TaxTMI 
TaxTMI 
2024 (1) TMI 451
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....(Rupees Nine Crores One Thousand Five Hundred Eighty Eight only) under Section 78 of the Finance Act, 1994 upon M/s. Sahara Sanchaar Limited, C-2,3,4, Sahara India Complex, Sector-11, Noida (iii) I also disallow the CENVAT credit of Rs. 2,27,05,076/- (Rupees Two Crores Twenty Seven Lakhs Five Thousand and Seventy Six only) as proposed in the show cause notice under Rule 14 of the CENVAT Credit Rules, 2004 read with the proviso to Section 73(1) of the Act, ibid, and order M/s. Sahara Sanchaar Limited, C-2,3,4, Sahara India Complex, Sector-11, Noida to pay the same along with interest under Rule 14 of the CENVAT Credit Rules, 2004 read with Section 73(2) of the Finance Act, 1994 (iv) I further impose a penalty of Rs. 2,27,05,076/- (Rs. Two Crores Twenty Seven Lakhs Five Thousand and Seventy Six only) under Rule 15(3) of the CENVAT Credit Rules, 2004 read with Section 78 of the Finance Act, 1994 on M/s. Sahara Sanchaar Limited, C-2,3,4, Sahara India Complex, Sector-11, Noida. (v) I also order to recover the interest under Section 75 of the Finance Act, 1994 from M/s. Sahara Sanchaar Limited, C-2, 3, 4, Sahara India Complex, Sector-11, Noida on the confirmed ....
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....nt had availed the CENVAT credit of input services for providing their output service namely the "Business Auxiliary Services". On scrutiny of the Input Service Credit ledger of the party for the financial years 2009-10, 2010-11, 2011-12, 2012-13 and 2013-14, it was observed that the party have availed the service tax credit on following input services- a) Space Segment Charges for KU banc / C band; b) Vehicle Maintenance charges; c) Freight & Cartage for matrix video board; d) Training Service & Installation, integration, commissioning & handholding; e) Insurance charges/ Insurance premium of equipment; f) Chartered flight hiring charges In the opinion of revenue these services would not qualify as input service as defined by Rule 2 (l) of the Cenvat Credit Rules, 2004 for the Business Auxiliary Services provided by the Appellant. Thus they availed the inadmissible input service credit during the years from 2009-10 to 2013-14 contravening the provisions of Rule 3 of the CENVAT Credit Rules, 2004. Further, the details of the input service credit and the related documents were never produced by the party and the instant case o....
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.... detailed at S No. (vi) 2.6 This show cause notice has been adjudicated as per the impugned order referred in para 1, above. Aggrieved appellants have filed this appeal. 3.1 We have heard Shri Mehul Jiwani, Chartered Accountant for the Appellant and Shri Manish Raj, Authorized representative for the revenue. 3.2 Arguing for the appellant learned Chartered Accountant submitted:- • Right to use goods is not covered the net of service tax. As is evident from the agreement between appellant and M/s SICC that appellant has given complete control & possession of the assets to M/s SICC. "Right to Use" is thus transferred • The effective control of the assets is purely in the hands of lessee, as the lessee is at his liberty to use the equipments hired by him. It is seen from the agreements that there is no dispute as to the fact that the goods are in the possession of the lessee and is being used by him for the intended purpose without any interference or hurdle from the appellant. Therefore, it is submitted that the transaction of appellant does not satisfy the condition of "without transferring right of possession and the effective control of such machi....
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....hat control has not been transferred to M/s SICCL. The same alleges that appellant o shall be the owner of the assets (Clause 2) o responsible for payment of insurance and Licence Fees which substantiate that control has not been transferred. (Clause 5). o shall charge compensation in case of any damage (Clause 7). o shall have right to inspect all the assets through their Engineers/authorized representatives at any time to ensure the condition of the assets(Clause 8). o lessee shall not be entitled to sub-let to any one, wholly or partially, any part of the assets without the prior consent of the appellant. (Clause 9). • The said allegations are not sustainable on account of the following reasons: o When 'right to use' gets transferred only the effective control and possession gets transferred to the lessee. The ownership does not get transferred. If the ownership also gets transferred, then it will amount to sale and there should be no difference between 'sale' and 'right to use'. Thus, allegation in the SCN will not be sustainable. o As far as insurance and license is concerned, a....
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....rect. • Observations made in the OIO are not sustainable. • The issue is revenue neutral. The assets has been leased out to the sister concern i.e. group companies of the appellant. They are paying service tax under broadcasting service and thereby even if service tax would have been paid then same would have been available as credit to them. Thus, entire situation is revenue neutral and thereby demand should not be made. Reliance on Coca-cola India Pvt. Ltd. [2007 (213) ELT 490 (SC)]. • Benefit of Cum-duty to be extended. The Appellant has not charged the service tax on lease rental and has in fact paid VAT. The explanation 2 to section 67 provides for the cum- duty benefit. Reliance is also placed on the following decisions: o Maruti Udyog [2002 (141) ELT 003 (SC)] o Advantage Media Consultant [2008 (10) S.T.R. 449 (Tri. Kolkata)] affirmed by the Supreme Court as reported at [2009 (14) S.T.R. J49 (S.C.)]. • It is submitted that appellant has not availed cenvat credit for the period 2013-14 all. It is evident from the ST-3 return for the period 2013-14 that appellant has not at availed credit. It is further subm....
