TaxTMI 
TaxTMI 
2024 (7) TMI 309
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....llied equipment and providing such equipment on lease/hire basis to their customers situated in India. These equipments were purchased by the appellants by importing it from their associated company situated in United Kingdom, and storing it in its various warehouses located across India and thereafter given on rental/lease basis to its customers as per their requirement. For the purpose of such activity of leasing of equipment, the appellants were registered with the jurisdictional authorities and were paying VAT/CST on the hire charges/lease charges, by treating the said transaction as deemed sale and not as provision of any taxable service under the Finance Act, 1994. While undertaking leasing/hiring of the equipment, the appellants were also undertaking various other activities such as transportation, loading and unloading of equipment; commissioning and decommissioning of the equipment; insurance of equipment; obtaining approval of concerned Electricity Board; operation of Diesel Generating sets; provision of fuel and other connected works by executing specific agreement to this effect. Wherever some of such activity is liable to be paid with service tax, the same were dischar....
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....9/2017 01.10.2009 to 31.03.2014 30,71,81,864/- VGN(30)STC/Range- V/SCN-Aggreko/11/ 2015 dated 20.04.2016 April, 2014 to March, 2015 6,47,73,118/- No.06/P-I/COMMR/ 2018-19 dated 18.04.2018 PUN-EXCUS-001-COM-24/18-19 dated 27.12.2018 & Appeal No. ST/86364/2019 April, 2015 to June, 2017 12,52,37,545/- 2.3 Learned Commissioner of Service Tax/Central Excise & GST, Pune-I vide impugned orders dated 18.11.2016 and 27.12.2018 had confirmed the adjudged demands; besides he had imposed penalty on the appellants under Sections 76 and 78 of the Finance Act, 1994. The appellants being aggrieved with the impugned orders passed by the learned Commissioner, have filed these appeals before the Tribunal. 3.1. Learned Senior Advocate appearing on behalf of the appellants submits that the appellants in the present case are primarily concerned with the renting of the Diesel Generating (D.G.) sets/equipment which constitutes the main business. The appellants enter into contact with the customers for the purpose of leasing/hiring the equipment. The terms of the agreement indicates that the equipment is given on hire/lease to the customers by the appellants, for a fix....
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....sions of Section 2(24) of the Maharashtra Value Added Tax Act, 2002. In terms of the above statutory provisions, the activities carried out by the appellants as a dealer who is registered under this Act and where the goods are transferred by a person to other for their right to use to goods for a period, the same shall be liable for payment of VAT at the rates specified in the Schedules. The appellants fulfill the various guidelines prescribed by the Hon'ble Supreme Court in BSNL case, viz., (i) there must be available for delivery; (ii) there must be a consensus ad idemas to the identity of the goods; (iii) the transferee should have a legal right to use the goods, consequently all legal consequences of such use including any permissions or licences required therefore should be available to the transferee; (iv) the transferee has a legal right during the period contract, which is for the exclusion to the transferor; (v) having transfer of right to use the goods during the period for which it is so transferred, the owner cannot again transfer the same rights to other person. Since the appellants have leased the equipment to customers for their use, the same is subjected to th....
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....e of Andhra Pradesh Vs. Rashtriya Ispat Nigam Ltd. - 2013 (31) S.T.R.513(S.C.) (iii) G.S. Lamba & Sons Vs. State of Andhra Pradesh - 2015 (324) E.L.T. 316 (A.P.) (iv) UFO Moviez India Ltd. Vs. Commissioner of Service Tax-V, Mumbai - 2018 (11) G.S.T.L. 391 (Tri. - Mumbai) affirmed by Hon'ble Supreme Court in Civil Appeal No.181 of 2022 (v) Bharat Sanchar Nigam Ltd. (BSNL) Vs. Union of India - 2006 (2) S.T.R. 161 (S.C.) (vi) Quippo Energy Pvt. Ltd. Vs. Commissioner of Service Tax, Ahmedabad - 2022 (12) T.M.I. 1440 - CESTAT- AHMEDABAD (vii) Gujarat Powerfield Pvt. Ltd. Vs. Commissioner of Service Tax, Ahmedabad - 2023 (9) T.M.I. 868 - CESTAT- AHMEDABAD (viii) Subhash Light House Vs. Commissioner, Central Goods & Service Tax, Audit-II - 2022 (2) TMI 141 - CESTAT NEW DELHI (ix) Agrawal Builders Vs. Commissioner, Central Excise, Allahabad 2019 (2)TMI 311 - CESTAT ALLAHABAD 4.1 Learned Authorised Representative (AR) appearing on behalf of the Revenue reiterates the findings of the impugned orders and submits that even if the VAT is paid, it does not entitle the appellants to escape from service tax liability. 4.2 He further stated that as per Sect....
