TaxTMI 
TaxTMI 
2023 (9) TMI 1495
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....the end of the lease period the appellants are required to dismantle and take away the equipment. 1.2 For the said purpose the appellants have entered in to lease agreement with its customers to give the FLOXAL Unit, storage tanks, cylinder, toners along with vaporizer on lease for which the rent is recovered from the customers. The FLOXAL Unit, storage tank, cylinder and toners were installed by the appellant free of charge and after installation the unit would be at the disposal of the customers throughout the duration of the contract. The customers were required to bear the expenses of goods and supplies required for functioning of FLOXAL Unit, storage tanks, cylinders, toners. 1.3 The appellant would be responsible for the operation of the FLOXAL Unit. The use of gas is a complete responsibility of the customer. also customer being keeper and user of FLOXAL Unit, storage tanks, cylinders, toners would be held responsible for claim made due to injury or damage to 3rd parties for leasing of the FLOXAL unit, storage tank, cylinder, toners. A fixed monthly amount is to be paid by the customers to the appellants. On the amount collected by the appellant under the lease agreeme....
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.... transferred to their customers, therefore the transaction does not fall under the activity of supply of tangible goods service. Therefore the demand is not sustainable. He placed reliance on the following board circulars and judgments: • Circular No. 334/1/2008-TRU dated 29.02.2008 • Circular No. 198/8/2016-S.T dated 17.08.2016 • Quippo Energy Pvt. Ltd Vs CST 20220-VIL-937-CESTAT-AHM-ST • Air Liquide North India Pvt. Ltd Vs CCE 2017 (4) GSTL 230 (T) • CST Vs UFO Moviez India Ltd 2022-VIL-07-SC-ST • CST Vs UFO Moviez India Ltd 2021-VIL-11-SC-ST • UFO Moviez India Ltd Vs CST 2017-VIL-774-CEST AT- ST • Subhash Light House Vs CGST 2022-VIL-106-CEST AT- DEL-ST • Express Engineers & Spares Pvt. Ltd Vs CGST 2022 (1) TMI 564- CESTAT ALLAHABAD • You Broadband & cable India Ltd Vs CCE 2020 (2) TM1187-CESTAT Ahmedabad • GE Power Services India Pvt. Ltd Vs PCCST 2021 (2) TMI 83-CESTAT • Compucom Software Ltd Vs CST 2019(25) GSTL 75 (T) • GIMMCO Ltd Vs CCE 2017(48) STR 476 (T) • Century Pulp and Paper Vs CCE 2019 (....
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....ipment and appliances. In the fact of the present case though the machinery equipments were supplied for use by the customer but right to possession and effective control has been transferred. 4.2 The appellant have supplied and installed the equipments in the premises of the customers thereafter the customer was at full liberty to possess and use the equipments for production of gas which is further used in their production activity during the lease period the possession of equipment and effective control is undoubtedly with the customers as the same was operated and used by the customer only during the lease period. this fact also gets reinforced on the basis that the appellant for such supply registered under VAT Act and discharging the VAT on the same transactions on which the revenue has demanded the service tax. The present nature of the transaction has been included as a deemed sale under Article 366 (29A) of the constitution of India which is reproduced below: [(29A) tax on the sale or purchase of goods' includes- (a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuab....
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....gh value machineries are supplied for use, with no legal right of possession and effective control. Transaction 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." 4.4 From the above circular it is abundantly clear that in a case where there is a transfer of right of use in any goods the same is leviable to Sale Tax / VAT as deemed sale of the goods where the transfer of right to use involves transfer of both possession and control of the goods to the use....
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.... a transfer of right to use. To examine this issue, it would be appropriate to refer to the agreement entered into between the appellant and its customers. As noted, the appellant supplies Power Generating Equipments / gas genset (Plant) to Customers on standby charges and variable charges basis under the agreement. We find that during the subsistence of the agreement, the lessee alone has the right to use the Plant and even the Appellant cannot trespass that right of the lessees/ customers. The Lessees fix the pattern in which the plant is to be used and the time when it will function. All the permission to be obtained from the statutory authorities to be obtained such as Electrical, Pollution, CCR have to be taken by the Customers, the lessee shall ensure the safety of the plant in a manner similar to its own plant. Customers have to provide fuel, Jacket water & feed water, the site and other facilities. Further, as per clauses of lease agreements, the customers will also indemnify the Lessor against the loss or damage arising to or in connection with plant for the reason other than Lessor's personnel. We also find that the clause 8.6 of agreement between the Appellant and Shah P....
