TaxTMI 
TaxTMI 
2024 (9) TMI 1727
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....ms, Beam Knotting Machine, High Speed Ring Frame) etc. on lease rent to M/s. Arvind Ltd under lease agreements dated 13.12.2005, 11.08.2009, 06.07.2010 and 24.07.2013 but fail to pay the service tax under the category of supply of tangible goods for use service. Hence, periodical show cause notices were issued for recovery of service tax along with interest and penalty. The show cause notices were adjudicated vide Orders-In-Original No. AHM-SVTAX-000- ADC-40-16-17 dated 06.03.2017 wherein demand of service tax was confirmed along with interest and penalty. Being aggrieved by the said Orders-In-Original the Assessee filed the appeals before the Commissioner (Appeals) who upheld the Order-in-original vide Orders-In-Appeal No. AHMEXCUS-001-APP-158-17-188 dated 08.12.2017 and AHM-EXCUS-002-APP95/2022-23 dated 28.12.2022 and rejected the appeals filed by the Assessee. 1.1 As regard the Revenue's case, the Ld. Commissioner (Appeals) has dropped the demand against Assessee and allowed the appeal against this impugned order, the Revenue filed the appeal bearing No. ST/10444/2020. 2. Shri S.J Vyas, Learned Counsel appearing on behalf of the Assessee at the outset submits that the Asse....
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....service. For the ease of reference the definition of the said category reads as under:- "65(105) "taxable service" means any service provided or to be provided xx xx xx (zzzzj) 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." 4.1 From the plain reading of the above definition, to bring a lease agreement under ambit of service tax under the category of supply of tangible goods for use service it is necessary that during the lease period the right to possession and effective control must be with the lessor and if the right to possession and effective control is transferred to the lessee then such lease will not be covered under the category of supply of tangible goods for use service. To ascertain whether right to possession and effective control has been passed on to the lessee or remains with the lessor, it is necessary to go through the terms of the agreement. Extract of the relevant conditions of the lease agreement dated 11.08.2009 are as below:- THIS IN....
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....nery" for yarn processing and weaving of fabrics from the yarns of the Lessee and for any other industrial purposes permitted in Law. iii) To make, maintain and keep in repair all machinery, erections, equipments, apparatus attached to the "Said Machinery", and at all time during the continuance of this demise to observe and conform to all such rules, regulations and by-laws relating theretofore the time being in force and at all times during the continuance of these present at their own expenses to execute or cause to be executed all such works as are or ay under or in pursuance of the statutory provisions, orders, rules or bye-laws e directed or required to be executed upon or in respect of the "Said Machinery" or other works in connection therewith.. 4.2 From the reading of the agreement in particular the above terms, it is clear that right to possession and effective control of machineries have been transferred to the lessee M/s. Arvind Ltd. Moreover since the right to possession has been transferred, the transaction is of deemed sale in terms of Article 366 (29A) of the Constitution of India and the Assessee are admittedly paying the said VAT. Therefore, this fact ....
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....ompletely with the lessee and not with the lessor (appellant). It is also not disputed that the said transaction is the deemed sale in terms of Article 366 29 (A) of Constitution of India which is liable to State VAT. In the present case also the appellant considering the transaction as deemed sale discharged the VAT liability to the state Government. Therefore, the transaction which is a domain of VAT department, the same cannot be liable to service tax. In the identical facts, the issue has been considered in various judgments wherein the following orders were passed. (i) In the case of G.S. Lamba & Sons Vs. State of Andhra Pradesh Hon'ble Andhra Pradesh has passed the following order: "6. The two issues that spring up from the background facts and the rival submissions are : Whether the petitioners' contract is for transfer of the right to use Transit Mixers to M/s. Grasim Industries Limited for transporting the RMC? And whether the State Sales Tax Appellate Tribunal has committed any error warranting interference under Section 22(1) of the Andhra Pradesh General Sales Tax Act, 1957? Revisional jurisdiction under APGST Act 7. We will first dea....