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.... referred to the contractual arrangements in the present case and the ratio laid down by the Hon'ble Supreme Court in the case of BSNL (supra) and Commissioner of Service Tax, Ahmedabad Vs. Adani Gas Ltd. 2020 (8) TMI 789 Supreme Court, for confirmation of the adjudged demands in both the above referred orders. The relevant paragraphs of the impugned orders, which are identical in wordings and paragraph numbers, are extracted and given below: "27/22.7. I further find that crucial factor to determine the transfer of right to use of goods is the point of signing of the contract. Transfer of right to use, transfer of custody and transfer of effective control and possession all are governed by the terms of a written contract. I rely on the judgment of Hon'ble Andra Pradesh High Court in the case of M/s G.S. Lamba & Sons V/s State of Andhra Pradesh - 2015 (324) E.L.T. (A.P) in this regard. xxx xxx xxx xxx As per the law laid down transfer of the right to use takes place when the contract in respect thereof is executed. In the instant case I find that even post signing of the contract several operations e.g. steps to be taken i....
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....nature and the factual position of the transactions made with their customers and terms and conditions mentioned in the contract, I find that the noticee cannot to be said to have transferred of the right to use the goods to their customers. Therefore, even though they are paying VAT on the transactions, the activity carried out by the noticee are squarely covered under the definition of taxable service prior and after 01-07-2012 being 'Supply of Tangible Goods' without transfer of the right to use of goods. I find that in the instant case only on the basis of transfer of custody and merely having transfer of license to use the goods the noticee is arguing that there is transfer of the right to use the goods which in my opinion is not sustainable as per terms of agreement and test laid down by the Apex Court in the case of Bharat Sanchar Nigam Limited Vs. Union of India (2006 (2) S. T. R. 161 (S.C)). Accordingly, I hold that service tax is payable on the said service by the noticee." 7. We find that the issues arising for consideration before us from these appeals are to determine the following: (i) whether the activities performed or services provided by the appellants....
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....ative list of services. Section 66D: The negative list shall comprise of the following services, namely:- (a) services by Government or a local authority excluding the following services to the extent they are not covered elsewhere- ..... Declared services. Section 66E: The following shall constitute declared services, namely:- (a) renting of immovable property; (b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion certificate by the competent authority; xxx xxx xxx xxx (e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; (f) transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods;..." The Constitution of India "Article 366. In this Constitution, unless the context otherwise requires, the following expressions have the meanings hereby respectively assigned to them, that is ....
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....st regime prior to 01.07.2012 and after introduction of negative list regime w.e.f. 01.07.2012 are covered in these cases, we have carefully examined the relevant legal provisions that existed both the above relevant time period. We find that the key aspect to be considered for identifying whether a particular activity would be subject to levy of service tax or not, is the fact of supply of tangible goods or transfer of goods without transferring the right of possession or by way of hiring, leasing, licensing or any such manner without transfer of right to use such goods. 9.3 On analysis of the above legal provisions during the relevant period, we find that in order to fall within the definition of taxable service, following three conditions are required to be satisfied: (i) there should be a supply or transfer of goods for use; (ii) The transfer of goods must be by way of hire or lease or licences for using the goods; and (iii) The right of possession and effective control of such goods must not have been passed on to the transferee. Once all these aforesaid three conditions are satisfied, the provisions of the said taxable entry for the purpo....
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....red 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." The above instructions clearly provide that such levy under STGU is only in respect of transactions of allowing another person to use the goods, without giving legal right of possession and effective control, by treating the same as service. The detailed explanatory notes brought out by the Finance Ministry, TRU at the time of introduction of the above levy under STGU makes it clear, that such levy on the newly proposed services is leviable subject to the same not being subjected to Sales tax/VAT. Hence, the exclusion specifically provided in the scope of levy of service tax on STGU squarely applies in the present case. 9.6 We also find that the above explanatory instructions have correctly reflected the Budget Speech of the Hon'ble Union Finance Minister laying down the policy with respect to the introduction of levy of service on specified services including STGU, wh....
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....in order to make it operational, as per the requirement of the clients, the appellants had provided erection, commissioning, installation at the site of the client and decommissioning at the end of the rental/lease period. For these services, the appellant had separately charged their clients and have also paid applicable service tax thereon. In terms of the contract, the equipment supplied on rental/lease basis is to be insured by their clients. As this equipment are for use at the site of the clients, the approval of the State Electricity authorities for obtaining their permission in the name of the client, was obtained by the client themselves. The appellants have only facilitated obtaining the said approval as the said permission is being issued in the name of their customers and not in the name of the appellants. We also find that the generating sets could be operated by the clients themselves, but wherever the clients required to provide assistance in supplying of such operators, the appellants have hired such labour from the external manpower supply agency. The labour employed in such manner is working directly under the control and supervision of their clients and performin....