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....or 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." 4.5 In the light of above discussion and observations of Hon'ble Supreme Court, we note that Appellant have complied with all the tests as laid down in the above case to hold that there is transfer of right to use gas genset. Thus the activity is not in the nature of 'service' under the Finance Act in both during the period prior to negative list regime and thereafter as held in the impugned orders. 4.6 We find that the adjudicating authority has held that since as per contract the equipment will remain sole property of equipment provider and skilled manpower supplied by the Appellant are responsible for maintenance operations of gas genset/plant, it is clear that the legal right and effective controls rests with the appellant. We find that except the above findings the Commissioner has not dwelled upon any of the submission and facts made by....
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....her or not for a specified period) for cash, deferred payment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made;" In view of the Article 366(29A) (d) of the constitution, transfer of the right to use any goods for any purpose, whether or not for a specified period, for cash, deferred payment or other valuable consideration, has to be considered as deemed sale or purchase of goods. It is clear that a tax on the sale or purchase of goods includes a tax for transfer of right to use ....
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....s reproduced as below which was upheld by the Hon‟ble Supreme Court: "5. We have carefully considered the arguments and written submissions made by both sides, 6. We find that the first demand of service tax is on lease rentals collected by the Appellant from the Theatre owner. The Appellant is receiving film in analogue format from the distributors/producers and converting into compressed encrypted Digital format for which they are charging Digitalization fee from the distributors/ producers and are also discharging service tax on the same. The Distributors on the other hand are entering into agreements with the Theatre owners for exhibition of movies. The agreement between the Distributors and Theatre owners are based on number of shows. The Distributor also enters into a content distribution agreement with the Appellant to deliver the digital content in movie Theaters and to monitor the number of shows exhibited. The Appellant track the number of show with the help of smart card inserted into the DCE as part of the service to Distributors. The Theatre owner in order to receive the Digital content and exhibit cinema require Digital Cinema Equipments which ....
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.... to decide the nature of service 6.1. Further the fact that 600 Theatres had exhibited the IPL matches and none of the content was provided by Appellant. None of these submissions has been taken into account while passing the impugned order. We also find that in addition the Appellant had made various other submissions which do not find mention in order and are discussed in later part of this order. The Appellant has contended that the DCE equipments could be operated on standalone basis by the Theatre owner for screening of any content which the Theatre owner would procure. The Appellant had no say in all such actions of the Theatre owner. The role of Smart card was limited to keeping track of shows to be played and deducting credit which is available on the smart card for running of shows. It was installed on the direction of the Distributors who had entered into agreement with the Theatre owners for exhibiting their movie and the Appellant had no connection with the Theatre owner in respect of such smart card. Thus the smart card were not an, instrument to control the operation of DCE on behalf of Appellant or has no bearing on the agreement between the Theatre owner an....
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.... as per their liking with no right of the Appellant to interfere or to be forced by the Appellant to run the Equipments as per their directions or control. The Appellant has also relied upon the order of Tripura HC in case of Bharti Telemedia Ltd. Vs The State of Tripura-2015- TIOL 2983 HC Tour 2015-VIL-222- TRI relating to identical situation and the Ld. Senior Counsel has argued that the ratio of said judgment would squarely applicable to the case.. 6.2. We also find that the Appellant had regularly been filing their returns and even the department from time to time had initiated enquiry with the Appellant which was properly responded. The DGCEI also investigated the issue in 2008- 2009 and after response by the Appellant vide their letter dt. 17.06.2009 no further action was taken which shows that even the revenue appears to have satisfied regarding non applicability of tax on activities of the Appellant. Further it is also not in dispute that the Appellant had been paying VAT even before the levy of service tax which is being demanded in the instant case. Even the circular issued in 2008 referred above clearly states that VAT and Service Tax are mutually exclu....
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.... that there was no contract or agreement between the Theatre owners and the persons whose advertisements were exhibited in cinema theaters. Only the Appellant had an agreement with such persons to exhibit the advertisements. Thus there is no ground to hold that the Appellant were providing any business supports service to Theater owner. The DCE equipment at the most can be said to have been jointly used by the Appellant and the Theater owner to provide the services of Sale of Space for Advertisement. The DCE Equipment being specified Capital goods as defined under Rule 2 (a) and having been used for providing output service are eligible for availment of credit. In terms of Rule 3(1) of Cenvat Credit Rules and proviso to Rule 3 (5) it transpires that the credit is available even if the Capital goods are removed outside the premises of the provider of output service for providing the output service. As regard a submission of Ld. AR that while removing capital goods to theatre, the appellant was supposed to reverse the cenvat credit as said capital goods was purportedly sold to Cinema theatres. In this regar we find that though the DCE was deemed sold to Cinema Theatre but ultimate ow....