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....re of each input service. All the input services on which the credit is sought to be denied on the ground that the same is not in relation to provision of output service can be explained and these input service is clearly relating to output services • Aforesaid services are used for business purpose. In view of decisions as follows the credit should not have been denied. o Reliance Industries Ltd [2022 (380) E.L.T. 457 (Tri. - LB)] o COCA-COLA INDIA PVT. LTD. 2009 (15) STR 657 (BOM). • The demand pertains to the period April 2009 to March 2014 whereas the show cause notice is received in August 2015. Thus, the demand for the period upto September 2013 is hit by limitation. The show cause notice proposes to invoke the extended period of limitation by alleging suppression of facts. The extended period of limitation under section 73(1) can only be invoked in the case of fraud, suppression of facts, etc. with an intention to evade duty. As the appellant was under a bonafide belief that transaction involves transfer of right to use goods and hence chargeable to VAT & accordingly VAT was discharged by the appellant. Appellant is rightly eligibl....
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.... It has been alleged in the show cause notice that during the course of search proceedings carried out by the officers of Anti-Evasion branch of Central Excise & Service Tax, Noida of accounts of the party for the years 2010-2011 to 2011-2012, it was noticed that the party i.e. M/s Sahara Sanchaar Limited has leased out Earth Stations and other equipment and related infrastructure to have a linking facility of TV programs to their sister concern i.e. M/s Sahar India Commercial Corporation Ltd (i.e. M/S SICCL). During search proceedings, the agreement dated 01.04.2009 between the party and M/s SICCL was obtained on the spot. Further, on going through the clauses of the lease agreement dated 01.04.2009 (as amended further on 15.10.2010), it was, inter alia, observed that - (a) The party /.e. M/s. Sahara Sanchaar Limited shall be the owner of the assets. (Clause 2). (b) The party ie. M/s. Sahara Sanchaar Limited shall be responsible to make or get adequate insurance cover for the assets given on lease to the second party (Clause2). (c) The party i.e. M/s. Sahara Sanchaar Limited shall bear the entire license fees etc. to be paid to Govt. authorities ....
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...., in his statement, recorded on 26.03.2015, stated that they have taken the view of their legal advisor on the incidence of the service tax on lease rent and they were advised by their advisors that the incidence of service tax is not applicable on them, but he failed to specifically explain how the service tax was not applicable on them. Accordingly, M/s. Sahara Sanchaar Limited, C-2,3,4, Sahara India Complex, Sector-11, Noida were issued show cause notice thereby demanding the Service tax, amounting to Rs. 9,00,01,588/-, along with interest and proposing penalty under Section 78 of the Finance Act, 1994. 6.3 I observe that the party in their defence has questioned the whole gambit of "Right to Use under the supply of the tangible goods services and have negated the investigation and allegation in the SCN by claiming the transaction between them and Ms SICCL as deemed sale. They have built their case on the following plinth that:- 1. Right to Use is transferred 2. Payment of VAT has been made against the supply of goods 3. On account of rebuttal to the allegations made in the show cause notice The party has analyzed the taxability of se....
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....t been disputed even in the show cause notice. They further submitted that the levy of service tax under supply of tangible goods service is alternate in nature and subordinate to the levy of VAT. Thus, if the VAT is paid by them, the service tax on the same cannot be levied. They also quoted the relevant portion of the TRU's circular. They also stated that it is well settled position that the service tax is not leviable on the item on which the sales tax has been collected as there is mutual exclusivity and cited pronouncements in their support: • • Bharat Sanchar Nigam Ltd. 2006(2)STR.161(S.C.) • Imagic Creative Pvt Ltd 2008(9) S.T.T.337(S.C) • Idea Mobile Communications Ltd. 2006-TIOL 857-CESTAT -BANG • Essar Telecom Infrastructure P. Ltd V Union Of India 2012 (25) STR-16 (Kar) • M/s G S Lamba & Sons-2012-TIOL-49-HC-AP-CT 6.5 I further observe that in their defence, they also rebutted the allegations made in the show cause notice as regard to various clauses of the agreement that (a) As per clause 2 of the agreement, they shall pay the owner of the asset. Hence this clause does no....
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....iances," I observe that with effect from 1.07.2012, Section 66B of the Finance Act, 1994 provided that there shall be levied a tax (hereinafter referred to as the service tax) at the rate of twelve per cent, on the value of all services other than those specified in the negative list, provided or agreed to be provided in a taxable territory by one person to another and collected in such manner as may be prescribed. Further under Section 66E(f) of the Finance Act, 1994, transfer of goods by way of hiring leasing licensing or In any such manner without transfer of right to use such goods, has been termed as declared service' 6.6.2 Further, the CBEC has clarified vide M.F.(D.R) letter F.No. 198/08/2016 dated 17.8.2016 on the service tax liability in case of hiring of goods without the transfer of the right to use goods. It is clarified as under: "In terms of sub-clause (d) of clause (29A) of Article 366 of the Constitution of India, 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 is deemed to be a sale of those goods by the person making the tran....
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....3.2 The following case law may also be referred to. These should not be applied mechanically but their applicability to the facts of a given case, the terms of the contract in the given case and the criteria laid down by the Supreme Court should be examined carefully 3.2.1 Commissioner VAT vs International Travel House Ltd - Delhi High Court judgement dated 8-9-2009 in ST Appeal 10/2009 3.2.2 Rashtriyalspat Nigam Limited VS Commercial Tax Officer reported in 1990( 77) STC 182 and State of Andhra Pradesh VS Rashtriyalspat Nigam Limited reportea in 2002 (126) STC 114 3.2.3 State Bank of India vs State of Andhra Pradesh reported in 1988 ( 70) STC 215 A.P 3.2.4 Ahuja Goods Agency VS State of Uttar Pradesh reported in 1997 (106) STC 540 3.2.5 Lakshmi AV Inc vs Assistant Commercial Tax Officer reported in 2001(124) STC 426 Karnataka 3.2.6 G. S Lamba and Sons vs State of Andhra Pradesh reported in 2015(324) ELT 316 A.P 4.1 There will also be cases involving either a financial lease or an operating lease The former generally involves transfer of the asset and also the risks and rewards incident to the ownership of that asset. T....