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....ORL, we have extracted the various clauses and the same are given below: "AGREEMENT THIS AGREEMENT No.: BRP/O&M/59 - 13832 - C001 - AS is made on this day of 5th, October 2010 between BHARAT OMAN REFINERIES LIMITED, incorporated In India registered under Companies Act 1956 having Its registered office at 'A' Block, Office Complex, Gautam Nagar, BHOPAL 462023 (Madhya Pradesh) and Refinery at Bina, Dist. Sagar (Madhya Pradesh) (hereinafter referred to as "the Owner which expression, unless the context requires otherwise, shall include its successors and permitted assignees) First Party, and AGGREKO ENERGY RENTAL INDIA PVT LIMITED, a company Incorporated In India and registered under Companies Act 1956, having its registered office at 404 Lunkad Skystation, Viman Nagar, Pune 411 014 India (hereinafter referred to as "the Contractor", which expression, unless the context requires otherwise, shall Include its successors and permitted assignees) Second Party: WHEREAS A. The Owner requires the services of temporary generators plus ancillary equipments to be installed, commissioned, operated and maintained at the BORL Refinery Sites as defined below. B. The Con....
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....e for. Phase 1A - Site C - From date of Commissioning to 31st October 2010 Phase 1A - Site A - for one Month Phase 1A - Site B - for one Month Phase 1B - Site A, Site B and Site C for one Month Phase 2 - Site C from January 01st 2011 to 15 February 2011 Phase 2 - Site A for three Months Phase 2 - Site B for three Months xxx xxx xxx xxx 3. PAYMENT 3.1 The Owner shall pay the Contractor for the Service in accordance with clause 3 and as set out in Schedule 1 Schedule of Rates. However the Onward Transport Charges and Return Transport Charges for the Temporary Boiler Plant will be charged at actuals and reflected in the total Freight Charges accordingly. xxx xxx xxx xxx 3.5 The Contractor shall submit to the Owner an Invoice detailing the amounts payable to the Contractor hereunder. The Owner shall pay each invoice submitted by the Contractor: 3.5.1 In respect of Hire Charges and O&M Charges; within 15 days of the date of the Invoice; and 3.5.2 In respect of Onward Transport and Mobilization Charges prior to mobilization of the Plant and i....
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....nsuring compliance with the Specification. 7.7 Any inspection of any item of the plant necessarily required during the currency of the contract to ensure continued compliance with certification requirements, or for any other reason, shall be conducted at a time convenient to the contractor... 7.8 The Contactor will have the right to carry out routine service, maintenance and repairs for the Plant and shall notify the owner at least 7 days in advance of any such scheduled maintenance.... 7.10 The Owner acknowledges and agrees that the Plant is the exclusive property of the Contractor and undertakes, until the termination of the Contract: 7.10.1 not to lease, lend or dispose of the Plant in any way; 7.10.2 not to infringe against the Contractor's rights of ownership of the Plant; 7.10.3 to protect the Plant against any attachment, confiscation or any other enforcement procedure applicable under local law and to inform the Contractor of any threatened attachment, confiscation or any other enforcement procedure without delay, 7.10.4 not to repair, improve, move, interfere with, deface, or otherwise Interact or attempt to inte....
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....f Bill of Laden for the equipment from the Contractor subject to clause 3.5 7 Installation Charge The Owner shall pay the Installation Charge to the Contractor upon full Installation as per the agreed billing schedule set in Schedule 1 - Schedule of Rates SCHEDULE 2-SCOPE OF WORK AGGREKO SCOPE OF WORK the Contractor will Design, Engineer (Preparation of SLD) and Deploy Diesel Generator Sets of suitable capacity on Hire basis to Bharat Oman Refineries Limited at Bina Refinery at Various Substations as per the Load Requirements. These sets are to be operated by the contractor on round the clock basis inclusive of supply all associated equipment of the DG sets. The scope of services under this contract shall cover the following aspects: 1. Technical Support & Consultation During the entire contract tenure, the contractor shall provide technical support and consultation so as to ensure service excellence. In the event of operating parameters being revised, the contractor shall make recommendations for revisions to equipment configuration / operational mode to cater to the requirements 2. Approvals Obtain necessary clearances license from the statutory authorit....