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....r is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or canceling the assessment and directing a fresh assessment. (Explanation and subsections (2) and (3) are omitted.) (emphasis supplied) 8. The power under Section 263(1) of the Income-tax Act conferred on the Commissioner is exercisable only when an order passed by the assessing officer, "is erroneous insofar as it is prejudicial to the interest of the revenue". In Malabar Industrial Co., Ltd., the Supreme Court held that, "the Commissioner of Income Tax has to be satisfied of twin conditions, namely, (i) the order of the assessing officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue (and) if one of them is absent - if the order of the Income Tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse ca....
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.... the assessee before the Tribunal. Transportation service or Transfer of the right to use Transit Mixers? 11. The petitioners allege that the contract with Grasim is for transportation service. They deny that it is for the transfer of the right to use the goods. Transit Mixers are indisputably goods as defined in Section 2(h) of the Act. Section 2(n) defines "sales" to mean transfer of the property in goods for cash in the course of trade or business and includes mortgage, hypothecation, pledge or charge on goods. This definition has eight Explanations. Fourth of them was inserted by Andhra Pradesh Act No. 18 of 1985 with effect from 2-2- 1983. It is to the effect that "a transfer of the right to use any goods for any purpose" shall be deemed to be sale. When is the right to use goods said to have been transferred? To appreciate this, a brief journey into the past relating to tax on sale of goods under Entry 54 of List II of the Seventh Schedule to the Constitution of India may be necessary. 12. The Sale of Goods Act, 1930 defined "sale" as a contract of sale of goods whereby the seller transfers or agrees to transfer the property in goods to a buyer for ....
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....ns. A few general observations may now be made. A sale of goods requires an agreement to transfer title in goods for money, followed by the actual passing of such title as a result of the agreement. The broad concept, thus, requires (i) an agreement to transfer title, (ii) in goods, (iii) for money and (iv) passing of title as a result of the agreement. Most of the problems that have arisen as to the taxability of various transactions are due to the fact that one (or more) of the ingredients mentioned above are missing from the transaction. This will be clear if the ingredient and its antithesis are represented as in the following chart, which also mentions the situation where the antithesis exists. Ingredient Antithesis (i) Agreement to transfer title Title passing without agreement, or no transfer of title. (ii) In goods Title passing under the agreement but not for goods. Illustrative situation - Works contracts (No agreement to transfer the very goods which come into existence). (iii) For money Title passing for value other than money. Illustrative situation - Barter. (iv) Passing of title as a result of the agreement Title does not pass b....
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....whether or not for a specified period) for cash, deferred payment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made. 15. The expression 'tax on sale or purchase of goods' is an inclusive definition. It must receive a wide and expansive meaning. The latter part of clause (29A) contemplates that 'such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods'. The sub-clauses (a) and (b) use "transfer"; sub-clause (c) uses "delivery"; sub-clause ....
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.... to in sub-clauses (a) to (f) thereof wherever such transfer, delivery or supply becomes subject to levy of sales tax. (emphasis supplied) 17. Inspired by the Forty-sixth Amendment, like many States, Andhra Pradesh also enacted a provision on similar lines being Section 5-E of the Act. It is appropriate to read it here. 5E. Tax on the amount realized in respect of any right to use goods. - Every dealer who transfers the right to use any goods for any purpose, whatsoever, whether or not for a specified period, to any lessee or licensee for cash, deferred payment or other valuable consideration, in the course of his business shall, on the total amount realized or realizable by him by way of payment in cash or otherwise on such transfer or transfers of the right to use such goods from the lessee or licensee, pay a tax at the rate of five paise in every rupee of the aggregate of such amount realized or realizable by him during the year : Provided that no such tax shall be levied if the total turnover of the dealer including such aggregate is less than Rs. 1,00,000. 18. The challenge to the above provision failed before this Court in Padmaja ....