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....e to the transferee; d. For the period during which the transferee has such legal right, it has to be to the exclusion to the transferor this is the necessary concomitant of the plain language of the statute viz. a "transfer of the right" to use and not merely a licence to use the goods e. Having transferred the right to use the goods during the period for which it is to be transferred, the owner cannot again transfer the same right to others. Thus it is construed that important attribute constituting transfer of right to use goods as deemed sale is that there should be transfer of effective control and possession of goods. If the owner retains effective control over the equipment, it should construe as not transfer of right to use. Further a mere contract of hiring without transfer of control, may be a contract of bailment and not a contract for transfer of right to use goods. In the above stated factors, the said agreement between the party and M/s SICCL and other relevant case records are required to be thoroughly and critically analysed. I observe that in the balance sheet, income from the impugned activity has been booked in the profit and loss accou....
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....vice activity where substantial risk and owner ship of the equipment remains with the lessor (i.e. owner of the equipment). However, observe that service in relation relation to supply of tangible goods where the right of possession and effective control of such machinery, equipment and appliances stands transferred by the service provider to the receiver of such service, has been kept out of the purview of the scope of taxable service under Section 65(105)(zzzzj) of the Finance Act, 1994 (as applicable upto 30.06.2012) and under Section 66B of the Finance Act, 1944 read with Section 66E(f) of the Act, ibid. As regards the issue whether right to possession and effective control of equipment leased out stands transferred in this case, I find that earth station is installed in the premises of the party and it is also a fact on record that necessary license for possessing and operating the said telecast/broadcast/transmission equipment is in the name of the party and not in the name of lessee. I observe that the party in the entire defence submission has only tried to interpret the terms and conditions of lease agreement dated 01.04.2009 in their favour without bringing any substantia....
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....he impugned show cause notice quite conspicuously and unequivocally has left no stone unturned in scrutinizing the said agreement, The investigation has indeed kept its focus on various clauses of the said agreement and has got into the insight of each of the clauses Vis-a-vis the taxability under the service tax provision Since, the said agreement IS critical in defining the taxability the investigation draws inference on the said agreement and for better understanding, the plain and conspicuous meaning of the various clauses of the said agreement is as under- (a) The party i.e. M/s. Sahara Sanchaar Limited shall be the owner of the assets and right to use of the assets can be extended by them to the any third party (Clause 2). (b) The party ie. M/s. Sahara Sanchaar Limited shall be responsible to make or get adequate insurance cover for the assets given on lease to the second party (Clause2). (c) The party i.e. M/s. Sahara Sanchaar Limited shall bear the entire license fees etc to be paid to Govt. authorities in respect of usage of such assets (Clause 5) (d) The party i.e. M/s. Sahara Sanchaar Limited shall charge compensation in case of any da....
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....his use, the condition that the contractor would be responsible for the custody of the machinery while it was on the site did not militate against respondent's possession and control of the machinery It may also be noticed that even the Appellate Deputy Commissioner, Kakinada in the order dated 15.11.1999 in regard to assessment years 1986-87 and 1987-88 held that under the terms and conditions of the agreement, there was no transfer of right to use the machinery in favour of the contractor Although it cannot be said that the appellant was estopped from contending otherwise in regard to assessment year 1988-89, it is an additional factor and circumstance, which supports the stand of the respondent 4. In our view, no fault can be found with the order under challenge in the light of what is stated above this appeal has no merit. Consequently it is dismissed directing the parties to bear their respective costs." I also find support from the decision of the Hon'ble Karnataka High Court in the case of Indus Towers Ltd. Vs Deputy Comm. of Commercial Taxes, Bangalore, as reported in 2012(285)ELT.003(Bang.) wherein it has been held that "Transaction is not within ....
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....ring the rights to use and the same cannot be construed as sales (deemed sales). The Hon'ble Supreme Court in the case of Idea Mobile Communication Ltd. Vs CCE Cochin [2011 (23)STR 433(S.C.)] held that "It also cannot be disputed that even if sales tax is wrongly remitted and paid that would not absolve them from the responsibility of payment of service tax, if otherwise there IS a liability to pay the same. If the article is not susceptible to tax under the Sales Tax Act, the amount of tax paid by the assessee could be refunded as the case may be or, the assessee has to follow the law as may be applicable. But we cannot accept a position in law that even if tax is wrongly remitted that would absolve the parties from paying the service tax if the same is otherwise found payable and a liability accrues on the assessee." Thus, I find that plea of the party that they are not liable to pay the service tax for the reason that they have paid the VAT, is, therefore, not tenable. 6.6.6 I also notice that the party in their defence has gone on to rebut the allegation In the SCN vis-à-vis the said agreement. 1 find the party's contention as a mere after thought and a ....
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....rried out by them is that M/s SICCL has a unit "Sahara India TV Network which is engaged in broadcasting "Sahara" channel on television and earns income by way sale of advertisement time slot on this channel. M/s SICCL appointed them for broadcasting its channel through network of cable operators and they in turn entered into an agreement with the cable operators. They received fixed mark-up, over and price paid to the cable operators and for the said activity on which they paid the service tax under the category of Business Auxiliary Services (BAS). The said activity has been stopped from April 2012. Hence, tax has been paid during the period 2009-10 to 2011-12. Accordingly, credit has also been taken only for the period upto March 2012. The nature of services on which credit has been taken are in relation with the provision of output service i.e. the BAS services. 6.7.3 I observe that the basic tenets on which the CENVAT credit has been allowed is to negate the cascading effect of incidence of duty/tax double taxation. Further the law makers have put this rationale in framing the CENVAT credit rules but at the same time has provided for the safeguard against any misuse o....
