TaxTMI 
TaxTMI 
2024 (11) TMI 1413
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....6 passed by respondent no. 2. 3. The petitioner entered into a Leasing Agreement for the supply of compressors with various companies such as Indraprastha Gas Ltd. ["IGL"] and M/s. Mahanagar Gas Ltd. ["MGL"] etc. for compression of natural gas at their outlets. 4. It has been submitted by learned counsel for the petitioner that Service Tax authorities have, contrary to the provisions of Section 65(105)(zzzzj) of the Act, held that the transactions are subject to service tax levy. It has been contended that with the handing over the possession of the equipment, effective control ceased with the petitioner and therefore, the transaction was subject to local/state service tax levy. It has been further submitted that vide order dated 20 February 2010 passed by the Deputy Commissioner of Sales Tax, the petitioner was held liable to pay Sales Tax/VAT. The petitioner has been regularly paying Sales Tax/VAT since 2005 and has also filed Annual Returns with the Sales Tax Department from time to time. It is submitted that since the petitioner is discharging appropriate Sales Tax/VAT under the respective state laws of Delhi and Maharashtra and in view of the Circular dated 29 February 2....
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....ith (i) Gujrat Adani Energy Ltd. ["GAEL"]; (ii) Gas Authority of India Ltd. ["GAIL"]; (iii) Green Gas Ltd. (iv) IGL (v) MGL (vi) Bharat Heavy Electrical Ltd. ["BHEL"]. The question as to whether the activities undertaken by the petitioner with its customers are exigible to the service tax depends upon the intention of the parties, which can be discerned from the terms of reference given in the contracts. 9. The relevant portion of the scope of work in respect of all the six wet leasing contracts has been reproduced in paragraph 68 of the order of the Commissioner dated 28 November 2016, which is reproduced below: "(i) Gujarat Adani Energy Ltd. (GAEL) "Wet leasing of booster Compressors" "...we are pleased to award you the Work Order for Wet Leasing of 2 nos. of booster compressors with 2 nos. of dispensers as per the agreements terms and conditions jointly signed by GAEL and ICM authorized signatory. 2. Contractor's Scope of work: - o Delivery of booster along with dispenser at M/s Neelu Motors & Mitesh near APMC CNG refueling stations. o The supplier shall bear the transportation cost & octroi incurred from the suppliers....
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....x @ 8% [emphasis supplied], GAIL shell deduct Income tax at source. 8.0 Payment Terms The lessor shall raise bills to GAIL on monthly basis and payment to the lessor shall be made within 15 days of receipt of bills. The monthly billing shall be made as per average derived slab. For the certification of monthly bills, the lessor shall also submit a separate statement giving the station wise log book on breakdowns, non-availability of equipments for that month. This statement shall be duly signed by the SIC. ... (iii) Green Gas Ltd. Repeat Order for Wet leasing of 01 No of Daughter Booster Compressor for CNG & City Gas Distribution Project at Lucknow of M/s Green Gas Limited. ...the major salient terms & conditions are stated below:- 1. Price basis be supplied at site : Monthly wet lease basis for items to 2. Taxes & Duties : Included in your [ICL] scope. No statutory variation shall be admissible. 3. Price Break-up .... : As per enclosed Annexure-I 6. Payment terms : The lessor shall raise bills to GGL on monthly basis and the payment to lessor shall be made within 15 days of receipt o....
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....ied, skilled and trained engineers and technical manpower to operate and maintain the outlet on round the clock basis. The lessor shall ensure that the staff deployed at the outlet takes all precautions to ensure safety of the system since CNG is a very high pressure and flammable gas. The lessor shall also make his own arrangements for providing sitting place for the operator at the proposed site at his own risk and expense. The manpower deployed by the lessor should be adequately trained in the fire fighting... 7. The lessor shall ensure that all the equipments supplied under wet lease ore in good operating condition..... 11. The lessor shall maintain proper record of compressors operating parameters, energy meter reading and hourly gas sale through each dispensing point... 13. The lessor shall bear and pay lease tax and/or any other taxes, duties or levies as applicable from time to time and will keep MGL informed in respect of payment of said taxes, duties and levies..... Billing and Payment: The lessor shall raise bills to MGL on monthly basis and the payment to the lessor shall be made within 15 days of receipt of bills from lessor. ....
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....r leasing the compressors and other equipments is a service falling under the taxable category of Supply of Tangible Goods Service. Transfer of right to use any goods is leviable to Sales Tax/VAT as deemed Sale of goods. Transfer of right to use involves transfer of both possession and control of goods to the user of goods. However, in the instant case, going through the various provisions of the agreement, it is evident that there is no transfer of right to use as features of command, domination, regulation etc. is very much in the hands of the noticee. Thus effectively, if the lessee has been provided with control of use of goods it will tantamount to transfer of right to use of goods and service tax will not be chargeable. However, in this case there is a transaction of another person to use the goods without giving legal right of. possession and effective control and hence has to be treated as service." 12. Clause 4.4 of the Central Board of Excise & Customs, New Delhi's ["Board"] Circular DOF No. 334/1/2008-TRU dated 29 February 2008 is reproduced below: "4.4 SUPPLY OF TANGIBLE GOODS FOR USE; 4.4.1 Transfer of the right to use any goods is leviable to sale....
