AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (6) TMI 622
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....d imposed penalties however, the Commissioner (Appeals) set aside the order in original and allowed relief to the respondents. Aggrieved by the said order the revenue is an appeal before Tribunal. 2.1. Learned DR pointed out that the agreement for supply of wagons under Wagon Investment Scheme to Indian Railways contains following clauses. 2.1 The Respondent are providing "Wagon" under "Wagon Investment Scheme" to the Indian Railway which comes under the purview of "Service" as envisaged under Section 65B(44) of the Finance Act 1994 (herein after referred to as "the act"). The respondent entered into various agreements with Indian Railway. Examination of the such agreements revealed that:- i. Clause 2.5 of the agreement under head "FREIGHT REBATE' mentions that "the Railway shall give rebate @ 10% on the normal tariff rate to the investor". ii. Clause 2.7 of the agreement under head "DURATION OF FREIGHT REBATE" mentions that "the freight rebate mentioned under clause 2.5 shall be given for a period of 10 years from the commencement date". Clause 3.0 of the agreement under head "GUARANTEE/WARRANTY" mentions that "In case of direct procureme....
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....ecuted between the respondent and the railways specify that customers investing in railway wagon will be assured a supply of guaranteed number of Rakes every month, based on the number of rakes procured and the turnaround time of the type of wagon with 10% concession in freight. He further pointed out that no lease charges are payable under the scheme and that ownership of wagon procured under the scheme shall get transferred to Indian railways only after period of 10 years. He further pointed out that freight rebate shall be granted by railways for a period of 10 years. 2.4. Learned DR further argued that if the respondents had not invested in wagon investment scheme, the freight rebate would not be available to them. He pointed out that although Indian railways uses these wagons for transporting goods of other entities as well the railway wagons supplied under scheme remain under ownership of the respondents. Learned DR pointed out that in this circumstances the supply of wagons under the scheme can be considered as provision of service and the freight rebate obtained by the respondents is nothing but a consideration in lieu of the hiring of Wagons. He pointed out that this ar....
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.... 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;] 1 [(30) "Union territory" means any Union territory specified in the First Schedule and includes any other territory comprised within the territory of India but not specified in that Schedule." It is seen that it includes transactions involving transfer of right to use as deemed sale. Section 658(44) of the Finance Act, 1994 defines "service" as under: "(44) "service" means any activity carried out by a person 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 sale within the meaning of clause (29A) of article 366 of the Constitution: or iii. a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment: (c) fees taken ....
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....er article 366 (29A) of the constitution. 3.2. The said principal was reaffirmed by Hon'ble Apex Court in the case of Commissioner of Service Tax Vs. Adani gas Limited MANU-SC-0691-2020. The same principal was again reiterated by Hon'ble Apex Court in the case of Quick Heal Technology Limited MANU-SC-0968-2022. 4. In the appellant own case the tribunal vide order no. 51108/2023 dated 18.08.2023 has observed as follows: 6. The submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the department have been considered. 7. The only point to be decided in this appeal is as to whether the appellant had transferred possession and effective control of the wagons to the Indian Railways under the terms of the Agreement. There is no manner of doubt that in terms of Clause 4.1 of the Agreement, the right of possession and effective control of the wagons had been transferred by the appellant to the Railways as the wagons provided by the appellant merged and operated under the general pool of wagons of the Indian Railways. This fact also finds support from the Certificate dated 25.03.2015 issued by the Indian ....