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.... the Secondary and Higher Education Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007 (22 of 2007). and (xi) .... paid on- (i) ------------------ (ii) any input service received by the manufacturer of final product or by the provider of output services on or after the 10th day of September, 2004" On perusal of the above statutory provisions, I observe that a plain reading of above definition of 'input service' read with Rule 3 of the CENVAT Credit Rules, 2004 clearly means that credit of the service tax paid only on the input service can only be availed when the same is either used by the manufacturer, whether directly or indirectly, in or In relation to the manufacture of final products and clearance of final products upto the place of removal or when the same is used by the output service provider for providing an output service. 6.7.4 I find that the party was rendering the BAS services for marketing of their group company M/s SICCL'S business with the cable operators and receiving mark up for rendering of the services. The party in their defence, has gone into leng....
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....r of Central Excise, Bolpur (supra) without referring the grounds as to how such decision is applicable to the present facts and circumstances inasmuch as I find that all the allegations against the party have been clearly spelt out in the show cause notice in the instant case. The party has neither cited any instance of either wrong invocation of the provision in the SCN or any ambiguity in the allegations made against them. In this regard , I place reliance on the judgment of the Hon'ble Supreme Court in the case of CCE Vs. Alnoori Tobacco Products reported at 2004 (170) ELT 0135 (S.C.), wherein it has been held that "11. Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed Observations of Courts are neither to be read as Euclid's theorems nor as provisions of the statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of Courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embar....
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....(1) of the CENVAT Credit Rules, 2004 and referred to the Tribunal's decisions in the cases of Shervani Indus. Syndicate [2009(14)STR 486(T)] and ITW India Ltd. [2009(14)STR 826(T). 6.8.2. I find that in the present case relates to the demand of the service tax on the supply of tangible goods service and irregular availment of the CENVAT credit for the period 2009-10 to 2013-14 observe that such service of supply of goods was brought in tax applicability net of w.e.f. the 16.05.2008 and the party was fully aware about the facts of applicability of the service tax on such services as Shri Hardeep Singh, the the Head- Of Accounts of the party in his statement dated 26. 03. 2015, inter alia, stated Finance that they had taken the View of their legal advisor on the aforesaid lease agreement and incidence of service tax on transaction under such agreement who had advised that incidence of service tax was not applicable under such transaction under the agreement. The said contention of Shri Hardeep Singh acting On behalf of the party appears to be an afterthought as no such copy of legal opinion has been brought on record during either these proceedings Or earlier. observe th....
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....ither obtained registration as a taxable service provider nor filed periodical returns nor remitted Service Tax as mandated by the provisions of the Act. The tax evasion by the appellant came to notice of revenue only when intelligence officers of the Anti-Evasion Wing came upon information of the activities of the appellant .... The requisite information was provided by the appellant to revenue in bits and pieces. In these totality of circumstances, the conclusion by revenue that there was willful suppression of relevant material with a view to evade liability to tax cannot be faulted nor considered inconsistent with the statutory prescription that justify invocation of the extended period of limitation." The ratio of this Judgment is squarely applicable to this case. Therefore, I hold that the show cause notice is correctly issued to them by invoking extended period under the proviso of the Section 73(1) of the Finance Act, 1994 and that the Service Tax demanded and irregular CENVAT availed as alleged is recoverable from them under the proviso to the Section 73 (1) Finance Act, 1994. Hence, provisions related to the extended period are rightly applicable in the ....
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.... their own cost. As such, claim of the CENVAT credit on Vehicle Maintenance Charges, if the same were leased out, appears to be contrary to the contention of party for allowing the CENVAT Credit. In view of the foregoing, I reject the contention of party to allow the CENVAT credit in the case." 4.3 Interpreting the definition of "Supply of Tangible Goods" as per Section 65 (105) (zzzzj) of the Finance Act, 1994 as inserted by Finance Act, 2008 vis a vis the Article 366 (29A) of the Constitution of India and after taking note of decisions rendered on the subject, Hon‟ble Supreme Court has in the case of Adani Gas Ltd [2020 (40) GSTL 145 (SC)] while setting aside the order of tribunal reported at [2019 (28) ELT 238 (Tri Ahmd)] Hon‟ble Supreme Court has observed as follows: "12. The question that arises for our consideration is whether Section 65(105)(zzzzj) of the Finance Act, 1994 is applicable in the present case, that is, whether the supply of pipes and measurement equipment (SKID equipment), charged under the head of "gas connection charges" by the respondent to its industrial, commercial and domestic consumers, amounts to supply of tangible goods fo....
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....to use any goods", Dr. A.R. Lakshmanan, J. in a concurring opinion held : "97. To constitute a transaction for the transfer of the right to use the goods, the transaction must have the following attributes : (a) there must be goods available for delivery; (b) there must be a consensus ad idem as to the identity of the goods; (c) the transferee should have a legal right to use the goods - consequently all legal consequences of such use including any permissions or licenses required therefore should be available to the transferee; (d) for the period during which the transferee has such legal right, it has to be the exclusion to the transferor; this is the necessary concomitant of the plain language of the statute viz. a "transfer of the right to use" and not merely a licence to use the goods; (e) having transferred the right to use the goods during the period for which it is to be transferred, the owner cannot again transfer the same rights to others." (emphasis supplied) 16. The test laid down in BSNL has been applied by courts to determine whether a transaction involves the "transfer of the right to use any goods" under....
