TaxTMI 
TaxTMI 
2024 (8) TMI 1542
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....d Four Hundred Three Only) upon the party under Section 76 of the Finance Act, 1994 on the amount of tax confirmed at (i) above, (iv) I further impose a total penalty of Rs.20,000/- (Rupees Twenty Thousand Only) upon the party under Section 77(1)(a) and Section 77(2) of the Finance Act, 1994. The above adjudged dues should be paid forthwith by the party 2.1 Acting on the intelligence that the party were evading service tax payment on supply of the tangible goods services, the premises of the appellant were searched. 2.2 During the course of search proceedings, it was noticed that the party has leased out earth station and other equipment and related infrastructure having uplinking facility of T.V Programs to their sister concern namely M/s Sahara India Commercial Corporation Limited (herein after referred to as "the SICCL"). The proceedings were detailed in Panchnama dated 20.3.2015 recorded on the spot. In her statement recorded on 20.03.2015 on the spot, Smt. Santosh Khandelwal, the Cost accountant as well as company secretary stated that the party is engaged in the business of leasing earth station and related equipment to its sister concern namely the SICCL....
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.... • Meaning of transfer of right to use as interpreted has been interpreted by various authorities in following cases: o 20th Century Finance Corporation Ltd. [2000 (5) TMI 980 (SC)] o Rashtriya Ispat Nigam [1990 (77) STC 182] o G S Lamba & Sons [2015 (324) ELT 316 (AP)] • Criteria specified by the Hon'ble Supreme Court in case of Bharat Sanhar Nigam Limited [2006 (2) STR 161 (SC)] are fulfilled. • Decision of Hon'ble Supreme Court in case of Adani Gas Limited [2020 (40) GSTL 145 (SC)] is not applicable. • Vat has been paid and therefore no service tax payable. o Narayan Premji Savala [2022 (66) GSTL 417 (Bom)] o Imagic Creative Pvt Ltd [2008 (9) STR 337 (SC)] o Rajeshwari Colour Lab [2020 935) GSTL 75 (Mad)] o Essar Telecom Infrastructure (P) Ltd. [2012 (275) ELT 167 (Kar)] o Express Engineers & Spares Pvt Ltd. [2022 (64) GSTL 112 (T-All)] • Benefit of Cum duty to be extended. • Penalty under Section 76 could not have been imposed as the issue involved is one of interpretation. o Uniflex Cables Ltd. [2011 (271) ELT 161 (SC)] o....
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.... (a) The party i.e. M/s. Sahara Sanchaar Limited shall be the owner of the assets (Clause 2). (b) The party i.e. M/s. Sahara Sanchaar Limited shall be responsible to make or get adequate insurance cover for the assets given on lease to the second party (Clause2). (c) The party i.e. M/s. Sahara Sanchaar Limited shall bear the entire license fees etc. to be paid to Govt. authorities in respect of usage of such assets (Clause 5). (d) The party i.e. M/s. Sahara Sanchaar Limited shall charge compensation in case of any damagę\(Clause 7). (e) The party i.e. M/s. Sahara Sanchaar Limited shall have right to inspect all the assets through their Engineers / authorized representatives at any time to ensure the condition of the assets (Clause 8). (f) That the second party shall not be entitled to sub-let to any one, wholly or partially, any part of the assets without the prior consent of the first party (Clause 9). Here, it is pertinent to mention that the first party and second party in the said agreement are M/s. Sahara Sanchaar Ltd. and M/s. Sahara India Commercial Corporation Ltd. respectively. On perusal of these clauses and the d....
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.... the investigation and allegation in the SCN by claiming the transaction between them and Ms SICCL as deemed sale. They have built their case on the following plinth that:- 1. Right to Use is transferred. 2. Payment of VAT has been made against the supply of goods. 3. On account of rebuttal to the allegations made in the show cause notice The party has analyzed the taxability of service of supply of tangible goods under Section 65(10)(zzzzj) of the Finance Act, 1994 by stating that (a) there shall be supply of tangible goods; (b) supply shall be for use by the recipient; and (c) supply shall be effected "without" transferring right of possession and effective control of such machinery, euipment and appliances. Thereafter, the party has argued about the effective possession by relying the decision given in the case of Supdt, And Remembrancer of Legal Affairs, West Bengal Vs Anil Kumar Bhunja and Ors (1979)4SCC 274, wherein the court explained that "Possession" implies a right and a fact the right to enjoy annexed to the right of property and the fact of the real intention. If involves power of control and intent to control., The party further stat....