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.... the Act, and that, the taxable event of delivering the goods having occurred in the State of Tamil Nadu, the same is not excisable under Section 5-E of the Act. Relying on Builders Association and Gannon Dunkerly and Co. v. State of Rajasthan - (1993) 1 SCC 364 : (1993) 88 STC 204 the contention was accepted observing thus. In the determination of the inter-State character of a sale, the situs is immaterial. When goods are entrusted to a common carrier for delivery, it amounts to delivery to the consignee and when it takes place outside the State, the fact that subsequently the goods have reached the State where the tax is sought to be imposed, cannot be a ground for determining the tax liability. The decision of the Bombay High Court in 20th Century Finance Corporation Limited, (1989) 75 STC 217, proceeds on the footing that a transfer of the right to use is different from sale without considering the fiction introduced by clause (29A) of Article 266 of the Constitution. .... .... The principle that where a State law while defining the expression "sale" makes the situs a relevant consideration for the purpose of determining a deemed sale, the same cannot bring within its....
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....sale in the course of import or export of the goods; and (iii) an inter-State sale. The decision of this Court in ITC Classic Finance was affirmed, and the Bombay decision in 20th Century Finance was overruled. It is apt to quote the following relevant portion from the Judgment. 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. Thus, the transfer of goods will be a deemed sale in the cases of sub-clauses (a) and (b), the delivery of goods will be a deemed sale in case of sub-clause (c), the supply of goods and services respectively will be deemed sales in the cases of subclauses (e) and (f) and the transfer of the right to use any goods will be a deemed sale in the case of s....
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.... vested in the lessee. Thus, the situs of taxable event of such a tax would be the transfer which legally transfers the right to use goods. In other words, if the goods are available irrespective of the fact where the goods are located and a written contract is entered into between the parties, the taxable event on such a deemed sale would be the execution of the contract for the transfer of right to use goods. But in case of an oral or implied transfer of the right to use goods it may be effected by the delivery of the goods. (emphasis supplied) 24. In State of Andhra Pradesh v. Rashtriya Ispat Nigam Limited - (2002) 3 SCC 314 : AIR 2002 SC 1305 : (2002) 126 STC 114 (SC) = 2013 (31) S.T.R. 513 (S.C.), the decision of the High Court in RINL-I was affirmed by the Apex Court holding that so as to attract levy of tax under Section 5-E, the essential requirements of the transfer of the right to use must be shown to exist and collection of mere hire charges is not excisable to sales tax. The relevant observations are as under. The High Court after scrutiny and close examination of the clauses contained in the agreement and looking to the agreement as a whole, ....
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....ion, it was held that whether there is a transfer of the right to use goods, would depend ultimately upon the intention of the parties, to be determined with reference to the contract between the parties. In the concurring opinion, following attributes to constitute the transfer of the right to use goods were pointed out; (a) there must be goods available for delivery; (b) there must be a consensus ad idem as to the identity of the goods; and (c) the transferee should have a legal right to use the goods - consequently all legal consequences of such use including any permission or licences required therefore should be available to the transferee; (d) for the period during which the transferee has such legal right, it has to be the exclusion to the transferor - this is the necessary concomitant of the plain language of the statute viz., a "transfer of the right to use" and not merely a licence to use the goods; and (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. 26. At this stage, the following principles to the extent relevant may be summed up. (a) The ....
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....ods, is the place where the relevant right to use goods is transferred. The place where the goods are situated or where the goods are delivered or used is not relevant. 27. To buttress the argument that the essential requisites of the transaction of the transfer of the right to use goods are absent, the counsel relies on Sandeman v. Scurr - (1866) L.R.2 QB. 86, The Omoa Coal and Iron Company v Huntley - (1877) 2 Company Pleas Division 464, Baumvoll v. Gilchrest - (1892) 1 QB. 253 and Sea and Land Securities v. William Dickinson Company - (1942) 2 KB 65 as well as passage from 'Scrutton on Charterparties and Bills of Lading' (Twenty-first edn., by Stewart C. Boyd CBE Q.C.). He has also invited attention of this Court to the decisions of the Supreme Court in 20th Century, BSNL, RINL-I and RINL-II, and decisions of various High Courts in Ahuja Goods Agency v. State of Uttar Pradesh - (1997) 106 STC 540 (All.), Lakshmi Audio Visual Inc v. Assistant Commissioner of Commercial Taxes - (2001) 124 STC 426 (Kar.), Commissioner, VAT, Trade and Taxes Department v. International Travel House Limited - 2009-10 DST J-77 (Del.), State of Orissa v. Dredging Corporation of India Limited - ....
