TaxTMI 
TaxTMI 
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2025 (4) TMI 66
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....ndred Ninety Six Only) i.e. 10% of the confirmed demand, upon the party under Section 76 of the Finance Act, 1994 on the amount of tax confirmed at (i) above as discussed supra, (iv) I further impose a total penalty of Rs.10,000/- (Rupees Ten Thousand Only) upon the party under Section 77(2) of the Finance Act, 1994. However, I do not impose penalty upon the party under Section 77(1)(a) of the Finance Act, 1994 as discussed supra." The above adjudged dues should be paid henceforth. 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 recorded on the spot. In her statement recorded on the spot, Smt. Santosh Khandelwal, the Cost accountant as well as company secretary stated that the party is engaged in the busines....
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....e appeal for the period 2014-15 to 2015-16 has been decided. In Para 4.6 of the said order, benefit of cum-tax has been granted to the appellant. We submit that although the demand is not sustainable on the basis of submissions made in our appeal. However, if the demand is upheld, the benefit of cum-tax must be allowed. 3.3 Learned authorized representative reiterates the findings recorded in the impugned order. 4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments. 4.2 Impugned order records following findings: "5.0 I have gone through the show cause notice as well as submissions made by the party at the time of personal hearing, defence reply dated 24.10.2017 submitted for the earlier show cause notice dated 12.04.2017 and which the party reiterated for the statement of this demand also and other case records. I find the issues to be decided in this case are that as to whether:- i) the leasing out of earth station and related equipment would qualify as taxable service under the "Supply of Tangible goods services" or not; ii) the demand of service tax amounting to Rs.2,23,05,959/- is liable to be recover....
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....ipment and appliances for use (earth station and related equipment in instant case), without transferring right of possession and effective control of such machinery equipment and appliances. Further, at the time of visit of the premises of the party on 20.03.2015, the copy of registration certificate of the utility van, which was a part of the equipment leased out to M/s. SICCL, was in the name of M/s. Sahara Sanchar Limited at the time of registration on 29.12.2008 and remained under the control of M/s. SICCL as on that date, as shown in the fitness certification issued by the Transport Department of Uttar Pradesh on 26.06.2014.. Thus, it was deduced that the party owned their properties which are part of the leased out equipment and thus, the legal right of possession and effective control was still in the hands of the party i.e. M/s. Sahara Sanchaar Limited. Accordingly, the party was found to be liable to pay service tax on lease income/ rental income received by them during the period 2009-10 to 2013- 14 & further for the period 2014-15 to 2015-16 to June, 2017. 5.2 I observe that on being specifically asked about it, Smt. Santosh Khandelwal, Cost accountant and Company Sec....
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....ion, the party has relied upon the Hon'ble Supreme Court in the case of 20th Century Finance Corporation and Anr. Vs State of Maharashtra (2000) 6.SCC.12. where it has been held that the levy of (sales) tax is not on the use of goods but on the transfer of the right to use goods. Thereafter, the party have stated that Clause 2 & Clause 3 of the said agreement show that the 'right to use' has been transferred to the lessee. 5.4 also observe that the party forwarded their arguments by stating that VAT has been paid by them, and hence, no service tax is leviable in terms of Circular No. 334/1/2008-TRU dated 29.2.2008. They further stated that they had been discharging the VAT liabilities on such transaction which was evident from the VAT challans and has not been disputed even in the show cause notice. They further submitted that the levy of service tax under supply of tangible goods service is alternate in nature and subordinate to the levy of VAT. Thus, if the VAT is paid by them, the service tax on the same cannot be levied. They also quoted the relevant portion of the TRU's circular They also stated that it is well settled position that the service tax is not le....
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....vice tax laws. As per Section 65(105) [(zzzzj) of the Finance Act, 1994- "Taxable Service" means any service 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;" I observe that with effect from 01.07.2012, Section 66B of the Finance Act, 1994 provided that there shall be levied a tax (hereinafter referred to as the service tax) at the rate of twelve per cent, on the value of all services, other than those specified in the negative list, provided or agreed to be provided in a taxable territory by one person to another and collected in such manner as may be prescribed. Further, under 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, has been termed as a 'declared service' 5.6.2 Further, the CBEC has clarified vide M.F.(D.R) letter F.No.198/08/2016 dated 17.8.2016 on the service tax liability in case of hiring of goods without the transfer of the r....