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....ucture P. Ltd V Union Of India 2012 (25) STR- 16 (Kar) Ms G S Lamba & Sons-2012-TIOL-49HC-AP-CT 5.5 I further observe that in their defence, they also rebutted the allegations made in the show cause notice as regard to various clauses of the agreement that (a) As per clause 2 of the agreement, they shall pay the owner of the asset. Hence this lause does not, in any way, mean that the 'right to use' is not being transferred to the lessee (b) The insurance company issues insurance policy only in the name of the owner and not in the name of lessee and therefore, insurance cover has been taken by them and not by the lessee. (c) The license fee of Rs 56,85,000/-appx. for an year is to be paid to Govt. authorities for operating the earth station. The said department (like insurance company), only recognizes the owner of the asset and not the lessee of the asset Hence, the license fee is to be paid by them. (d) As per clause 7 of the agreement, M/s SICC will be liable to pay compensation to them in case of any damages to the asset. This shows that the possession has been transferred (e) It is mentioned in clause 8 that assessee....
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....he transfer of the right to use goods. It is clarified as under: - "In terms of sub-clause (d) of clause (29A) of Article 366 of the Constitution of India, 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 is 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. It follows that such transactions will be liable for Sales Tax/Value Added Tax. In terms of section 66E(f) of the Finance Act, 1994, transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods IS a "declared service" and hence liable to service tax. In this regard some representations have been received. 2 The matter has been examined. I am directed to draw your attention to the fact that in any given case involving hiring, leasing or licensing of goods, it is essential to determine whether, in terms of the contract, there is a transfer of the right to use the goods. Further, the Supreme Court in the case of Bha....
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....AV Inc vs Assistant Commercial Tax Officer reported in 2001(124) STC 426 Karnataka 3.2.6 G. S Lamba and Sons vs State of Andhra Pradesh reported in 2015(324) ELT 316 A.P 4.1 There\will also be cases involving either a financial lease or an operating lease. The former generally involves a transfer of the asset and also the risks and rewards incident to the ownership of that asset. This transfer of the risks and rewards is also recognised in accounting standards. It is generally for a long term period which covers the major portion of the life of the asset and at the end of the lease period, usually the lessee has an option to purchase the asset. The lessee bears the cost of repairs and maintenance and risk of obsolescence also rests with him. In contrast, an operating lease does not involve the transfer of the risks and rewards associated with that asset to the lessee. It is for a short term period and at the end of the lease period the lessee does not have an option to purchase the asset. The cost of repairs, maintenance and obsolescence rests with the lessor. 4.2 Similarly in the aircraft industry there are "dry leases" and "wet leases". Generally speaki....
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....r a mere contract of hiring without transfer of control, may be a contract of bailment and not a contract for transfer of right to use goods. In the above stated factors, the said agreement between the party and M/s SICCL and other relevant case records are required to be thoroughly and critically analysed. I observe that in the balance sheet, income from the impugned activity has been booked in the profit and loss account. In this regard, in the notes to financial statements for the year ending 31st March 2014 under the head 'Significant Accounting Policies', the following declaration has been made: "1.04 OPERATING LEASE- WHERE ASSETS ARE GIVEN ON LEASE Leases in which the company does not transfer substantially all the risk and benefits of ownerships are classified as operating lease. Assets subject to operating are included in the fixed assets. Income on an operating lease is recognised in the statement of Profit and Loss Accounts over the lease period. Thus, it is apparent that it is undisputed fact that the issue involved in the present case is not concerning the financial leasing which has been distinguished by the Hon'ble Supreme Court ....
