellant has leased such equipments to some of the theaters. The appellant in order to fulfil contract with the distributors are inserting smart cards to monitor the number of shows in such DCE. They are also collecting registration fee from theaters for conducting feasibility study which is reimbursement of expenses. The demand against them is on lease of DCE equipments given to the theatre owners on the ground that since the effective control and possession of such equipments has remained with the appellant, hence the services are of "supply of tangible goods for use". We find that the adjudicating authority has held that since as per contract the equipment will remain sole property of equipment provider and he shall bear the cost of normal wear and tear and repairs it is clear that th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ibutors who had entered into agreement with the theatre owners for exhibiting their movie and the appellant had no connection with the theatre owner in respect of such smart card. Thus the smart card were not an instrument to control the operation of DCE on behalf of appellant or has no bearing on the agreement between the theatre owner and appellant in case of leasing of DCE Equipments. As far as insurance of the DCE equipment is concerned the Appellant were owners of the equipments and the nature of leasing agreement does not change for the reason that the insurance was done by the appellant. For bringing any service under the category of "supply of tangible goods service" in terms of Section 65(105)(zzzj) it is imperative to see that such service is in respect of services towards supply of tangible goods for use "without transferring right of possession and effective control". In the present case once the DCE were transferred to theatre owner the appellant had no control over running of such equipments which are to be operated by the persons employed/deputed by the theatre owner. The theatre owner had contractual control over such equipments which was in their possession. All th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....icability of tax on activities of the appellant. Further it is also not in dispute that the appellant had been paying VAT even before the levy of service tax which is being demanded in the instant case. Even the circular issued in 2008 referred above clearly states that VAT and Service Tax are mutually exclusive. Considering all above factors it appears there is no suppression of fact on appellant"s part. It is also observed that the appellant obtained DDQ (Determination of Disputed Question) dated 26-6-2008 from Commissioner of Sales Tax, who held that lease rental is liable for VAT. The appellant accordingly was discharging the VAT liability even before the taxability on "Supply of Tangible goods for use". With the above undisputed facts. We are of the clear view that there is no suppression of facts with intent to evade payment of Service Tax on lease rentals on DCE, on the part of the appellant. Therefore we hold that the demand for extended period is clearly time-barred. 6.3 As regard demand of service tax on merit for the normal period, we observed in our above discussions that various vital facts and submissions of the appellant were not properly verified by the adj....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for providing the output service. As regard submission of Ld. AR that while removing capital goods to theatre, the appellant was supposed to reverse the Cenvat credit as said capital goods was purportedly sold to Cinema theatres. In this regard we find that though the DCE was deemed sold to Cinema Theatre but ultimate ownership of DCE remains with the appellant. The DCE admittedly used for exhibiting advertisement. The appellant paid service tax on service of sale of space for advertisement which was provided through the said DCE. It therefore leaves no doubt that credit on capital goods is available even if they are removed outside from the premises of the appellant for providing output service. We are therefore of the view that there is no ground for denial of Cenvat credit on capital goods to the appellant. 6.5 We also find that while invoking extended period for demand of Cenvat credit on DCE, in Para 33 of the Order-in-Original, adjudicating authority has admitted that the appellants have disclosed Cenvat credit on capital goods in the return, despite recording this, he has given adverse finding on limitation. Considering the fact that appellants have been paying VAT ....