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....main in the original owner through the master and crew, who continue to be his servants. Although the master, by agreement between the owner and charterer, may acquire authority to sign bills of lading on behalf of, and may be obliged to accept voyage instructions from, the latter, he nevertheless remains in all other respects the servant of the owner. Whether or not the charter amounts to a demise must turn on the particular terms of the charter. "The question depends, where other things are not in the way, upon this: whether the owner has by the charter, where there is a charter, parted with the whole possession and control of the ship, and to this extent, that he has given to the charterer a power and right independent of him, and without reference to him to do what he pleases with regard to the captain, the crew, and the management and employment of the ship. That has been called a letting or demise of the ship. The right expression is that it is a parting with the whole possession and control of the ship. Time charters almost always contain expression such as "letting:, "hiring", "hire", "delivery" and "redelivery", which are really apt only in charters by de....
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....isentitled from using the vehicle covered by the agreement in any route. The bus was to be run for Corpn. as per the agreement and directions of an officer. The transaction is a "sale" within the extended meaning of the word. Providing of the driver by the owner notwithstanding there was a transfer of the right to use bus for consideration, and effective control, general control and possession of the bus vested in the Corporation. 6. (1993) 88 STC 357 (P&H) (Harbans Lal v. SoHaryana) Tents, kanats, crockery, utensils, furniture, shuttering material, gas cylinders and buses - These are given on hire to third parties. The authorities levied the sales tax on the hire amount under Haryana Act. The terms of the contract determine whether or not there is transfer of right to use goods. Delivery of possession of goods is essential ingredient. If erected tents are given to customers, it will not be "goods" and any transfer of right to use shall be exercisable to sales tax. The transfer of chairs, tables, crockery would be deemed sale. Hiring of shuttering material to builders/contractors amounts to transfer of the right to use goods. The supplying of purified acetylene gas c....
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....sfer of the right to use goods. But if the work is entrusted to the contractor for achieving desired results and such work also involves use of the goods, it will not be deemed sale within the meaning of the transfer of the right to use goods. 10. (2006) 6 SCC 1 : (2006) 145 STC 91 (SC) (BSNL v. UoI) Mobile telephone connections - BSNL and such other service providers - Telephone service connections. The infrastructure/ appliances exchanges through which electro magnetic/radio waves carrying signals are controlled by the service provider. Goods do not include electro magnetic waves or radio frequencies for the purpose of Art. 366(29A)(d). The goods in telecommunications are limited to the handsets supplied by mobile service provider. In composite contract of service and sale, the sale element is liable to the State tax. The attributes that qualify transaction for the transfer of right to use the goods are availability of goods for delivery, consensus ad idem about identity of goods. Legal right of transferee to use goods along with permissions or licences for such use, exclusive use by the transferee and owners disentitlement to transfer again to others during the perio....
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....ts in relation to goods would also be available to the user of goods, even if such licences or permits are in the name of owner (transferor) of the goods, and (vi) during the period of contract exclusive right to use goods along with permits, licences etc., vests in the lessee. 31. The counsel also brought to our notice the decisions in Ahuja Goods Agency, Commissioner, Trade Taxes, Uttar Pradesh v. Jamna Prasod Jaiswal - (2008) 13 VST 403 (All.), R.P. Kakoty v. ONGC - (2009) 22 VST 136 and International Travel House Limited. We, however, do not feel it necessary to refer to these as they involve similar questions. As has been held in a number of precedents, the nature of transaction and the issue whether the contract is for the transfer of the right to use the goods or for providing service depends on the intention of the parties to be determined on a construction of the contract. 32. At this stage, we need to visit the principles of interpretation of contracts. In Dr. K. Subbaiah v. C.N. Krishnamacharyulu - Appeal Suit No. 151 of 1991 and batch, dated 29-12-2010, one of us (VVSR, J) after referring to the seven rules of interpretation of deeds from ODGERS' 'Cons....