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....ation is installed in the premises of the party and it is also a fact on record that necessary license for possessing and operating the said telecast/broadcast/transmission equipment is in the name of the party and not in the name of lessee. 1 observe that the party in the entire defence submission has only tried to interpret the terms and conditions of lease agreement dated 01.04.2009 in their favour without bringing any substantial material to support their stand like the terms of license issued to them by the respective ministry/department of the government so as to examine whether lessee was merely acting as an operator of the leased equipment or was having right to possession and effective control during the period of lease for his own independent use. I also observe that clause 2 of the said agreement although mentions that the second party (lessee) shall enjoy the exclusive right to use the assets SO installed but at the same time it mentions that the lessee shall not claim ownership Further, it is also provided in the said clause that the said right to use can be extended by the first party (i.e. the party) to any third party after obtaining consent of the second party whic....
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....(b) The party ie. M/s. Sahara Sanchaar Limited shall be responsible to make or get adequate insurance cover for the assets given on lease to the second party (Clause2). (c) The party i.e. M/s. Sahara Sanchaar Limited shall bear the entire license fees etc to be paid to Govt. authorities in respect of usage of such assets (Clause 5). (d) The party i.e. M/s. Sahara Sanchaar Limited shall charge compensation in case of any damage (Clause 7). (e) The party i.e. M/s. Sahara Sanchaar Limited shall have right to inspect all the assets through their Engineers / authorized representatives at any time to ensure the condition of the assets (Clause 8). (f) That the second party shall not be entitled to sub-let to any one, wholly or partially, any part of the assets without the prior consent of the first party (Clause 9). 5.6.4 Thus, I have no iota of doubt that the said agreement does not transfer the right to use tangible goods with effective possession and control to the lessee i.e Ms. SICCL. Thus, I am of the view that the same is taxable service chargeable to the service tax in terms of the provisions of Section 65(105)(zzzzj) read with Se....
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....enge. In the light of what is stated above this appeal has no merit. Consequently it is dismissed directing the parties to bear their respective costs." I also find support from the decision of the Hon'ble Karnataka High Court in the case of Indus Towers Ltd. Vs Deputy Comm. of Commercial Taxes, Banglaore, as reported in 2012(285)ELT.003(Bang.) wherein it has been held that "Transaction is not within the ambit of Article 366(29-A)(d) of Constitution of India - Mobile operators did not get possession and effective control of passive infrastructure, and there was no physical delivery of same - Mobile operators only used services provided by service provider, and their access to the infrastructure did not amount to its possession or right to use goods - Mobile operator were merely provided access to the infrastructure, and that did not amount to service provider losing control over the infrastructure, and especially so as mobile operators could not transfer it during period of contract to a third party - Right of mobile operators was personal right to do something on the passive infrastructure belonging to service provider; it did not amount to creation of interest therei....
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....e found payable and a liability accrues on the assessee." Thus, I find that plea of the party that they are not liable to pay the service tax for the reason that they have paid the VAT, is, therefore, not tenable. 5.6.6 I also notice that the party in their defence has gone on to rebut the allegation in the SCN vis-à-vis the said agreement. 1 find the party's contention as a mere after thought and a desperate attempt to keep away them from the service tax net. The fact of the case is that the allegations in the SCN are based on the terms of various clauses which have been reproduced, and are narration of the facts of the matter. The party has shown its inability to circumvent the clause and thus giving strength to the revenue case as the activity spell out of said agreement drives home one and only point that the party has not transferred right to use the tangible goods and thus activity would be covered under the ambit of service tax, quite rightly, as alleged in the SCN. 5.6.7. The party has contended that the demand for the period up to March 2015 is hit by limitation, but, they have not given any reason therefore. In this regard, 1 find that the no ....
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....6 of the Finance Act, 1994 the party has submitted that the same is not imposable as they were under bonafide belief that transaction involved transfer of right to use the goods and hence chargeable to the VAT, and that the issue involved interpretation of statute. They have placed reliance on the following case laws Bharat Petroleum 2002 (48) RLT 979 (CEGAT-MUM) Uniflex Cables Ltd 2011 (271) ELT 161 (SC) Sonar Wires Pvt. Ltd. Vs. CCEx. 1996 (87) ELT 439 (T) Synthetics & Chemicals Ltd. 1997 (89) ELT 793 (T) Man Industries Corporation 1996 (88) ELT 178 (T) Sports & Leisure Apparel Ltd. CCE., Noida 2005 (180) ELT 429 Aquamall Water Solutions Ltd. 2003 (153) ELT 428 Blue Cross Laboratories Ltd. vide order no. A/1529/CIV/SMB/2007 On the issue, I find that the present case relates to the demand of the service tax on the supply of tangible goods service. I observe that such service of supply of goods was brought in tax net w.e.f. 16.05.2008 and the party was fully aware about the facts of applicability of the service tax on such service as Shri Hardeep Singh, the Head- Finance & Accounts of the party in his ....