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....ticle 366(29A)(d) on transactions which resemble a sale in substance as they result in a transfer of the right to use in goods, instead of the transfer of title in goods. The Finance Act, 1994, deriving authority from the residuary Entry 97 of the Union List, enabled the Central Government to levy tax on services. 'Service tax' was introduced as a response to the advancement of the contemporary world where an indirect tax was necessary to capture consumption of services, which are economically similar to consumption of goods, inasmuch as they both satisfy human needs [All India Federation of Tax Practitioners v. Union of India, (2007) 7 SCC 527, para 4 = 2007 (7) S.T.R. 625 (S.C.)]. This Court, in Association of Leasing and Financial Service Companies v. Union of India, [(2011) 2 SCC 352 = 2010 (20) S.T.R. 417 (S.C.)] had noted : "38...Today with technological advancement there is a very thin line which divides a "sale" from "service". That, applying the principle of equivalence, there is no difference between production or manufacture of saleable goods and production of marketable/saleable services in the form of an activity undertaken by the service provider for consider....
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....der 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." (emphasis supplied) 19. The above circular clarified that Section 65(105)(zzzzj) is applicable only to those transactions where there is a supply of tangible goods for use, without the transfer of possession or effective control to the recipient. This aspect has been interpreted by various Courts and Tribunals. In the Bombay High Court decision in Indian National Shipowners' Association and Anr. v. Union of India and Others ("Shipowners") [(2009) 4 AIR Bom R 775 = 2009 (14) S.T.R. 289 (Bom.)], the petitioners were engaged in providing services to major exploration and production operators by supplying their various vessels including offshore drilling rigs, offshore support vessels, harbour tugs, and construction barges. The question before the Bombay High Court was whether, prior to the introduction of Section 65(105)(zzzzj) in 2008, the petitioner could be taxed on its services in rela....
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.... (zzzzj), the ingredients that have to be fulfilled are : (i) The provision of a service; (ii) The service is provided by a person to another person; (iii) The service is provided in relation to the supply of tangible goods, including machinery, equipment and appliances; (iv) There is no transfer of the right of possession; (v) Effective control over the goods continues to be with the service provider; and (vi) The goods are supplied for use by the recipient of the service. 21. A GSA entered into by the respondent on 17 November, 2008 with one of its buyers (Polymer Industries) has been adverted to by the contesting parties as a representative sample. Under the terms of the GSA, the respondent as the seller agrees to sell and tender for delivery at the 'Delivery Point', gas in the quantities, times and at the prices determined in accordance with it. Clause 2.1 stipulates that : "2.1 ...... Clause 5.1 requires the seller to deliver gas to the buyer at the Delivery Point. The seller is required to set up a gas pipeline to the metering station of the buyer from the nearest distribution mains at the cost o....
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.... Kg/cm2 of Gas delivered at the Delivery Point and for the safe operation of the Buyer's Facilities." Ownership of the measurement equipment continues to vest with the respondent as per clause 5.3. The buyer is required to provide land and a power connection, free of cost at its premises. The buyer has to pay for providing a gas pipeline connection from the distribution mains up to the measurement equipment. Gas is transported from the 'Measurement Equipment' by means of a pipeline provided by the buyer as stipulated in Clause 5.5 : "5.5 ..........." Clause 5.6 clarifies that the buyer has no right to adjust, clean, handle, replace, maintain, remove or modify the measurement equipment : "5.6 The Buyer shall not have the right to adjust, clean, handle, replace, maintain, remove or modify in any manner measurement equipment at any time during the currency of the Contract." Under clause 5.7 the buyer cannot lease, sublet or sell the measurement equipment : "5.7 The Buyer under no circumstances shall sublet/lease/sell/create a charge over part or whole of measurement equipment at any given time." Clause 5.10 provid....
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....that Fortnight in SCM; (ii) the aggregate quantity of Gas delivered by the Seller in such Fortnight, in SCM and Gross Calorific Value for the same; (iii) the Weighted Average Gross Calorific Value (GCV) of such Gas taken by the Buyer in such fortnight; (iv) the amount payable by the Buyer to the Seller for the quantifies of the Gas delivered during the Fortnight equal to quantities of Gas delivered by the Seller in SCM/Kcal as determined in (ii) above multiplied by Contract Price prevailing for the Fortnight. 12.2 The Buyer shall within seven (7) days of the receipt of the fortnightly invoice from the seller, pay to the seller the amount mentioned in such invoice in the manner to be specified by the Seller. 12.3 The Buyer agrees that, notwithstanding any dispute in relation to any amount invoiced, it shall not be withheld payment in accordance with the provisions of this Section 12 of any amounts. After making full payment of such invoice, the Buyer shall lodge the claims with the Seller giving full particulars within a period of fourteen (14) days from the date of making payment, and if such claims are found correct, the Seller shall ad....
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....arantees that the seller shall have the right of entry at all hours to the Measurement Equipment and associated apparatus at the Buyer‟s premises. The pipelines are also part of the "Seller‟s Facilities" under the agreement and are constructed and maintained by the respondent at the cost of the customer. Thus, the ingredient of not transferring the ownership, possession or effective control of the goods under Section 65(105)(zzzzj) is satisfied. 24. The crux of the dispute is whether the supply of tangible goods - the SKID equipment - is for the use of the purchaser. In determining as to whether the provisions of Section 65(105)(zzzzj) are attracted, it is necessary to distinguish between the rights and obligations of the respondent (as the seller of gas) and of their purchasers, from the issue of whether the measurement equipment (SKID equipment) is supplied for the use of the purchaser of gas, without transferring the right of possession and effective control. 25. The purchaser of gas has an interest in ensuring the accuracy of billing and regulation of supply. The respondent is interested in ensuring that it receives payment for the quantity of gas ....