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....ll be entitled to dispose of the same as scrap elther directly or through the railways, if the owner so likes. If the wagons are found mechanically fit for service after the expiry of the 20 years period the lease may be continued on mutually agreed terms. 2.0 Validity of Agreement of Lease This agreement shall remain in force for a period of 20 years from the date of commencement. 5.0 Lease Charges 5.1 Lease charges will be paid by the Indian Railways to the leasing companies in advance on quarterly basis. The calculation of the lease charges will be based on the cost of procurement which will include the transfer price of free supply items provided by the Railways. Central Excise (Net of MODVAT) and any other statutory tax/duty paid by the Lessor will also form a part of the cost of wagons for the purpose of lease charges. 5.2 The lease charges shall be paid on the Asset Value as indicated in Clause 5.1, comprising (i) a base lease charge @ Rs. 40/- per thousand per quarter for the primary period of ten years subject to the variation formula contained in following clauses and (ii) at a flat rate of Rs - 10 /- per thousand per year for ....
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....o prove that during the leased period, the effective control of the wagons is with the Railways. 3.1 We find that the relevant provisions of law as follows: "Section 65(105)(zzzzj) of the Finance Act, 1994 defines taxable service in respect of "supply of tangible goods" as under: "Taxable service" means any service provided or to be provided to any person, by any other person in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring the right of possession and effective control of such machinery, equipment and appliances". Section 658(44) of the Finance Act, 1994 defines "service" as under - "(44) "service" means any activity carried out by a person 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 sale within the meaning of clause (294) of article 366 of the Constitution; or (iii) a transact....
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....dded Tax Act, 2002. Incorporating the same, following notice under subsection (1) of Section 69 of the KVAT Act, 2003 read with sub-section (1) of Section 36 and sub-section (2) of Section 72 of the KVAT Act, 2003 was issued on 14/11 / 2018 The Commercial Tax Officer (Enforcement-3), Bellary Inspected your business premises of the dealer company on 06-06-2018 and during the course of inspection, the inspecting authority found that, the dealer company have received Rs. 12,11,68,095/- towards leasing of Railway wagons to South Western Railways, Hubli and not reported this taxable turnover in the monthly return of turnover filed in Form VAT 100 for the tax period from April 2007 to March 2008 and not paid the taxes. The inspecting authority confirmed the information already with the undersigned. In response to the said notice, the dealer company have filed their written objections on 21/11 / 2018 which is reproduced as under: The advance ruling was given by the prescribed authority on 20th June 2018 showing that VAT liability accrued on lease rental income which was manifested in the form of tax demand dated 17th July 2018 relating to period FY 2006-07 to FY....
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.... 3.3 We find that Supreme Court in the Great Eastern Shipping Company Ltd. vs. State of Karnataka (supra) held that: "33. When we peruse the various terms and conditions of the Charter Party Agreement (Annexure 1), clause 1 provides that the contractors "let" and the charterer "hire" the goods vessel for six months. The expression 'let' has been used, and the vessel most significantly during the charter period has been placed at the "disposal" of the charterers and under their control in every respect. The charterers have been given the right to use all outfits, equipment, and appliances on board the vessel at the time of the delivery, including the whole reach, burthen, and deck capacity. Thus, in our considered opinion, merely by providing the staff, insurance, indemnity, and other responsibilities of bearing officials costs. Effective control for the entire period of six months has been given to the charterers. It is a case of transfer of right to use the vessel for which certain expenses and staff are to be provided by the contractor, which is not sufficient to make out that the control and possession of the vehicle are with the contractor. The possession....
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.... use. The entire use in the property in goods is to be exclusively utilised for a period of 42 months by Grasim. The existence of goods is identified and the Transit Mixers operate and are used for the business of Grasim. Therefore, conclusively it leads to the only conclusion that the petitioners had transferred the right to use goods to Grasim. For these reasons, we are not able to countenance any of the submissions made by the petitioners' counsel." 3.5 We find that Supreme Court in the case of Aggarwal Brothers vs. Haryana and Another (supra) have held that: "5. The said Act defines 'sale' to mean the transfer of property in goods for cash or deferred payment or other valuable consideration and includes 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." Such transfer of the right to use goods for consideration is "deemed" to be a sale. The provision expressly speaks of "transfer of the right to use goods" and not of transfer of goods. There is, therefore, no merit in the submission that to be a deemed sale within the meaning of the abovemen....