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....ax liability will arise in a given case. It is not possible to either give an exhaustive list of illustrations or judgements on this issue. Cases decided under the Sales Tax /VAT legislations have to be considered against the background of those particular legislative provisions and terms of contract in that case. 3.2 The following case law may also be referred to. These should not be applied mechanically but their applicability to the facts of a given case, the terms of the contract in the given case and the criteria laid down by the Supreme Court should be examined carefully. 3.2.1 Commissioner VAT vs International Travel House Ltd - Delhi High Court judgement dated 8-9-2009 in ST Appeal 10/2009 3.2.2 Rashtriyalspat Nigam Limited vs Commercial Tax Officer reported in 1990( 77) STC 182 and State of Andhra Pradesh vs Rashtriyalspat Nigam Limited reported in 2002 (126) STC 114 3.2.3 State Bank of India vs State of Andhra Pradesh reported in 1988 ( 70) STC 215 A.P 3.2.4 Ahuja Goods Agency vs State of Uttar Pradesh reported in 1997 (106) STC 540 3.2.5 Lakshmi AV Inc vs Assistant Commercial Tax Officer reported in 2001(124) STC 426 Karnataka 3.2.6 G. S Lamba and So....
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....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 therefor should be available to the transferee, d. For the period during which the transferee has such legal right, it has to be to 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 right to others. Thus it is construed that important attribute constituting transfer of right to use goods as deemed sale is that there should be transfer of effective control and possession of goods. If the owner retains effective control over the equipment, it should construe as not transfer of right to use. Further 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 agreeme....
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....come under the expression "financial leasing services" in Section 65(12) of the Finance Act, 1994 (as amended)." Thus, on perusal of the above judgement, I observe that 'operational lease' is purely a service activity where substantial risk and owner ship of the equipment remains with the lessor (i.e. owner of the equipment). However, I observe that service in relation to supply of tangible goods where the right of possession and effective control of such machinery, equipment and appliances stands transferred by the service provider to the receiver of such service, has been kept out of the purview of the scope of taxable service under Section 65(105)(zzzzj) of the Finance Act, 1994 (as applicable upto 30.06.2012) and under Section 66B of the Finance Act, 1944 read with Section 66E(f) of the Act, ibid, thereafter. As regards the issue whether right to possession and effective control of equipment leased out stand transferred in this case, I find that earth station 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....
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....s not been refuted by the party in their defence submissions by bringing on records the terms of license/permission issued in the case for having the possession/operation of impugned leased equipment. Thus, 1 find that the impugned show cause notice quite conspicuously and unequivocally has left no stone unturned in scrutinizing the said agreement. The investigation has indeed kept its focus on various clauses of the said agreement and has got into the insight of each of the clauses vis-à-vis the taxability under the service tax provision. Since. the said agreement is critical in defining the taxability, the investigation draws inference on the said agreement and for better understanding, the plain and conspicuous meaning of the various clauses of the said agreement is as under- (a) The party i.e. M/s. Sahara Sanchaar Limited shall be the owner of the assets and right to use of the assets can be extended by them to any third party (Clause 2). (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 th....
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....se of the machinery for the works other than the project work of the respondent or move it out during the period the machinery was in his use; the condition that the contractor would be responsible for the custody of the machinery while it was on the site did not militate against respondent's possession and control of the machinery. It may also be noticed that even the Appellate Deputy Commissioner, Kakinada in the order dated 15.11.1999 in regard to assessment years 1986-87 and 1987-88 held that under the terms and conditions of the agreement. there was no transfer of right to use the machinery in favour of the contractor. Although it cannot be said that the appellant estopped from contending otherwise in regard to was assessment year 1988-89, it is an additional factor and circumstance, which supports the stand of the respondent. 4. In our view, no fault can be found with the order under challenge. 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 C....