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.... reference "11. Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of Courts are neither to be read as Euclid's theorems nor as provisions of the statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of Courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes In London Graving Dock Co. Ltd. J-Horton (1951 AC 737 at p. 761), Lord Mac Dermot observed - 'The matter cannot, of course, be settled merely by treating the ipsissima vertra of Willes, J as though they were part of an Act of Parliament and applying the rules of interpretation appropriate thereto. This is not to detract from the great weight to be given to the language ....
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....s to ensure assessee failing to pay tax to make payment with interest and lenient view can be taken as regards penalty in cases of lack of knowledge and reasonable cause". 4.3 We find that facts and issues involved in the present caase are on all fours identical to case decided by us vide Final Order No 7011/2024. The Chartered accountant appearing for the appellant strenuously sought to distinguish the said order by stating that thesid decision is not based on the amended provisions. However we do not find any merits in the said submission as the perod involved in the said case was upto 31.03.2014, and the Finance Act, 1994 was amended to introduce new taxation regime with effect from 01.07.2014. 4.4 On the merits of the case we have observed as follows: 4.3 Interpreting the definition of "Supply of Tangible Goods" as per Section 65 (105) (zzzzj) of the Finance Act, 1994 as inserted by Finance Act, 2008 vis a vis the Article 366 (29A) of the Constitution of India and after taking note of decisions rendered on the subject, Hon'ble Supreme Court has in the case of Adani Gas Ltd [2020 (40) GSTL 145 (SC)] while setting aside the order of tribunal reported at [2019 (28) ....
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....Nigam Limited and Another v. Union of India and Others [2006 (3) SCC (1) = 2006 (2) S.T.R. 161 (S.C.)] ("BSNL"). In BSNL, the Court held that the purpose of Article 366(29A)(d) was to levy tax on those transactions where there was a "transfer of the right to use any goods" to the purchaser, instead of passing the title or ownership of the goods. Thus, by a fiction of law, these transactions were now treated as 'sale'. Elucidating on the "transfer of the right to use any goods", Dr. A.R. Lakshmanan, J. in a concurring opinion held : "97. To constitute a transaction for the transfer of the right to use the goods, the transaction must have the following attributes : (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 lan....
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....ods, which is determinative of deemed sale as per the Constitution of India and provisions of section 5C reflecting the said intendment. We are of the considered opinion that there is transfer of right to use exclusively given to charterer for six months, and the vessel has been kept under the exclusive control. The charterer qualifies the test laid down by this court in BSNL (supra)." (emphasis supplied) 17. Therefore, sales tax is levied in pursuance of Article 366(29A)(d) on transactions which resemble a sale in substance as they result in a transfer of the right to use in goods, instead of the transfer of title in goods. The Finance Act, 1994, deriving authority from the residuary Entry 97 of the Union List, enabled the Central Government to levy tax on services. 'Service tax' was introduced as a response to the advancement of the contemporary world where an indirect tax was necessary to capture consumption of services, which are economically similar to consumption of goods, inasmuch as they both satisfy human needs [All India Federation of Tax Practitioners v. Union of India, (2007) 7 SCC 527, para 4 = 2007 (7) S.T.R. 625 (S.C.)]. This Court, in Association o....
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....ng 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." (emphasis supplied) 19. The above circular clarified that Section 65(105)(zzzzj) is applicable only to those transactions where there is a supply of tangible goods for use, without the transfer of possession or effective control to the recipient. This aspect has been interpreted by various Courts and Tribunals. In the Bombay High Court decision in Indian National Shipowners' Association and Anr. v....