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....maintenance of the measurement equipment is exclusively carried out by the seller. The buyer has contractual remedies against the seller in terms of the GSA. These remedies to the buyer as a purchaser of gas are distinct from the issue as to whether the equipment for which gas connection charges are recovered is used by the buyer. 26. Under Section 65(105)(zzzzj), the taxable service is provided or to be provided in relation to the supply of tangible goods for the use of another, without transferring the right of possession and effective control. The expression "use" has been defined in Black's Law Dictionary : "Use, n. Act of employing everything, or state of being employed; application, as the use of a pen, or his machines are in use. Also the fact of being used or employed habitually; usage, as, the wear and tear resulting from ordinary use. Berry-Kofron Dental Laboratory Co. v. Smith, 345 Mo. 922, 137 S.W. 2d 452, 454, 455, 456. The purpose served; a purpose, object or end for useful or advantageous nature. Brown v. Kennedy, Ohio Appellant. 49 N.E. 2d 417, 418. To put or bring into action or service; to employ for or apply to a given purpose. Beggs v. Texas De....
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....indicate that the supply, installation, maintenance and repair of the measurement equipment is exclusively entrusted to the respondent as the seller. These provisions have been incorporated in the GSA to ensure that a buyer does not calibrate or tinker with the equipment. It is an incident of ownership and control being vested with the respondent. The purpose of the SKID equipment and its utility, lie in its ability to regulate the supply and achieve an accurate verification of that which is supplied; in the present case the supply of goods by the respondent to its buyers. This enures to the benefit of the seller and the buyer. The seller is concerned with the precise quantification of the gas which is supplied to the buyer. The buyer has an interest in ensuring the safety of its facilities and that the billing is based on the correct quantity of gas supplied and delivered under the GSA. To postulate, as did the Tribunal, that the measurement equipment is only for the benefit of the seller in measuring the quantity of the gas supplied would not be correct. The GSA is an agreement reflecting mutual rights and obligations between the seller and the purchaser. Both have a vital intere....
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....her person in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances. Position of law 42. Tata Consultancy Services (supra) was a case in which the specific issue of computer software packages was considered as is the concern in the present case also. There was, however, a distinction drawn insofar as the 'uncanned software' and 'canned software' alternatively termed as 'unbranded' and 'branded' is concerned. The distinction is in that a 'canned software' contains programmes which can be used as such by any person purchasing it, while an 'uncanned software' is one prepared for a particular purchaser's requirements by tweaking the original software to adapt to the specific requirements of a particular entity. While a 'canned software' could be sold over the shelf, an 'uncanned software' is programmed to specific and particular needs and requirements. This Court held that in India the test to determine whether a property is "goods", for the purpose of sales tax, is not confined to whether the goods are tangible or intangible....
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....jee had pointed out that the High Court has, in the impugned judgment, held as follows : "... In our view a correct statement would be that all intellectual properties may not be 'goods' and therefore branded software with which we are concerned here cannot be said to fall outside the purview of 'goods' merely because it is intellectual property; so far as 'unbranded software' is concerned, it is undoubtedly intellectual property but may perhaps be outside the ambit of 'goods'." (Emphasis supplied) 29. Mr. Sorabjee submitted that the High Court correctly held that unbranded software was "undoubtedly intellectual property". Mr. Sorabjee submitted that the High Court fell in error in making a distinction between branded and unbranded software and erred in holding that branded software was "goods". We are in agreement with Mr. Sorabjee when he contends that there is no distinction between branded and unbranded software. However, we find no error in the High Court holding that branded software is goods. In both cases, the software is capable of being abstracted, consumed and use. In both cases the software can be transmitted, transferred, delivered, stored, possessed,....
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.... chattel, which can be regarded as goods, has no role to play in the present statutory scheme as we have already observed that the word "goods" as defined under the Customs Act has an inclusive definition taking within its ambit any moveable property. The list of goods as prescribed by the law are different items mentioned in various chapters under the Customs Tariff Act, 1997 or 1999. Some of these items are clearly items containing intellectual property like designs, plans, etc.'. (Underlining by us for emphasis) 44. We may also refer to and rely upon a decision of this Court in the case of 20th Century Finance Corpn. Ltd. v. State of Maharashtra, reported in (2000) 6 SCC 12. In this decision, this Court considered the incorporation of clause (d) of Clause (29A) of Article 366 of the Constitution referred to above. It is apt to quote the following relevant portion from the judgment:- "26... The various sub-clauses of clause (29A) of Article 366 permit the imposition of tax thus : sub-clause (a) on transfer of property in goods; sub-clause (b) on transfer of property in goods; sub-clause (c) on delivery of goods; sub-clause (d) on transfer of the right to use goo....
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....ed:- "27. Article 366(29A)(d) further shows that levy of tax is not on use of goods but on the transfer of the right to use goods. The right to use goods accrues only on account of the transfer of right. In other words, right to use arises only on the transfer of such a right and unless there is transfer of right, the right to use does not arise. Therefore, it is the transfer which is sine qua non for the right to use any goods. If the goods are available, the transfer of the right to use takes place when the contract in respect thereof is executed. As soon as the contract is executed, the right is vested in the lessee. Thus, the situs of taxable event of such a tax would be the transfer which legally transfers the right to use goods. In other words, if the goods are available irrespective of the fact where the goods are located and a written contract is entered into between the parties, the taxable event on such a deemed sale would be the execution of the contract for the transfer of right to use goods. But in case of an oral or implied transfer of the right to use goods it may be effected by the delivery of the goods." (Emphasis Supplied) 46. In BSNL (supra) thi....
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....se the goods; (e) Having transferred the right to use the goods during the period for which it is to be transferred, the owner cannot again transfer the same rights to others." 48. In the case of BSNL (supra), His Lordship noticed that none of the aforesaid attributes were present in the relationship between the telecom service provider and a consumer of such services. 49. His Lordship thereafter in para 117 of the judgment referred to the Sale of Goods Act, 1930. We quote para 117 as under :- "117. Sale of Goods Act, comprehends two elements, one is a sale and the other is delivery of goods. 20th Century Finance Corporation Limited v. State of Maharashtra, 2000 (6) SCC 12 at p. 44, para 35 ruled that "35. (c) where the goods are available for the transfer of right to use the taxable event on the transfer of right to use any goods is on the transfer which results in right to use and the situs of sale would be the place where the contract is executed and not where the goods are located for use. (d) In cases where goods are not in existence or where there is an oral or implied transfer of the right to use goods, such transactions ....