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....ave the same operation as if they were inserted in the clause referring to them] and Ad proximum antecedens fiat relatio, nisi impediatur sententia [Relative words refer to the next antecedent, unless by such construction the meaning of the sentence would be impaired] furnish subsidiary rules while discovering the intention of the parties. 35. The third principle is to give literal meaning to the words used in a document. There are five legal maxims relatable to this principle. The legal maxim ut res magis valeat quam pereai [A liberal construction should be put upon written instruments, so as to uphold them, if possible, and carry into effect the intention of the parties] means that statute must be read always in such a manner that it would not lead to absurdity and make the instrument workable. Literal meaning depends on the circumstances of the parties and technical legal terms will always be given their legal meaning. When the language is very clear, the interpreter is precluded from supplying the words or reading something depending on the oral evidence. But as postulated by the maxim Ambiguitas verborum latens verificatione suppletur nam quod ex facto oritur ambiguum....
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....her because it has a moral element, that the construction shall not be such as to work a wrong.' Similarly, in Fausset v. Carpenter, (1831) 2 Dow & Cl 232 : 6 ER 715, the House of Lords accepted the submission of counsel that the court : '... in judging of the design and object of a deed, will not presume that a party executing the deed meant to do and did what he was wrong in doing, when a construction may be put on the instrument perfectly consistent with his doing only what he had a right to do.' However, the question of construction should not be approached with a leaning in one direction or another. Thus although the law frowns upon covenants in restraint of trade, nevertheless such a covenant should not be approached on the basis that it is prima facie illegal. 'You are to construe the contract, and then see whether it is legal.' 38. On the sidelines, a 'not so insignificant' issue is raised by the Special Counsel. The agreement which is part of the record does not contain the day or date and the place of execution of the contract by the parties. From this, Revenue would like the Court to draw an inference that the agreement is not genuine;....
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....f the agreement in its footnote contains the address of the Marketing Department of Grasim sufficient enough to conclude that it was entered into between the parties at Secunderabad. Even otherwise it is fairly well settled that the transfer of the right to use goods can be effected even under an oral agreement. Hence, submission of the special counsel is rejected. 40. That brings us to the construction of the agreement between the parties which indisputably came into force on 1-10-2002. The intention of the parties as noticed supra has to be understood by reading the entire agreement; reading a word here or a clause there is not sufficient. Grasim was looking for a transporter to take care of the transporting need of their RMC plants in Hyderabad. The petitioners, who are owners of Transit Mixers, were looking for advancing their business interest in Hyderabad. The latter approached the former offering their Transit Mixers to take care of all transporting solution needs. These essentially form part of the recitals. The Habendum of the agreement speaks of the petitioners providing a dedicated fleet of five Transit Mixers painted in a particular style and colour as well as ....
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....B. That the Second party will ensure that adequate number of vehicles are made available on a 24/7 basis i.e., 24 hours and everyday of the weeks as per the instructions of the officials of the First party. If the Second party fails to provide the vehicles as desired it shall attract penalties as prescribed later in this document. The First party agrees that the Second party will require upto 2 days a month for the maintenance and upkeep of the vehicles and will, therefore, allow 2 days a month for this activity and will not demand any penalty for these days. C. That the Second party will be solely responsible for ensuring that the produce of the First party reach the destination in time and as per the agreed schedule. No delay on any account will be acceptable and the Second party must ensure safe delivery of the produce. D. That the produce of the First party has a strong Brand Equity in the market and they would like the vehicles to be painted in a particular style and color. The Second party has agreed to get the same done at their cost and have also assured the First party that they shall paint the vehicles every six months. E. That the Second party ....