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.... which is provided or which is to be provided by any person to another "in relation to supply of tangible goods". The provision indicates that the goods may include machinery, equipment or appliances. The crucial ingredient of the definition is that the supply of tangible goods is for the use of another, without transferring the right of possession and effective control "of such machinery, equipment and appliances". Hence, in order to attract the definition of a taxable service under sub-clause (zzzzj), the ingredients that have to be fulfilled are : (i) The provision of a service; (ii) The service is provided by a person to another person; (iii) The service is provided in relation to the supply of tangible goods, including machinery, equipment and appliances; (iv) There is no transfer of the right of possession; (v) Effective control over the goods continues to be with the service provider; and (vi) The goods are supplied for use by the recipient of the service. 21. A GSA entered into by the respondent on 17 November, 2008 with one of its buyers (Polymer Industries) has been adverted to by the contesting parties as a representa....
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....Measurement Equipment, other metering facilities and other equipment necessary for flow control and the processing, compression, measuring and testing of Gas to enable delivery of Gas to the Buyer at the Delivery Point." Further, the expression 'Measurement Equipment' is defined as follows : " "Measurement equipment" means such main and subsidiary meter, including apparatus, mains and pipes, as the Seller considers necessary for the measurement and recording of the volume in SCM and pressure in Kg/cm2 of Gas delivered at the Delivery Point and for the safe operation of the Buyer's Facilities." Ownership of the measurement equipment continues to vest with the respondent as per clause 5.3. The buyer is required to provide land and a power connection, free of cost at its premises. The buyer has to pay for providing a gas pipeline connection from the distribution mains up to the measurement equipment. Gas is transported from the 'Measurement Equipment' by means of a pipeline provided by the buyer as stipulated in Clause 5.5 : "5.5 ..........." Clause 5.6 clarifies that the buyer has no right to adjust, clean, handle, replace, mainta....
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....pplied) The provisions for billing and payment are contained in clause 12. The relevant portion is extracted below : "12. Billing and Payment 12.1 Following the end of the Fortnight, the Seller shall render to the Buyer a statement including the following details for each Day of the previous Fortnight (hereinafter referred to as the "Fortnightly Invoice"), which shall show in respect of the previous Fortnight, along with the details of calculations : (i) the DCQ for each Day of that Fortnight in SCM; (ii) the aggregate quantity of Gas delivered by the Seller in such Fortnight, in SCM and Gross Calorific Value for the same; (iii) the Weighted Average Gross Calorific Value (GCV) of such Gas taken by the Buyer in such fortnight; (iv) the amount payable by the Buyer to the Seller for the quantifies of the Gas delivered during the Fortnight equal to quantities of Gas delivered by the Seller in SCM/Kcal as determined in (ii) above multiplied by Contract Price prevailing for the Fortnight. 12.2 The Buyer shall within seven (7) days of the receipt of the fortnightly invoice from the seller, pay to the seller the amount....
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....p or possession of the pipelines or the measurement equipment (SKID equipment) by the respondent to its customers. Clause 5.3 of the agreement specifically provides that the 'Measurement Equipment' is to be supplied, installed and maintained by the seller at the cost of the buyer and that the ownership of the equipment will rest with the respondent forever. Clause 5.6 further clarifies that the buyer has no right to adjust, clean, handle, replace, maintain, remove or modify the measurement equipment. Clause 5.10 guarantees that the seller shall have the right of entry at all hours to the Measurement Equipment and associated apparatus at the Buyer's premises. The pipelines are also part of the "Seller's Facilities" under the agreement and are constructed and maintained by the respondent at the cost of the customer. Thus, the ingredient of not transferring the ownership, possession or effective control of the goods under Section 65(105)(zzzzj) is satisfied. 24. The crux of the dispute is whether the supply of tangible goods - the SKID equipment - is for the use of the purchaser. In determining as to whether the provisions of Section 65(105)(zzzzj) are attracted, it is necess....
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....curacy, this has to be communicated in writing to the seller, who alone is entitled to test, re-calibrate, remove or modify it. Similarly, if the seller has any doubt about the proper working of the measurement equipment it is entitled to check the meter in the presence of the representatives of the buyer. If according to the seller, the existing measurement equipment is not working satisfactorily it would be replaced at the cost of the buyer. These provisions indicate that the supply, installation and maintenance of the measurement equipment is exclusively carried out by the seller. The buyer has contractual remedies against the seller in terms of the GSA. These remedies to the buyer as a purchaser of gas are distinct from the issue as to whether the equipment for which gas connection charges are recovered is used by the buyer. 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....