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....nder which the right is vested in the lessee. (h) The agreement or the contract between the parties would determine the nature of the contract. Such agreement has to be read as a whole to determine the nature of the transaction. If the consensus ad idem as to the identity of the goods is shown the transaction is exigible to tax. (i) The locus of the deemed sale, by transfer of the right to use goods, is the place where the relevant right to use the goods is transferred. The place where the goods are situated or where the goods are delivered or used is not relevant. 52. From the judicial decisions, the settled essential requirement of a transaction for the transfer of the right to use the goods are : (i) it is not the transfer of the property in goods, but it is the right to use the property in goods; (ii) Article 366(29A)(d) read with the latter part of the clause (29A) which uses the words, "and such transfer, delivery or supply"... would indicate that the tax is not on the delivery of the goods used, but on the transfer of the right to use goods regardless of when or whether the goods are delivered for use subject to the condition that....
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....their business purposes And whereas the first party has agreed to grant lease of the assets to second party for its business purpose exclusively Now, this lease agreement witnesses as follows- 1. That the first party (M/S Sahara Sanchar Limited) shall charge yearly lease @20% plus taxes (as applicable) per annum on the total cost of lease out assets (as given in schedule-1 and forming part of these lease agreement) from the Second party from 1st day of April 2009 and lease rent on further new additions to lease out assets shall be charged @ 30% by the first party from the first day of the following month in which such assets arrive at site and are installed. 2. That the second party shall enjoy the exclusive right to use the assets so installed and shall not claim ownership on it anytime. However, the right to use the assets can be extended to any third party by the first party after obtaining consent of the second party. 3. That the second party shall be responsible to maintain all the assets given on lease and to keep them in good and working condition for which it may carry out minor internal and external repairs of the assets as many....
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....e amendment was as under- "Whereas, the parties have mutually agreed to amend / make a few changes to the said agreement. Now, as per the agreed amendment/changes, SANCHAR shall charge annual Lease Fee 15% plus taxes (as applicable) per annum on the 40% of the total Asset Value of the equipments & lease rent on further new additions to Leased out assets shall be charged @15% by the First party from the first day of the following month in which such asset arrived at site & are installed. Taxes: TDS as applicable shall be deducted at source from the Payments. Payment terms: Lease rent shall accrue annually at the end of each financial year against appropriate invoice and its verification by SAHARA." 4.5 From the above agreement dated 01.04.2009 as amended by agreement dated 15.10.2010 it is evident that: a) The Appellant shall be the owner of the assets. Appellant extends only the right to use assets to the lessee and reserves the right that the same right can be extended to third party by the appellant with consent of lessee.(Clause 2) b) Appellant shall be responsible to make or get adequate insurance cover for the assets given on lea....
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....able on them. Clause 2- Since, the second party is enjoying right to use and they are having the possession and effective control on such assets therefore, incidence of service atx does not arise there. Clause 4- To the best of my knowledge insurance can be procured from the insurance company by the owner of assets therefore first party has to aquire insurance cover for such assets. Clause 5 - To the best of my knowledge License fee is payable by the first party as such license has been issued to the first party. Clause 8- This clause simply gives a right to lessor to verify the physical presence of the assets which is a standard clause generally prevailed in all lease agreements. Clause 9- There is no subletting of such equipments and this clause prevents second party to do any sub-letting of such assets. 4.8 Interestingly in the present case the appellant as per the clause 2 of the agreement has only transferred the right to use the assets and have reserved the right with themselves to give the right to third person also with the consent of the lessee. Thus though appellant has permitted the use of the assets by the lessee they by r....
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.... the Act on the hire charges collected during the period 1988-89, was illegal and unconstitutional. The appellant filed a counter affidavit in the writ petition contending that the respondent was lending highly sophisticated and valuable imported machinery to the contractors engaged in the execution of the project work on specified hire charges; the machinery was given in the possession of the contractor and he was responsible for any loss or damage to it and in view of the terms and conditions contained in the agreement, there was transfer of property in goods for use and on the amounts collected by the respondent as charges for lending machinery attracted tax liability under Section 5E of the Act. 3. The High Court after scrutiny and close examination of the clauses contained in the agreement and looking to the agreement as a whole, in order to determine the nature of the transaction, concluded that the transactions between the respondent and contractors did not involve transfer of right to use the machinery in favour of the contractors and in the absence of satisfying the essential requirement of Section 5E of the Act, i.e., transfer of right to use machinery, the hire ....
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....rson for another for consideration, and includes a declared service, but shall not include- (a) an activity which constitutes merely,- (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution; or (iii) a transaction in money or actionable claim;" Section 66E defines the Declared Services stating as follows: "Declared services. - The following shall constitute declared services, namely:- " (f) transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods;" Article 366 (29A) (d) of the constitution of India reads as follows: "(29A) "tax on the sale or purchase of goods" includes- (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;" It is the claim of appellant that they are covered by the exclusion clause of the definition....
