TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 931
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....s with various customers for renting out such equipment for specific period on rental basis. As per the agreements, entered into with the customers, the Appellant shall deploy the equipments at the site of the customers, for specified period, during which the responsibility of the equipment entirely and exclusively rests with the customer. In short, the customer takes the possession and control of the equipment, whereas the ownership would remain with the Appellant. 4. Few of the important terms of the Agreements entered into by the Appellant with various customers are summarized below - (i) An operator for operating the equipment may either be deputed by the customer itself or by the Appellant, at the request of the customer. However, in both the scenarios, the responsibility for any claim arising in connection with the operation of the equipments vests with the customer. (ii) The equipment delivered on rent by the Appellant, shall be at the sole risk of the Customer. (iii) The equipment shall be under the possession, control and custody of the Customer during the tenure of the agreement (iv) The equipment will be returned to the Appellant on expiry of the contract period....
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....which are rented out, are retained by the Appellant, and thus, it does not qualify to be "deemed sales" and hence taxable under the category of "supply of tangible goods service". 11. The impugned Orders are being assailed by the Appellant vide the instant appeals on the following grounds which are independent of and without prejudice to each other. 12. The Ld. Counsel for the appellant submits that entry 54 of List II of the 7th Schedule of Constitution of India empowers the State to levy tax on sale and purchase of goods. Further, vide the 46th amendment, Article 366(29A) of the Constitution of India, that defines the term "tax on the sale or purchase of goods" was widened to include in sub-clause (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". Therefore, basis the aforementioned scheme of the Constitution of India, various States including West Bengal amended their VAT Act to include within its ambit the levy of VAT on such transaction in the nature of transfer of right to use goods. The relevant portion of Section 2(39) of the West Bengal Value Added T....
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....e for delivery". B. Further, as regards the second attribute of BSNL decision that "there must be consensus ad idem as to the identity of goods" a part of page 93 of the Appeal Paper Book in ST/76877/2016 and is extracted below - Equipment & Attachment Description Quantity (Units) Rental Rate Type Maximum Permissible Operating Hour Cap Per Unit (Hours) Minimum Base Rental Charges Per Unit (Rs.) Extra day Per Unit (Rs.) CAT 42B 1 Monthly 250 Rs. 95,000 + 4% VAT Prorata C. Further, as regards the third attribute of the BSNL decision which states that transferee should have a legal right to use the goods with all the permissions and licenses being made available to the transferee, it is submitted that such attribute does not apply to the present case since the Customers do not require any legal permission or license for its use. Further, as per the agreement, the Appellant has transferred all the rights in the said equipments to the customers, and the same are used at the discretion of the customers. The customers are also provided with option to appoint their own operators for operating the equipment. The relevant clauses of the agreement are extracted below....
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....ecision is that after transferring the right to use, the same rights cannot again be transferred to others. In this case, it is submitted that the above said attribute is clearly present in the present transaction as a necessary implication. Once the equipments are delivered and installed in the customers premises, there is no question of the same being used by some other party. Thus, such condition also stands fulfilled. I. Hence, from the above extracted clauses it is proved beyond doubt that the effective control and possession of the goods have been transferred to the customers of the Appellant, therefore, the same being a transaction of 'transfer of right to use the goods', thereby the same being a deemed sales and falling within the ambit of West Bengal VAT Act. J. Reliance is placed on the decision of the Hon'ble CESTAT Kolkata in the case of M/s. Computer Exchange Pvt. Ltd. v. Commissioner of Service Tax, Service Tax - II Commissionerate, Kolkata - 2024-VIL-1904-CESTAT-KOL-ST wherein it was held that when the effective control of the equipment is with the service recipient and if the assessee is paying appropriate VAT on the transaction, the assessee is not liable to pay ....
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....fact that the transaction constitutes transfer of the right to use the tangible goods, including possession and effective control of the tankers since there were several other clauses in agreements which stipulated that personnel on board the vessels operated strictly in terms of detailed instructions, guidelines and directives issued by the contractee, and they could be replaced by contractor based on requirement of contractee. O. Therefore, placing reliance on the aforementioned decisions, it is humbly submitted that in the instant case, as clearly evident from the contract, there is transfer of right to use the goods, i.e., transfer of effective control and right of possession of the goods to the customers, and hence, the same is a deemed sale within the West Bengal VAT Act / Central Sales Tax and falls outside the scope of levy of service tax. 18. Service Tax and VAT are mutually exclusive, and in the instant case demand of service tax is not sustainable since VAT has undisputedly been paid on the transaction. 19. He also submitted that it is a settled position of law that service tax and VAT are mutually exclusive, and in the instant case, VAT has been undisputedly discharg....
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....lly exclusive, and when it is an undisputed fact that VAT has been duly paid on the transaction, the same cannot be subject to service tax again. Hence, on this ground alone, the impugned Orders are liable to be set aside. 27. Demand confirmed for the period post 01.07.2012 is not sustainable since the provisions of the negative list regime have not been invoked. 28. It is humbly submitted that for the period from July 2012 to March 2015, the impugned Order has confirmed the demand of Service Tax demand on the ground that the same falls within the ambit of "supply of tangible goods service" under Section 65 (105) (zzzzj) of the Finance Act. 29. In this regard, it is humbly submitted that post 01.07.2012, such a provision cited by the Ld. Commissioner in the impugned Order is inapplicable on account of advent of the negative list. 30. The Appellant humbly submits that it is a settled law that demand confirmed based on non-applicable provisions is unsustainable. In this regard, reliance is placed on the recent decision of the Hon'ble CESTAT, New Delhi in the case of Commissioner of Central Tax Goods and Service Tax, Delhi East v. M/s. Sanjay Electricals (vice-versa) - 2024-VIL-18....
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....acts and applicable law, then extended period of limitation cannot be invoked. 35. He also relied on the decision of the Hon'ble CESTAT Chandigarh in the case of Sant Roadlines v. Commr. of C.Ex. & S.T., Panchkula - 2020 (43) G.S.T.L. 206 (Tri. - Chan.) wherein it was held that extended period of limitation is not invokable when the assessee was under the bona fide belief that no service tax is payable under the category "supply of tangible goods" when the agreements clearly show such bonafide belief on the part the assessee. 36. Therefore, it is a trite law that when the issue involved is of bonafide interpretation of law, extended period of limitation cannot be invoked. He relied on the decision of the Hon'ble CESTAT, Kolkata in the case of M/s. Amit Metaliks Limited v. Commr. of Central Excise, Bolpur - 2023-VIL-1683-CESTAT-KOL-CE. 37. Thus, extended period has been wrongly invoked in the instant case. 38. Where the principal demand itself is not payable, the demand for interest and penalty ought to be set aside. 39. He relied on the decision of the Hon'ble Supreme Court in the matter of Pratibha Processors v. UOI - 1986 (88) E.L.T. 12 (S.C.) wherein it was held that i....
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....te a transaction for the transfer of the right to use the goods the transaction must have the following attributes: a. There must be a 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 all 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 status -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 against transfer the same rights to others." 49. Admittedly, the transaction in this case would fall within the ambit of VAT/CST if there is a transfer of right to use there should be transfer of right to possession and transfer of effective control. Admittedly, the appellant have transfer the right of possession and transfer the effective control of the ....