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....er Section 65(105)(zzzzj) at hand, where effective control or possession is not ceded. Thus, physical operation is not the only or invariable feature of use. As a corollary to the same, technical expertise over the goods in question is not a sine qua non for determining the ability of the consumer to use the goods. Therefore, the expression "use" also signifies the application of the goods for the purpose for which they have been supplied under the terms of a contract. 28. The terms of the GSA indicate that the supply, installation, maintenance and repair of the measurement equipment is exclusively entrusted to the respondent as the seller. These provisions have 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 ....
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....red payment or value consideration is considered as deemed sale under sub-clause (d) of Article 366(29A) of the Constitution of India. Right to use of tangible goods and services has also been brought under the service tax net by the Finance Act, 2008, with effect from 16-5-2008 vide Notification No. 18/2008-S.T., dated 10-5-2008 whereby taxable service has been defined under Section 65(105)(zzzzj) of the Act, 1994 to mean as :- "Any services 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 right of possession and effective control of such machinery, equipment and appliances. Position of law 42. Tata Consultancy Services (supra) was a case in which the specific issue of computer software packages was considered as is the concern in the present case also. There was, however, a distinction drawn insofar as the 'uncanned software' and 'canned software' alternatively termed as 'unbranded' and 'branded' is concerned. The distinction is in that a 'canned software' contains programmes which can be used as such by any person purchasing....
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....r CD. Thus a transaction/sale of computer software is clearly a sale of "goods" within the meaning of the term as defined in the said Act. The term "all materials, articles and commodities" includes both tangible and intangible/incorporeal property which is capable of abstraction, consumption and use and which can be transmitted, transferred, delivered, stored, possessed, etc. The software programs have all these attributes". 28. At this stage it must be mentioned that Mr. Sorabjee had pointed out that the High Court has, in the impugned judgment, held as follows : "... In our view a correct statement would be that all intellectual properties may not be 'goods' and therefore branded software with which we are concerned here cannot be said to fall outside the purview of 'goods' merely because it is intellectual property; so far as 'unbranded software' is concerned, it is undoubtedly intellectual property but may perhaps be outside the ambit of 'goods'." (Emphasis supplied) 29. Mr. Sorabjee submitted that the High Court correctly held that unbranded software was "undoubtedly intellectual property". Mr. Sorabjee submitted that the High Court fell in....
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....re goods for the purpose of the Customs Act was answered in the affirmative. This Court clearly held that "the intellectual property when put on a media would be regarded as an article on the total value of which customs duty is payable". "When technical material is supplied whether in the form of drawings or manuals the same are goods liable to customs duty on the transaction value in respect thereof". It was concluded so in paragraph 46 : '46. The concept that it is only chattel sold as chattel, which can be regarded as goods, has no role to play in the present statutory scheme as we have already observed that the word "goods" as defined under the Customs Act has an inclusive definition taking within its ambit any moveable property. The list of goods as prescribed by the law are different items mentioned in various chapters under the Customs Tariff Act, 1997 or 1999. Some of these items are clearly items containing intellectual property like designs, plans, etc.'. (Underlining by us for emphasis) 44. We may also refer to and rely upon a decision of this Court in the case of 20th Century Finance Corpn. Ltd. v. State of Maharashtra, reported in (2000) 6 S....
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....d is of no relevance to the locus of the deemed sale. Also of no relevance to the deemed sale is where the goods are delivered for use pursuant to the transfer of the right to use them, though it may be that in the case of an oral or implied transfer of the right to use goods, it is effected by the delivery of the goods." 45. While holding that in a contract for the transfer of the right to use goods, the taxable event would be the execution of the contract for delivery of the goods, it was observed :- "27. Article 366(29A)(d) further shows that levy of tax is not on use of goods but on the transfer of the right to use goods. The right to use goods accrues only on account of the transfer of right. In other words, right to use arises only on the transfer of such a right and unless there is transfer of right, the right to use does not arise. Therefore, it is the transfer which is sine qua non for the right to use any goods. If the goods are available, the transfer of the right to use takes place when the contract in respect thereof is executed. As soon as the contract is executed, the right is vested in the lessee. Thus, the situs of taxable event of such a tax woul....