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....Hon'ble Supreme Court held as under: "26. Next question that arises for consideration is, where is the taxable event on the transfer of the right to use any goods. Article 366(29A)(d) empowers the State Legislature to enact law imposing sales tax on the transfer of the right to use goods. The various sub-clauses of clause (29A) of Article 366 permit the imposition of tax thus : sub-clause (a) on transfer of property in goods; sub-clause (b) on transfer of property in goods; sub-clause (c) on delivery of goods; sub-clause (d) on transfer of the right to use goods; sub-clause (e) on supply of goods; and sub-clause (f) on supply of services. The words "and such transfer, delivery or supply ..." in the latter portion of clause (29A), therefore, refer to the words transfer, delivery and supply, as applicable, used in the various sub-clauses. ........... In our view, therefore, on a plain construction of sub-clause (d) of clause (29A), the taxable event is the transfer of the right to use the goods regardless of when or whether the goods are delivered for use. What is required is that the goods should be in existence so that they may be used. .......... 27. Art....
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....nder this category ius that goods have been supplied for use without transferring the property or rights in the goods. In the present case we are convinced that the appellant had supplied the goods for use by the lessee against a lease rent without transferring any right in the goods to the lessee. Hence for the period post 01.07.2012 also the services rendered by the appellant were taxable under this category. 4.11 Appellant has during the entire period of dispute not paid applicable service tax on such activity i.e. lease rent, carried out by them was not deposited to the government exchequer, with the intent to evade payment of the service tax. They have also not incorporated the details of the incomes earned on this account in their ST-3 returns thus suppressed the facts from the department. These fact come to the knowledge of the department only at the time of visit/search of the of the premises of the appellant and after making investigations in this respect. Thus appellant have had deliberately suppressed the facts from the department with the intent to escape the service tax payments. Thus, the proviso to Section 73 (1) of the said Act for invoking the extended period of....
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....service tax in respect of the lease amount recovered by them from SICC by suppressing the facts of lease from the department. As we have held that these output services are taxable under the category of "Supply of Tangible Goods Services" we hold that CENVAT Credit in respect of these four input services namely, Space Segment Charges, Training Service & Installation, Freight & Cartage, Vehicle Maintenance, Insurance Charges and Internal Audit fee will be admissible to the appellant. However are not in position to admit the claim of the appellant towards "Chartered Flight hiring" as admissible credit. Nothing has been stated by the appellant as to how this service was used for providing the output services provided by them. We uphold the impugned order to the extent of denying the credit to the tune of Rs 16,80,000/- in respect of these services. 4.13 On the issue of the invocation of extended period of limitation we have already observed that the same is invokable in the present case as the appellant was suppressing the facts with intent to evade payment of service tax. In case of Bombay Dyeing & Mfg Co Pvt Ltd [1999 (113) ELT 331 (T)] following has been held: "9. Where....
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.... done by the appellant amounting to Rs. 991.66 lakhs and at that stage only the department came to know that the work order was to carry out the job for furniture also. A bare perusal of the records shows that the aforesaid reply was sent by the respondent on receipt of a letter issued by the Commissioner of Central Excise on 27-2-1997. If the period of limitation of five years is computed from the aforesaid date, the show cause notice having been issued on 15-5-2000, the demand made was clearly within the period of limitation as prescribed, which is five years." In our considered view, the ratio of the aforesaid decision squarely applies to the facts of the present case. Since the copy of the agreement and relevant information were provided to the department only in 2011 the show cause notice issued in April, 2011 is clearly within the period of limitation and therefore, the demands confirmed as above for the period on or after 18-4-2006 cannot be said to be time-barred at all." Thus we do not find any merits in the submissions of the appellant that extended period should not have been invoked for making this demand. The issue of limitation has to be considered on the ....
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....able to accept the interpretation as tried to be attributed by the learned Counsel for one simple reason that an explanation ought to be therefor the purpose of explaining the main provision, it cannot nullify the effect of main provision. If Explanation (2) interprets as attempted by learned Counsel due to the phrase with which it ends "but for this sub-section", the explanation will have to be ignored being in conflict with sub-section (2B), which it explains. However, the meaning of this clause "but for this sub-section" can be enlightened when we refer to Section 11AB (1), we have reproduced two portions of this provision (in parts) in the earlier part of this judgment and for the sake of convenience, now we are quoting entire sub-section (1) of Section 11AB, which reads : "11AB. Interest on delayed payment of duty. - (1) where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person, who is liable to pay duty as determined under sub-section (2), or has paid the duty under sub-section (2B) of Section 11A, shall in addition to duty be liable to pay interest at such rate, not below 10% ....from the first da....
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....d with effect from July 13, 2006 and, therefore, have no application to the periods relevant to the two appeals. 15. Sub-section 2B of Section 11A provides that in case the person in default makes payment of the escaped amount of duty before the service of notice then the Revenue will not give him the notice under sub-section 1. This, perhaps, is the basis of the common though erroneous view that no penalty would be leviable if the escaped amount of duty is paid before the service of notice. It, however, overlooks the two explanations qualifying the main provision. Explanation 1 makes it clear that the payment would, nevertheless, be subject to imposition of interest under Section 11AB. Explanation 2 makes it further clear that in case the escape of duty is intentional and by reason of deception the main provision of sub section 2B will have no application. 16. The other provision with which we are concerned in this case is Section 11AC relating to penalty. It is as follows : [11AC. Penalty for short-levy or non-levy of duty in certain cases.- where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refund....
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.... 17. The main body of Section 11AC lays down the conditions and circumstances that would attract penalty and the various provisos enumerate the conditions, subject to which and the extent to which the penalty may be reduced. 18. One cannot fail to notice that both the proviso to sub-section 1 of Section 11A and Section 11AC use the same expressions : "....by reasons of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty,...". In other words the conditions that would extend the normal period of one year to five years would also attract the imposition of penalty. It, therefore, follows that if the notice under Section 11A(1) states that the escaped duty was the result of any conscious and deliberate wrong doing and in the order passed under Section 11A(2) there is a legally tenable finding to that effect then the provision of Section 11AC would also get attracted. The converse of this, equally true, is that in the absence of such an allegation in the notice the period for which the escaped duty may be reclaimed would be confined to on....