TaxTMI 
TaxTMI 
2024 (7) TMI 309
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....ort of D.G. Sets, temperature control and allied 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 p....
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....AX-000-COM-023024-16-17 dated 18.11.2016 & Appeal No. ST/85299/2017 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 agree....
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....h transactions. The provisions relating to transfer of right to use the goods is covered under the provisions 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....
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....Rashtriya Ispat Nigam Ltd. Vs. Commercial Tax Officer -1989 (12) TMI 325-Andhra Pradesh High Court (ii) State 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 o....
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....udicating authority had concluded that the right to transfer the property in the generating set/equipment had not been transferred by the appellants to their clients. He also 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 transf....
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.... that the noticee have given 'transfer of right to use the goods'. From the above mentioned legal position, clarification received from the Board, legal interpretation in the cases of similar 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 not....
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....rticle 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 in any Court or tribunal established under any law for the time being in force... Negative 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, ....
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....her w.e.f. 01.07.2012 in the negative list regime, the transfer of goods, by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods constituted the declared service, in terms of clause (f) of Section 66E of the Finance Act, 1994. 9.2 The disputed period in the present appeals cover the period commencing from October, 2006 to June, 2017. In view of both the periods i.e. before the negative list 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 co....
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.... of allowing another person to use the goods, without giving legal right of possession and effective control, not being treated as sale of goods, is treated as service. 4.4.3 Proposal is to levy service tax on such services provided in relation to supply of tangible goods, including machinery, equipment and appliances, for use, with no legal right of possession or effective control. Supply of tangible goods for use and leviable to VAT / sales tax as deemed sale of goods, is not covered under the scope of the proposed service. Whether a transaction involves transfer of possession and control is a question of facts and is to be decided based on the terms of the contract and other material facts. This could be ascertainable from the fact whether or not VAT is payable or paid." 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....
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....ance; obtaining approval of concerned Electricity Board; operation of Diesel Generating sets; provision of fuel, labour and other connected works which were duly incorporated in specific agreement executed to this effect by the appellants with their clients. Wherever the actual expenditure incurred as above involved mark-up, on such charges which is over and above the actual expenditure incurred, the appellants had paid service tax on the additional consideration received by them. Further, since the rented equipment are for specified use, 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.....
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....er the instructions of the client. Hence, on the facts of the case and on detailed examination of the services provided by the appellants as per the agreement entered into by the appellants, prima facie we do not find it feasible to categorise the activities undertaken by the appellants as 'Supply of Tangible Goods for use' in order to subject the transaction for levy of service tax under Section 65(105)(zzzzj) ibid. 10.1 In order to further examine the details of the agreement dated 05.10.2010 entered by the appellants with their clients BORL, 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 AG....
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.... be provided to the Owner in three phases (the "Phases") and during each Phase the 1250kVA Generators shall be located at the Sites as follows Phase 1A = 37 x 1250kVA Generators ("Phase 1A") xxx xxx xxx xxx Phase 1B = 41 x 1250kVA Generators ("Phase 1B") xxx xxx xxx xxx Phase 2 = 53 x 1250kVA Generators ("Phase 2") xxx xxx xxx xxx 2.4 The operational service period of each Phase shall commence on the Commercial Operation Date of that Phase and shall continue 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 O....
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....ontractor harmless from and against any Claim in connection with: 6.2.1 loss of or damage to the property of the Owner, and 6.2.2 death or sickness of or injury to any member of the Owner's personnel arising out of or in connection with the performance of this Contract, save where such Claim has resulted from the or has been contributed to by any negligence and/or breach of duty (statutory or otherwise) of the Contractor. xxx xxx xxx xxx 7.6 The Owner shall be entitled, at any time, to inspect all or any part of the Plant. If any part of the Plant does not, at any time, meet the Specifications for reasons attributable to the Contactor, then the Contractor shall promptly replace or repair such part of the Plant in ensuring 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 ....
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....vice Period or Extended Operational Service Period. 2 O&M Charge The Owner shall pay the O&M Charge to the Contractor from commencement of the Commercial Operation Date of each Phase until expiry of the Operational Service Period or Extended Operational Service Period. 3 Mobilisation Charge The Owner shall pay the Mobilisation Charge to the Contractor in full prior to the Plant from the Contractor's nominated depot. 4 Demobilisation Charge The Owner shall pay the Demobilisation Charge to the Contractor in full 4 weeks prior to demobilisation of the Plant from the Site on submission of a reciprocal Bank Guarantee for the same by the Contractor. 5 Onward Transport Charge The Owner shall pay the Onward Transport Charge to the Contractor in full prior to mobilisation of the Plant from the Contractor's nominated depot. 6 Return Transport Charge The Owner shall pay the Return Transport Charge to the Contractor upon receipt by the Owner of Bill of Laden for the equipment from the Contractor subject to clause 3.5 7 Installation Charge The Owner shall pay the Installation Char....
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.... 20. Site Supervision 21. Operation and Maintenance 22. Personnel Provision of unskilled labourers, to work under the supervision of the Contractor Technicians during installation, commissioning and operation of the Plant. 23. Load Management 24. Spares and Consumables 25. Break Down of DG Set THE OWNERS SCOPE OF WORK Bharat Oman Refineries Ltd. will provide services as listed below with all associated costs to BORL's account unless otherwise stated. 1. Suitable Land 2. Permits 3. Site Facilities 4. Refuse 5. Connection to BORL System 6. Supply of potable water and fuel oil for DG Set as per agreed specifications. 7. Personnel & Security Provision of Security facilities and Site Security Personnel at each of the locations." 10.2 On perusal of the agreement dated 05.10.2010, it transpires that this a contractual arrangement between the appellants and their clients for providing the facility of complete Plant/generating sets by making available the specified equipment. The various clauses in the a....