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....hrase 'offer services to take care of transporting solution needs' is used the real purpose, as can be seen from the second part, is to enable Grasim to have the right to use the Transit Mixers. The agreement requires the petitioners to provide drivers to be dressed in uniform, and all of them are to obey the lawful instructions issued by Grasim. Further RMC has to be delivered by these drivers in Transit Mixers only at the time and places as instructed by the officials of Grasim, and the petitioners have no right to carry RMC wherever and whenever they like. Thus the full control on the method, manner and time of using the Transit Mixers, owned by the petitioners vests absolutely in Grasim. 43. Clauses A to E and L deal with the second aspect of the agreement. Under these, the petitioners agreed to provide five dedicated fleet of five Transit Mixers 24/7 i.e., twenty-four hours every day of the week as per the instructions of Grasim for transporting RMC during the period from 1-10-2002 to 31-3-2006 (42 months). These dedicated vehicles are to be painted in a particular style and colour which has to be re-painted once in six months. For any third party, during these 42 mon....
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....the records. We find that the issue to be considered by us is that whether the supply of cylinders is a deemed sale in terms of Article 366 (29A) of constitution as 'deemed sale' or it falls under definition of 'supply of tangible goods for use' under the Finance Act, 1994. The definition of the alleged services needs to be gone through which is reproduced below: The definition of 'supply of tangible goods' as per the provision of section 65 (105)(zzzzj) of the Finance Act, 1994- "taxable services" means any service provided or to be provided to any person by any other person in relation to supply of tangible goods including machinery equipments and appliances for use without transferring right of possession and effective control of such machinery, equipments and appliances". From the above definition, it is clear that for the supply of tangible goods is for use by other person but without transferring right of possession and effective control, then only such supply shall classify under the taxable services of supply of tangible goods\service. Now it is to be seen that whether the supply of cylinders are with or without transferring right of possession and effecti....
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....reated 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. As per the above clarification, transfer of the right to use any goods is leviable to sales tax/VAT as deemed sale of the goods when transfer of right to use involves transfer to both possession and control of the goods to the user of the goods. In the present case also, transfer of right to use is clearly with transfer of both possession and control of goods to the lessee, accordingly the transaction is clearly of deemed sale of goods in terms of Article 366 (29A)(d) of the Constitution of India. Since the entire v....
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....ides for compensation to be paid by the hirer to the assessee in case of damage to the equipment during the period of use. These responsibilities cast on the hirer clearly show that the right of possession and effective control of the equipment rest with the hirer; otherwise the hirer cannot be held responsible for misuse/abuse, safe custody/security, liability to settle disputes with third parties in relation to use etc. Further Cl. 4.3 of the agreement provides for charging of VAT at 12.5% on the monthly invoice value which shall be payable by the hirer. These terms and conditions stipulated in the agreement, lead to the conclusion that the transaction envisaged in the agreement is one of "transfer of right to use" which is a deemed sale under Section 2(24) of the Maharashtra Value Added Tax Act, 2002. The Finance Minister's speech and the budget instructions issued by the C.B.E. & C. also clarify that if VAT is payable on the transaction, then service tax levy is not attracted. 5.3 A similar issue arose for consideration before the Hon'ble High Court of Andhra Pradesh in the G.S. Lamba case cited supra. The petitioners therein entered into a contract with M/s. Grasim, m....
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.... the ratio of the above decision to the facts of the present case, the transaction involved herein is "transfer of right to use" which is a deemed sale and not "supply of tangible goods for use" service. 6. In view of the foregoing, we are of the considered view that the assessee's activity of giving various equipments on hire does not fall under the category of "Supply of tangible goods for use", hence the same is not liable to service tax w.e.f. 16- 5-2008. Now coming to the Revenue's appeal, we find that the ld. Commissioner dropped the demand for the period prior to 16-5-2008 mainly on the ground that the service is of "Supply of tangible goods for use" which came into effect on 16-5- 2008, therefore prior to that date the service was not taxable. However, we, in our above findings, held that the service in question is not the service of "Supply of tangible goods for use". In this position the main ground of the ld. Commissioner for dropping of demand does not exist and not relevant. Though the ld. Commissioner in a passing reference mentioned in the impugned order that the service prior to 16-5-2008 does not fall under the "Business Auxiliary Service" but not given th....