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.... 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 therefor 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." 48. In the case of BSNL (supra), His Lordship noticed that none of the aforesaid attributes were present in the relationship between the telecom service provider and a consumer of such services. 49. His Lordship thereafter in para 117 of the judgment referred to the Sale of Goods Act, 1930. We quote para 117 as under :- "117. Sale of Goods Act, comprehends two elements, one is a sale and the other is delivery of goods. 20th Century Finance Corporation Limited v. State o....
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....is required is that the goods should be in existence so that they may be used. (f) The levy of tax under Article 366(29A)(d) is not on the use of goods. It is on the transfer of the right to use goods which accrues only on account of the transfer of the right. In other words, the right to use goods arises only on the transfer of such right to use goods. (g) The transfer of right is the sine qua non for the right to use any goods, and such transfer takes place when the contract is executed under which the right is vested in the lessee. (h) The agreement or the contract between the parties would determine the nature of the contract. Such agreement has to be read as a whole to determine the nature of the transaction. If the consensus ad idem as to the identity of the goods is shown the transaction is exigible to tax. (i) The locus of the deemed sale, by transfer of the right to use goods, is the place where the relevant right to use the goods is transferred. The place where the goods are situated or where the goods are delivered or used is not relevant. 52. From the judicial decisions, the settled essential requirement of a transaction for ....
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....uses of the said agreement as noted in the Show Cause Notice are reproduced below- "Whereas the first party (M/s Sahara Sanchaar Limited) has established Earth Station' at Sahara India Complex, C2,3,4, Sector-11, Noida and is acquiring other equipment and related infrastructure (hereinafter called 'Assets') to have up linking facility of T.V. Programmes. And whereas M/s Sahara India Commercial Corporation Limited has approached M/s Sahara Sanchar Limited for hiring the assets on lease for their business purposes And whereas the first party has agreed to grant lease of the assets to second party for its business purpose exclusively Now, this lease agreement witnesses as follows- 1. That the first party (M/S Sahara Sanchar Limited) shall charge yearly lease @20% plus taxes (as applicable) per annum on the total cost of lease out assets (as given in schedule-1 and forming part of these lease agreement) from the Second party from 1st day of April 2009 and lease rent on further new additions to lease out assets shall be charged @ 30% by the first party from the first day of the following month in which such assets arrive at site a....
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....ssets on lease to the Second Party by the First Party shalkl come in to Opeartion from the 1st Say of April' 2009 and will be valid for a period of 60 months i.. upto 31st march' 204. However, this may be renewed further on the mutually agreed terms and conditions by both the parties. 12. 12. Payment would be made on half yearly basis. This agreement was amended on 15.10.2010. The amended agreement was made effective from 01.04.2010 and was valid till expiry of the original agreement i.e. till 31 03.2014. The amendment was as under- "Whereas, the parties have mutually agreed to amend / make a few changes to the said agreement. Now, as per the agreed amendment/changes, SANCHAR shall charge annual Lease Fee 15% plus taxes (as applicable) per annum on the 40% of the total Asset Value of the equipments & lease rent on further new additions to Leased out assets shall be charged @15% by the First party from the first day of the following month in which such asset arrived at site & are installed. Taxes: TDS as applicable shall be deducted at source from the Payments. Payment terms: Lease rent shall accrue annually at the end of each financial y....
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.....2015, and submitted that they had given the legal right of possession and effective control to the lessee but she was unable to explain it in the light of agreement dated 01.04.2009. In his statement, recorded on 26.03.2015, Shri Hardeep Singh, Chartered Accountant and Head of Accounts of Appellant explaining the above referred clauses stated as follows: That they have taken the view of their legal advisor on incidence of service tax on lease rent and they were advised by their advisors that incidence of the service tax is not applicable on them. Clause 2- Since, the second party is enjoying right to use and they are having the possession and effective control on such assets therefore, incidence of service tax does not arise there. Clause 4- To the best of my knowledge insurance can be procured from the insurance company by the owner of assets therefore first party has to aquire insurance cover for such assets. Clause 5 - To the best of my knowledge License fee is payable by the first party as such license has been issued to the first party. Clause 8- This clause simply gives a right to lessor to verify the physical presence of the asse....