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....nd conditions of the said agreement clearly state the nature of transaction of the supply of tangible goods without transferring the rights to use and the same cannot be construed as sales (deemed sales). The Hon'ble Supreme Court in the case of Idea Mobile Communication Ltd. VS CCE Cochin [2011 (23)STR 433(S.C.)] held that "It also cannot be disputed that even if sales tax is wrongly remitted and paid that would not absolve them from the responsibility of payment of service tax, if otherwise there iS a liability to pay the same. If the article is not susceptible to tax under the Sales Tax Act, the amount of tax paid by the assessee could be refunded as the case may be or, the assessee has to follow the law as may be applicable. But we cannot accept a position in law that even if tax is wrongly remitted that would absolve the parties from paying the service tax if the same is otherwise 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 all....
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....ence to show consideration received inclusive of Service Tax"; and (ii) Shakti Motors Vs Commissioner of Service Tax, Ahmedabad [2008(12)STR710(Trib-Ahmd)] :: Held :: "Valuation (Service tax) - Cum-tax value - Plea of treatment of amount received as cum-tax to scale down the quanturn of demand In terms of Section 67(2) of Finance Act, 1994 if invoice specifically not says that gross amount charged includes Service tax, it cannot be treated as cum-service tax price - Cum-tax benefit not extendable in absence of evidence to show that invoice prepared in this manner - Section 67 ibid." 5.6.9 Accordingly hold that the service tax amounting to Rs.2,23,05,959/- for rendering "supply of the tangible goods services" as discussed in the foregoing para, is demandable from the party under Section73(1) of the Finance Act,1994. Demand of interest- 5.7 As regard demand of interest on the payment/non-payment of service tax as proposed in the Statement of Demand, the provisions of the Section 75 are being reproduced as under "SECTION 75-Interest on delayed payment of service tax- Every person, liable to pay the tax in accordance with the provisions of section 68 or rules made there un....
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....t, 1994 as leviable thereon. Penalty under Section 76 of the Finance Act, 1994 5.8 As regards the penalty under Section 76 of the Finance Act. 1994, the party has submitted that the same is not imposable as they were under bonafide belief that the transaction involved transfer of right to use the goods and hence chargeable to VAT: and that the issue involved interpretation of statute. They have placed reliance on some case laws also. 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 statement dated 26.03 2015, inter alia, stated that they had taken the view of their legal advisor on the aforesaid lease agreement and incidence of service tax on transaction under such agreement who had advised that incidence of service tax was not applicable under such transaction under the agreement. The said contention of Shri Hardeep Singh acting on behalf of the ....
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....tes. 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 v 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 actually used by that most distinguished judge 13. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases Disposal of cases by blindly placing reliance on a decision is not proper In view of above, the party is liable for penal action under the provisions of Section 76 of the Finance Act, 1994 as discussed supra. Penalty under Section 77 (1)(a) & 77(2) of the Finance Act, 1994- 5.9 As regards penalty proposed i....
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.... virtue of Section 173 of the CGST Act, 2017 notified vide Notification No. 9/2017 Central Tax dated 28th June, 2017 However, by virtue of saving clause provided under Section 174 of the CGST Act, 2017 all past investigation, inquiry, verification (including scrutiny and audit), assessment proceedings and adjudication had no effect of such repeal/amendment. Section 174 (2) (e) of the CGST Act, 2017 reads as:- "(2) The repeal of the said Acts and the amendment of the Finance Act, 1994 (hereafter referred to as "such amendment or 'amended Act', as the case may be) to the extent mentioned in the sub-Section (1) or Section 173 shall not- (e) affect any investigation, inquiry, verification (including scrutiny and audit). assessment proceedings adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such duty, fax surcharge penalty, fine, interest, nght privilege, obligation, liability, forfeiture or punishment. as aforesaid, and any such investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be instituted, continued or e....
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....bject to sales tax under Article 366(29-A)(d) of the Constitution of India. It is necessary to distinguish the applicability of these two provisions. Article 366(29A)(d), provides : "366(29A) tax on the sale or purchase of goods includes - xx xx xx (d) a tax on 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; xx xx xx 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." 15. The applicability of Article 366(29A)(d) was discussed in a decision of this Court in Bharat Sanchar 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 ....