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.... 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." 10.4 In the light of our discussion on the facts of the case and as the various clauses of agreement in paragraphs 10.1 and 10.2 and as per the guidelines of Hon'ble Supreme Court as above, we come to the conclusion that appellants have complied with all the tests as laid down in the above case to hold that there is transfer of right to use equipment/generating set. Thus the activity carried out by the app....
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.... to use any goods. Article 366(29A)(d) inserted by the Constitution (46th Amendment) Act, 1982 on 02.02.1983 also provide for specific meaning attached to the phrase "tax on the sale or purchase of goods" to included deemed sale i.e., 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. Thus, in our considered view, owing to the reason of the Article 366(29A)(d) of the Constitution of India, transfer of the right to use any goods for any purpose, whether or not for a specified period, for cash, deferred payment or other valuable consideration, has to be considered as deemed sale or purchase of goods. It is clear that the activities in the present case clearly establish that it is a transaction of sale or purchase of goods as there is a clear case for transfer of right to use goods, and thus it is a 'deemed sale' transaction. 11.2 It is also observed that the appellants have been paying VAT on such leasing of equipment/generating sets. In this regard, we also find that DOF No. 334/1/2008- TRU, dated 29.02.2008 Circular in Para 4.4 also states that "Supply of tangible go....
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....clusive from service. Since the nature of transaction under dispute is deemed sale, no service tax can be demanded, as held in various judgments and relied upon by the Appellant in the present matter. 4.9 Following the cited decisions and our independent observations in the facts of the present cases, we are of the considered opinion that the demand raised cannot sustain and requires to be set aside." 12.2 We further find that the order of the Tribunal in another case involving identical set of facts in Gujarat Power filed Pvt. Ltd. (supra) have held that it is unambiguous that when on supply of tangible goods, the sales tax is payable or paid, then the same transaction will not be subject to payment of service tax, for the reason that as per Article 366 (29A) of Constitution of India, the supply of tangible goods is considered as deemed sale and any sale transaction will not be a domain of service. 12.3 We further find that in respect of Adani Gas Ltd. (supra) relied upon by Revenue, the facts of the case were different from the present case; in that referred case the SKID equipment consisting of regulator, valves, filters and metering equipment was used for delivery of gas ....
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....w with the help of smart card inserted into the DCE as part of the service to distributors. The theatre owner, in order to receive the digital content and exhibit cinema, require Digital Cinema Equipments which are either owned by them or are taken on lease by them. The appellant has leased such equipments to some of the theaters. The appellant in order to fulfil contract with the distributors are inserting smart cards to monitor the number of shows in such DCE. They are also collecting registration fee from theaters for conducting feasibility study which is reimbursement of expenses. The demand against them is on lease of DCE equipments given to the theatre owners on the ground that since the effective control and possession of such equipments has remained with the appellant, hence the services are of "supply of tangible goods for use". We find that the adjudicating authority has held that since as per contract the equipment will remain sole property of equipment provider and he shall bear the cost of normal wear and tear and repairs it is clear that the legal right and effective controls rests with the appellant. We find that except the above findings the Commissioner has not dwe....
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....the theatre owner in respect of such smart card. Thus the smart card were not an instrument to control the operation of DCE on behalf of appellant or has no bearing on the agreement between the theatre owner and appellant in case of leasing of DCE Equipments. As far as insurance of the DCE equipment is concerned the Appellant were owners of the equipments and the nature of leasing agreement does not change for the reason that the insurance was done by the appellant. For bringing any service under the category of "supply of tangible goods service" in terms of Section 65(105)(zzzj) it is imperative to see that such service is in respect of services towards supply of tangible goods for use "without transferring right of possession and effective control". In the present case once the DCE were transferred to theatre owner the appellant had no control over running of such equipments which are to be operated by the persons employed/deputed by the theatre owner. The theatre owner had contractual control over such equipments which was in their possession. All these factors are to be taken into consideration while determining the nature of service. It is observed that the appellant has been ....
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....e the levy of service tax which is being demanded in the instant case. Even the circular issued in 2008 referred above clearly states that VAT and Service Tax are mutually exclusive. Considering all above factors it appears there is no suppression of fact on appellant's part. It is also observed that the appellant obtained DDQ (Determination of Disputed Question) dated 26-6-2008 from Commissioner of Sales Tax, who held that lease rental is liable for VAT. The appellant accordingly was discharging the VAT liability even before the taxability on 'Supply of Tangible goods for use'. With the above undisputed facts. We are of the clear view that there is no suppression of facts with intent to evade payment of Service Tax on lease rentals on DCE, on the part of the appellant. Therefore we hold that the demand for extended period is clearly time-barred." 14. We further find that the department's appeal filed against the order of the Tribunal in the case of UFO Moviez India Ltd. (supra) was dismissed by the Hon'ble Supreme Court by upholding the decision taken by the Tribunal and affirming that the question of claiming service tax on the activities does not arise on the activities for w....