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.... until the stage these are commissioned and ready for use by the lessee (owner). Similarly, after the hire/lease period, how such equipment shall be decommissioned is also provided therein. The consideration paid by the lessor (owner) is for the hire/lease of the equipment. By virtue of this agreement, the lessee (Owner) 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 equipment is purely in the hands of customers of the appellants, as the customer is at their liberty to use the equipment hired by him. It is seen from the agreement that there is no dispute as to the fact that the goods are in the possession of the lessee (Owner) and is being used by him for the intended purpose without any interference or hurdle from the appellants once it is commissioned. On going through the clauses of above agreement, we find that the appellants had handed over the "Goods‟ i.e., Plant's/generating set's possession to the lessee (Owner) as also the right to use. Therefore, we are of the considered view that the transaction of appellants d....
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....e and thereafter as held in the impugned orders. 10.5 We find that the adjudicating authority has held that since the appellants are providing skilled manpower for operating the generating set, loading and unloading activities are carried out by them, repair and maintenance is carried out by them at their own cost, the appellants cannot be said to have transferred the right of the equipment to their customers. We find that except the above findings, the Commissioner has not dwelled upon any of the submission and facts made by the appellants. The terms and conditions of the agreement are vast and comprehensive for providing various activities involved in the hire/lease of the equipment; the contract/agreement as a whole provides its essence and the same is crucial in determination of nature of contract/agreement. As per agreement the equipment is delivered to the customers; in terms of various Clauses of agreements as discussed above and customers are required to get all permissions for installation of equipment; Clauses of agreement also provide that customers shall be responsible for all injuries, losses and damages caused to the equipment and shall also indemnify the appel....
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....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". It is not in dispute that the appellants were paying VAT in all their transactions during the disputed period. Thus, we are of the considered view that the transfer of right to use gas generating set/equipment or plant on lease/hire basis is a deemed sale in terms of Article 366(29A)(d) of the Constitution of India, which is excluded from scope of levy of service tax. 12.1 In this regard, we find that on the identical set of facts, the Coordinate Bench of the Tribunal in the case of Quippo Energy Pvt. Ltd. (supra) have held that the transaction of leasing of power generating equipment is a deemed sale and no service tax can be demanded. The relevant paragraph of the above order is extracted and given below: "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 tangible goods for use and leviable to VAT/....
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....tity of the gas supplied through such equipment and additionally the equipment ensured the safety of supply of gas. Hence, the Hon'ble Apex Court concluded that the said SKID equipment is a 'tangible goods' where the buyer of gas has its use without possession or effective control over it. In the present case, the equipment/ generating set is in complete control and use for generating source of power, as per the requirements of the customer once it is commissioned. Even for routine maintenance and repair, the appellants as per clause 7.8 of the agreement have to notify the customer seven days in advance, to have access over the equipment. Further, the various clauses of the agreement clearly provide that the appellants were, nowhere having control over the equipment and the control over the equipment effectively remained with the customers/clients. Hence, we find that the facts of the present case before us is entirely different from the case of Adani Gas Ltd. (supra), and thus to this extent we are unable to agree with the Revenue's claim for application of the principle laid down by the Hon'ble Supreme Court in that case referred by them. 13. We also find that the Tribunal the c....
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..../agreement. The findings of the impugned order nowhere lead to the conclusion on the basis of this vital aspect. The appellant before the adjudicating authority and in their appeal memo has made submission on clause of agreements i.e. in terms of Clause 1B of the agreement the equipment is delivered to the theatre owner; in terms of Clause 1D the Theatre owner would put a person well versed with handling of equipment; Clause 5J where the theatre owner is required to get all permissions for installation of DCE; Clause 5K as per which the theatre owner shall be responsible for all injuries, losses and damages cause to the equipment and shall also indemnify the appellant against any loss or damage arising to or in connection with the equipment for the reason other than normal wear or tear; Clause 16A as per which the appellant has transferred the right to use of DCE exclusively to the theatre owner and the theatre owner shall have effective control of the DCE and shall be free to make its own use for theatrical exhibition purpose at its sole discretion. The Ld. Senior Counsel appearing on behalf of appellant has argued by citing case laws that agreement should be read as a whole and n....
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....re liable for VAT. The adjudicating authority has not given any findings on this aspect when brought before him. We also find that DOF No. 334/1/2008TRU, dated 29-2-2008 Circular in Para 4.4 also states that "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". It is not in dispute that the appellant were paying VAT since 2006 and the services of "supply of tangible goods" came into service tax net later. The subject DOF was issued before the enactment and intended that the "proposed service" would not include the transaction on which VAT is "Payable or paid". The theaters are free to choose which movie to be displayed, the number of shows, the timing of shows, weather to play a movie or not and also have operational control over equipment. From these facts, it prima facie appears that the theatre were having absolute authority to run the Cinem....