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....ght to use the vessel with which we are concerned in the instant matter, and that is a deemed sale as specified in Article 366(29A)(d). On the basis of the abovementioned decision, it was urged that all Charter Party Agreements are service agreements. The submission cannot be accepted, as there is no general/invariable rule/law in this regard. It depends upon the terms and conditions of the charter party when it is to be treated as only for service and when it is the transfer of right to use. xx xx xx 54. When we consider the charter party in question in the context of applicable law, particularly in view of the constitutional provisions of Article 366(29A)(d), we find that there is transfer of right to use tangible goods, 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 Arti....
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....ant portions of the circular are as follows : "4.4 SUPPLY OF TANGIBLE GOODS FOR USE : 4.4.1 Transfer of the right to use any goods is leviable to sales tax/VAT as deemed sale of goods [Article 366(29A)(d) of the Constitution of India], Transfer of right to use involves transfer of both possession and control of the goods to the user of the goods. 4.4.2 Excavators, wheel loaders, dump trucks, crawler carriers, compaction equipment, cranes, etc., offshore construction vessels & barges, geo-technical vessels, tug and barge flotillas, rigs and high 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. ....
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....essels, supply to rig or platform, diving support, fire fighting etc. Their marine construction barges support offshore construction, provide accommodation, crane support and stoppage area on main deck or equipment. Their harbour tugs are deployed for piloting big vessels in and out of the harbour and for husbanding main fleet. They give vessels on time charter basis to oil and gas producers to carry out offshore exploration and production activities. The right of possession and effective control of such machinery, equipment and appliances is not parted with. [...]" (emphasis supplied) 20. The taxable service is defined as a service 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 : ....
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....main distribution line upto the Measurement Equipment and Measurement Equipment in its premises. (emphasis supplied) The Buyer's Facilities and Seller's Facilities are defined to include the measurement equipment and pipelines and have been defined as follows : " "Buyers Facilities" means plant, machinery, measurement equipment and other equipment from the Delivery Point onwards necessary to receive Gas under this Agreement." " "Seller's Facilities" means the Seller's pipelines, gas plants, machinery, 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 responde....
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.... depending upon the final results of such check/re-calibration within a period of fourteen (14) days of such check/re-calibration. Such claim, if found correct by the Seller, shall be adjusted against the subsequent invoice(s) of supply of Gas. 9.2.9 Pending the resolution of any dispute, the Seller shall produce the invoices on the basis of self-verification." (emphasis supplied) 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 quanti....
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....lative DCQ over 45 consecutive days, the seller is entitled to terminate the agreement. 22. ....... 23. At the outset, it is clear from the provisions of the agreement, and it has been admitted by both the parties, that there is no transfer of ownership 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....
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....urpose, the measurement equipment is supplied, installed, owned and maintained by the seller at the cost of the buyer. The working of the measurement equipment is verified periodically by the parties to the agreement. If the buyer doubts its accuracy, 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....
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....ets the "right to use" to include the "right to reproduce, distribute, sell, etc. [Circular D.O.F. No. 334/1/2008-TRU, dated 29 February, 2008]". This understanding of "use" differs from the supply of tangible goods under 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 ....
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.... buyers." 4.4 Again in the case of Quick Heal Technologies Ltd. [2022 (63) G.S.T.L. 385 (S.C.)] Hon'ble Supreme Court observed as follows: "41. The Transfer of Right to use goods for case, deferred 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' ....
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....isc or the CD. As in the case of paintings or books or music or films the buyer is purchasing the intellectual property and not the media i.e. the paper or cassette or disc or 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....
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....that payment is made to the foreign collaborators. The question whether the papers or diskettes etc. containing advice and/or information are 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 ....
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....ce where the right to use the goods is transferred. Where the goods are when the right to use them is transferred 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 ....
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....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 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 C....
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....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 the transfer of the right to use the goods are : (i) it is not ....
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....ra Sanchaar Limited) has established Earth Station' at Sahara India Complex, C-2,3,4, 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 and are installed. 2. That the second party shall enjoy the exclusive right to use the assets so installed and shall not claim ownership on it anytim....
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.... on the mutually agreed terms and conditions by both the parties. 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 year against appropriate invoice and its verification by SAHARA." 4.5 From the above agreement dated 01.04.2009 as amended by agreement dated 15.10.2010 it is evident that: a) The Appellant shall be the owner of the assets. Appellant extends only the ri....