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....strictions are placed on the lessee, it can not be said that there is no right to use by the lessee. Such a view of the revenue does not appear to be tenable when we read carefully the provisions of the agreement. Cl. 13 of the agreement provides for Hirer's Covenants. As per Cl. 13.1, the hirer will use the equipment only for the purpose it is hired and shall not misuse or abuse the equipment. Similarly in Cl. 13.3, it is provided that the hirer will ensure the safe custody of the equipment by providing necessary security, parking bay, etc., and will be responsible for any loss or damage or destruction. Cl. 13.5 provides that the hirer shall be solely responsible and liable to handle any dispute entered with any third party in relation to the use and operation of the equipment. Further Cl. 14 dealing with title and ownership specifically provides that "equipment is offered by GIMMCO Ltd. only on 'rights to use' basis". Cl. 15 relating to damages provides for compensation to be paid by the hirer to the assessee in case of damage to the equipment during the period of use. These responsibilities cast on the hirer clearly show that the right of possession and effective control of the ....
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...., but the delivery may be one of the elements of the transaction; (4) the effective or general control does not mean always physical control and even if the manner, method, modalities and the time of the use of goods is decided by the lessee or the customer, it would be under the effective or general control over the goods; (5) the approvals, concessions, licences and permits in relation to goods would also be available to user of the goods, even if such licences or permits are in the name of transferor of the goods; and (6) during the period of contract exclusive right to use goods along with permits, licences, etc., vests with the lessee. Applying these principles and examining the terms of the contract, the Hon'ble High Court held that the transaction involved was a transfer of right to use Transit Mixers and not transport service and the petitioners had transferred the 'right to use goods' to Grasim. If we apply the ratio of the above decision to the facts of the present case, the transaction involved herein is "transfer of right to use" which is a deemed sale and not "supply of tangible goods for use" service. 6. In view of the fore....
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....in on the basis of the fact that the transaction was of deemed sale in terms of Article 336 (29) A it was held that the activity same is not classifiable as service of supply of tangible goods for use. This decision was upheld by the Hon'ble Supreme Court by dismissing the Revenue's Civil appeal reported at 2022 (61) G.S.T.L. 4 (S.C.) wherein the following observation was made by the Apex Court:- "[Order]. - Delay condoned. 2. In the facts of the present case as it is not disputed that the respondent had regularly paid amount towards VAT liability in respect of the subject goods during the relevant period, the question of claiming service tax thereon does not arise. 3. Accordingly, in the facts of the present case, the civil appeal is dismissed. 4. Pending applications stand disposed of." 4.5 Considering the facts of the present case, comparing with the facts of the above judgments and the principal of law laid down in the above judgments, we are of the view that the ratio of the above judgments are directly applicable in the present case. 5. Accordingly, the impugned orders are set aside. Appeals filed by Assessee are allowed and appeal fi....
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....s Cylinders by the Lessee to the Lessor. In case the Lessor fails to refund the security at the time of handing over all the Gas Cylinders by the Lessee, then the Lessor shall pay Interest @12% p.a. on net refundable security only for number of days during which the lessor defaults In refunding the security (net). The Lessee shall not use the Gas Cylinders for any Illegal or Immoral purpose or use It so as to not to cause any fraud to any Individual or Legal / statutory Body. The Lessee will also ensure all registration to use Gas Cylinders will be In full force all time during this MOU period. The Lessee will do repair at its own cost for any damage, leakage of Valves, etc. to the sald Gas Cylinders caused by any act or default on the part of the Lessee, Its servants, agents or visitors or otherwise by any reason whatsoever or by reasons of any breach of the Lessee's covenants herein contained. The Lessee will operate all cylinders at his own cost Including any man-power etc. without any interruption on the part of Lessor, at all time during period of this MOU. Iv) Maintenance responsibility: The Lessee shall make repairs, including leakage, Maintance etc. arising In t....