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....3 (31) S.T.R. 513 (S.C.)] 2. The respondent is owning Visakhapatnam Steel project. For the purpose of steel project, it allotted different works to contractors. The respondent undertook to supply sophisticated machinery to the contractors for the purpose of being used in execution of the contracted works and received charges for the same. The appellant made provisional assessment levying tax on hire charges under Section 5E of the Act. The respondent filed writ petition seeking declaration that the tax levied, exercising power under Section 5E of the Act on the hire charges collected during the period 1988-89, was illegal and unconstitutional. The appellant filed a counter affidavit in the writ petition contending that the respondent was lending highly sophisticated and valuable imported machinery to the contractors engaged in the execution of the project work on specified hire charges; the machinery was given in the possession of the contractor and he was responsible for any loss or damage to it and in view of the terms and conditions contained in the agreement, there was transfer of property in goods for use and on the amounts collected by the respondent as charges for l....
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....he view that the assets were made available to the lessee for use without transferring the effective control and possession over the said assets to the lessee and hence the service tax under the category of "Supply of Tangible Goods Services" has been rightly demanded from them. 4.10 From 01.07.2012 the scheme of taxation of services was changed and a negative list of services were defined which were kept outside the scheme of taxation. The service were defined as per clause 65B(44) as follows: ""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 a sale within the meaning of clause (29A) of article 366 of the Constitution; or (ii) a transaction in money or actionable claim;" Section 66E defines the Declared Services stating as follows: "Declared services. - The following shall constitute declared....
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....ase sale lies in the State where the agreement is executed if the goods are available for delivery. The Hon'ble Supreme Court further held that if the goods are not available for delivery or there is no written agreement, then the sale will be deemed to have taken place in the State where the delivery is given. While so holding, the Hon'ble Supreme Court elaborated upon the scope of Article 366 Clause (29A) and observing that the taxable event under Article 366(29A) is the transfer of right to use the goods and elaborately considering the scope of Article 366(29A), the Hon'ble Supreme Court held as under : "26. Next question that arises for consideration is, where is the taxable event on the transfer of the right to use any goods. Article 366(29A)(d) empowers the State Legislature to enact law imposing sales tax on the transfer of the right to use goods. The various sub-clauses of clause (29A) of Article 366 permit the imposition of tax thus : sub-clause (a) on transfer of property in goods; sub-clause (b) on transfer of property in goods; sub-clause (c) on delivery of goods; sub-clause (d) on transfer of the right to use goods; sub-clause (e) on supply of goods; and sub-c....
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....sfer" or "permitting the use or enjoyment of the copyright" is not within the State's exclusive power under Entry 54 of List II. Therefore, there is no merit in the contention that the taxable event provided under Section 65(105)(zzzzt) is covered by Article 366(29A)." Thus to claim the benefit of exclusion clause appellant has to show that transfer of right to use the goods was not in nature of transfer of right to use in absolute manner in the said goods and was just not the case of supply of goods for use. What is the crux of levy under the scheme of service tax under this category ius that goods have been supplied for use without transferring the property or rights in the goods. In the present case we are convinced that the appellant had supplied the goods for use by the lessee against a lease rent without transferring any right in the goods to the lessee. Hence for the period post 01.07.2012 also the services rendered by the appellant were taxable under this category. 4.5 The matter for the period after 01.07.2012 has been considered by us in para 4.10 of the above order and the amended provisions have been taken into account. Thus we do not find any merits in the ....
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....or a term which may extend to one year or with fine. It is clear that in the former case what it intended is a civil obligation while in the latter what is imposed is a criminal sentence. There can be no dispute that having regard to the provisions of Section 276C, which speaks of wilful failure on the part of the defaulter and taking into consideration the nature of the penalty, which is punitive, no sentence can be imposed under that provision unless the element of mens rea is established. In most cases of criminal liability, the intention of the Legislature is that the penalty should serve as a deterrent. The creation of an offence by Statute proceeds on the assumption that society suffers injury by and the act or omission of the defaulter and that a deterrent must be imposed to discourage the repetition of the offence. In the case of a proceeding under Section 271(1)(a), however, it seems that the intention of the legislature is to emphasise the fact of loss of Revenue and to provide a remedy for such loss, although no doubt an element of coercion is present in the penalty. In this connection the terms in which the penalty falls to be measured is significant. Unless there is so....