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....erred 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 atx 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 assets which is a standard clause generally prevailed in all lease agreements. Clause 9- There is no subletting of such equipments and this clause prevents second party to do any sub-letting of such assets. 4.8 Interestingly in the present case the appellant as per the clause 2 of the agreement has only transferred the right to use the assets and have ....
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....ment 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 lending machinery attracted tax liability under Section 5E of the Act. 3. The High Court after scrutiny and close examination of the clauses contained in the agreement and looking to the agreement as a whole, in order to determine the nature of the transaction, concluded that the transactions between the respondent and contractors did not involve transfer of right to use the machiner....
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.... 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 services, namely:- "(f) transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods;" Article 366 (29A) (d) of the constitution of India reads as follows: "(29A) "tax on the sale or purchase of goods" includes- (d) a tax on 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;" ....
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....he 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-clause (f) on supply of services. The words "and such transfer, delivery or supply ..." in the latter portion of clause (29A), therefore, refer to the words transfer, delivery and supply, as applicable, used in the various sub-clauses. ........... In our view, therefore, on a plain construction of sub-clause (d) of clause (29A), the taxable event is the transfer of the right to use the goods regardless of when or whether the goods are delivered for use. What is required is that the goods should be in ex....
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.... 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 submissions made by the appellant on the merits of the case. 4.6 Appellant has raised the issue of allowing cum tax benefit in the present appeal and the same was raised also before the adjudicating authority. Impugned order has proceeded to deny the said benefit while computing the demand against the appellant. We are not in agreement with the approach adopted. It is now settled position in law that benefit of cum tax benefit should have been allowed while computing the taxable value and the tax payable. For limited purpose o....
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....ion 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 something in the language of the statute indicating the need to establish the element of mens rea it is generally sufficient to prove that a default in complying with the statute has occurred. In our opinion, there is nothing in Section 271(1)(a) which requires that mens rea must be proved before penalty can be levied under that provision. We are supported by the statement in Corpus Juris Secundum Volume 85, page 580, Paragraph 1023 : "A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and....
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....e case of 20th Century Finance Corporation Ltd. was interpreted. In Paragraphs 74 and 75 of the judgment in the case of BSNL, Justice Ruma Pal observed thus :- In determining the situs of the transfer "74. of the right to use the goods, the Court did not say that delivery of the goods was inessential for the purposes of completing the transfer of the right to use. The emphasised portions in the quoted passage evidences that the goods must be available when the transfer of the right to use the goods takes place. The Court also recognised that for oral contracts the situs of the transfer may be where the goods are delivered (see para 26 of the judgment). 75. In our opinion, the essence of the right under Article 366(29A)(d) is that it relates to user of goods. It may be that the actual delivery of the goods is not necessary for effecting the transfer of the right to use the goods but the goods must be available at the time of transfer, must be deliverable and delivered at some stage. It is assumed, at the time of execution of any agreement to transfer the right to use, that the goods are available and deliverable. If the goods, or what is claimed to be goods by the respondents, ....
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....f Article 366 of the Constitution of India. 33. In the case of Quick Heal Technologies Ltd., in Paragraph 46, the tests laid down by Dr. A.R. Laxmanan, J. have been quoted with approval. In Paragraph 53 of the said decision, this Court held thus : The following principles to the extent "53. relevant may be summed up : The Constitution (Forty-sixth Amendment) 53.1 Act intends to rope in various economic activities by enlarging the scope of "tax on sale or purchase of goods" so that it may include within its scope, the transfer, delivery or supply of goods that may take place under any of the transactions referred to in sub-clauses (a) to (f) of clause (29A) of Article 366. The works contracts, hire purchase contracts, supply of food for human consumption, supply of goods by association and clubs, contract for transfer of the right to use any goods are some such economic activities. The transfer of the right to use goods, as 53.2 distinct from the transfer of goods, is yet another economic activity intended to be exigible to State tax. There are clear distinguishing features 53.3 between ordinary sales and deemed sales. Article 366(29A)(d) of the Constitution 53.4 im....