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....specifically emphasizes that a particular transaction is a deemed sale or a service is a question of fact and to be decided contingent upon the terms of the contract. I have already examined, in extensor, the terms of reference of the aforesaid contracts which clearly show that these are for Supply of Tangible Goods Service and do not come within the four corners of deemed sale. Therefore, paying of sales tax by them, suo moto does not make the said contracts to be the contracts involving deemed sale. Consequently, the reliance placed on the aforesaid circular and the laws cited in their favour are not applicable to this case. Accordingly, above plea of the Noticee having no force stands rejected." 14. Our conclusion as recorded above would stand fortified by the reasons which we assign hereinafter. It is pertinent to note at the outset that Section 65B(44)(a) of the Act defines 'service' in the following terms: "(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,....
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....ansferee; (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." 17. The case of the writ petitioner essentially proceeded on the basis that since the fifth respondent, the Maharashtra Sales Tax Authority had already subjected the transactions in question to a tax treating them to be deemed sales and involving a transfer of a 'right to use', no service tax could have been levied. It was in the aforesaid context that the petitioner appears to have placed reliance on the judgment of the Supreme Court in Gujarat Ambuja Cements Ltd. vs. Union of India (2005) 4 SCC 214 as well as of the Customs Excise and Service Tax Appellate Tribunal ["CESTAT"] in Sobha Developers Ltd vs. CCE & ST [2010] 24 STT 425. 19. However, from a reading of the order impugned before us, the following position emerges. Aft....
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....the provisions of the Act was succinctly explained by the Supreme Court in a recent decision rendered in Commissioner of Service Tax vs. Adani Gas Ltd. 2020 SCC OnLine SC 682 Adani Gas was a decision which was directly concerned with Section 65(105)(zzzzj). While ruling upon the scope and ambit of that provision as contained in the Act, the Supreme Court rendered the following pertinent observations: "16. The test laid down in Bharat Sanchar Nigam Ltd.* has been applied by courts to determine whether a transaction involves the "transfer of the right to use any goods" under article 366(29A)(d). In doing so, the courts have analysed the terms of the agreement underlying the transaction to ascertain whether effective control and possession has been transferred by the supplier to the recipient of the goods. Recently, this court in Great Eastern Shipping Co. Ltd. v. State of Karnataka** considered whether the transfer of a vessel under a charter party agreement was a "deemed sale", subject to sales tax. The court, after analysing the terms of the charter party agreement, held*** : "43. We are not turning our decision upon the terms used like 'let', 'hire....
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....cial Services Companies v. Union of India*** 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 consideration, which correspondingly stands consumed by the service receiver. It is this principle of equivalence which is inbuilt into the concept of service tax under the Finance Act, 1994. That service tax is, therefore, a tax on an activity. That, service tax is a value added tax. The value addition is on account of the activity which provides value addition.. . Thus, service tax is imposed every time service is rendered to the customer/client,. .. Thus, the taxable event is each exercise/activity undertaken by the service provider and each time service tax gets attracted." (emphasis supplied) 18. The introduction of section 65(105)(zzzzj) in the Finance Act, 1994, was with the intention of taxing such activities that enable the customer's use of....
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....tioners 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 relation to mining of mineral, oil, or gas under section 65(105)(zzzy). In the present matter, we are not concerned with the merits of Shipowners'*, which was affirmed on appeal by this court in Union of India v. Indian National Shipowners' Association**. This court explicitly restricted itself to the interpretation of section 65(105)(zzz) while leaving the other observations on interpretation of the law, "open to be considered at length at an appropriate stage".*** We note however, the analysis of section 65(105)(zzzzj) of the Bombay High Court, where the High Court observed# : "38. Entry (zzzzj) is entirely a new entry. Whereas entry (zzzy) covers services provided to any person in relation to mining of mineral, oil or gas, services covered by entry (zzzzj) can be identified by the ....
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....ary 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. xxxx xxxx xxxx 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....
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....ave 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 interest in ensuring the correct recording of the quantity of gas supplied. Additionally, delivery of gas in a safe and regulated manner, enabled by the SKID equipment, is a....
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....rvice in relation "tangible goods" where the recipient of the service has use (without possession or effective control) of the goods." 23. It is thus apparent that it is only 'deemed sales' as contemplated under Article 366(29-A) of the Constitution, which stands exorcised from Section 65(105)(zzzzj). Tested on the factors which had been identified by the Supreme Court in BSNL, and relevant for the purposes of evaluating whether a 'right to use' had been transferred, it becomes apparent that no dominion or control over the equipment stood transferred by the writ petitioner. The equipment remained under the regulation and control of the petitioner and was also to be worked upon by personnel deployed by it. It is these factors which appear to have weighed upon the respondent while holding that the transactions would be exigible to tax under Section 65(105)(zzzzj). 24. Tested on the principles as propounded by the Supreme Court in Adani Gas, we find that the ultimate conclusions which the respondent has arrived at on the question of 'right to use' are clearly unexceptionable. While the petitioner would be correct in its submission that a transaction which falls within the ambit ....