TaxTMI 
TaxTMI 
2025 (11) TMI 509
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....gramme Contract with its customers, whereby it supplies spare parts to its customers, which are stored at the premises of the customers and kept under the custody and control of the said customers. Since by virtue of the Contract, the critical spare parts are readily available, they are replaced by the customers in the event of any breakdown of machinery. The objective behind executing the contract is to ensure immediate availability of critical spares, thereby arresting zero down time and the time that would be consumed towards procurement/replacement of defective machine parts. The Appellant raises quarterly invoice upon its customers along-with VAT/CST, by treating the said activity as "deemed sale". At the end of the tenure of the Contract, the customers have the option to either return the inventory or renew the Contract or purchase the inventory as per mutual agreed consideration. In terms of the Show Cause Notice [SCN], it has been alleged that the Appellant placed critical spare parts at customer's premises, however, the Appellant owns and manages such spare parts inventory with effective control over these parts and in turn received monthly/quarterly fees for the service. ....
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....y claims, for any occurrence due to performance or non-performance of the services under the contact. In view thereof, inference can be drawn that the effective control of the spare parts is with the Appellant and not with the customers. 4. In view of the above findings, the Appellant has provided taxable service under the category of "supply of tangible goods for use" services and hence, Appellant is liable to pay the service tax along-with interest and penalty." 4. The Adjudicating Authority vide the impugned Order-in-Original has passed the following order:- "ORDER (i) I order that the service provided by the party are appropriately classifiable under the category of 'supply of tangible goods for use' as defined under Section 65(105)(zzzzj) of chapter V of the Finance Act, 1994. (ii) I confirm the demand of service tax amounting to Rs.1,32,10,199/- (One crore thirty two lacs ten thousand one hundred ninety nine only), under Section 73(2) of the Finance Act, 1994. (iii) I order for recovery of interest at the appropriate rate on the aforesaid amount of Rs.1,32,10,199/- of service tax confirmed at serial (ii) above, under Section 75 ....
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....e the goods-consequently all legal consequences of such use including any permissions or licenses required therefore should be available to the transferee; d. For the period during which the transferee has such legal right, it has to be the exclusion to the transferor this is the necessary concomitant of the plain 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. 10. We find that the Appellant is treating the said sale as deemed sale and paying sales tax and therefore as held by various judicial pronouncements, the transaction attracting the sales tax will not attract service tax. 11. We find that the consideration on which service tax was demanded was subjected to sales tax. 12. In view of the above discussion, impugned order cannot be sustained and is accordingly set aside. The appeal filed by the Appellant is allowed with consequential relief, as per law. (Order pronounced in open court on............) Sd/- (P. K. CHOUDHARY) M....
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....rejected this submission finding that the SIM card was "goods" within the definition of the word in the State Sales Tax Act. 80. It is not possible for this Court to opine finally on the issue. What a SIM card represents is ultimately a question of fact as has been correctly submitted by the States. In determining the issue, however the Assessing Authorities will have to keep in mind the following principles: If the SIM Card is not sold by the assessee to the subscribers but is merely part of the services rendered by the service providers, then a SIM card cannot be charged separately to sales tax. It would depend ultimately upon the intention of the parties. If the parties intended that the SIM card would be a separate object of sale, it would be open to the Sales Tax Authorities to levy sales tax thereon. There is insufficient material on the basis of which we can reach a decision. However we emphasise that if the sale of a SIM card is merely incidental to the service being provided and only facilitates the identification of the subscribers, their credit and other details, it would not be assessable to sales tax. In our opinion the High Court ought not to have finally det....
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....o the service provider being for alleged transfer of a right to use goods and no payment at all for service. The licence granted by the Central Government fixes the tariff rates and all are for services. 112. Sale of Goods Act, comprehends two elements, one is a sale and the other is delivery of goods. 20th Century Finance Corporation Limited v. State of Maharashtra - 2000 (6) SCC 12 at 44, ruled that - "(c) where the goods are available for the transfer of right to use the taxable event on the transfer of right to use any goods is on the transfer which results in right to use and the situs of sale would be the place where the contract is executed and not where the goods are located for use. (d) in cases where goods are not in existence or where there is an oral or implied transfer of the right to use goods, such transactions may be effected by the delivery of the goods. In such cases the taxable event would be on the delivery of goods." 113. It is, therefore, unnecessary to deal with the question of delivery of possession which is related only to situs and not to subject-matter of taxation which is a transfer of right to use goods. In the presen....
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....t laid down in BSNL has been applied by courts to determine whether a transaction involves the "transfer of the right to use any goods" under Article 366(29A)(d). In doing so, the Courts have analysed the terms of the agreement underlying the transaction to ascertain whether effective control and possession has been transferred by the supplier to the recipient of the goods. Recently, this Court in Great Eastern Shipping Company Limited v. State of Karnataka and Others [2020 (3) SCC 354 = 2020 (32) G.S.T.L. 3 (S.C.)] considered whether the transfer of a vessel under a charter party agreement was a 'deemed sale', subject to sales tax. The Court, after analysing the terms of the charter party agreement, held : "43. We are not turning our decision upon the terms used like 'let', 'hire', 'delivery' and 'redelivery' but on the other essential terms of the Charter Party Agreement entered in the instant case which clearly makes out that there is a transfer of exclusive right to use the vessel which is a deemed sale and is liable to tax under the KST Act. In the instant case, full control of the vessel had been given to the charterer to use exclusively for six months, and delivery ....
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....on or manufacture of saleable goods and production of marketable/saleable services in the form of an activity undertaken by the service provider for consideration, which correspondingly stands consumed by the service receiver. It is this principle of equivalence which is inbuilt into the concept of service tax under the Finance Act, 1994. That service tax is, therefore, a tax on an activity. That, service tax is a value added tax. The value addition is on account of the activity which provides value addition...Thus, service tax is imposed every time service is rendered to the customer/client...Thus, the taxable event in each exercise/activity undertaken by the service provider and each time service tax gets attracted." (emphasis supplied) 18. The introduction of Section 65(105)(zzzzj) in the Finance Act, 1994, was with the intention of taxing such activities that enable the customer's use of the service provider's goods without transfer of the right of possession and effective control. This provision creates an element of taxation over a service, as opposed to a 'deemed sale' under Article 366(29A)(d). For the purpose of clarification, the Department of Revenue is....
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....arges. The question before the Bombay High Court was whether, prior to the introduction of Section 65(105)(zzzzj) in 2008, the petitioner could be taxed on its services in relation to mining of mineral, oil, or gas under Section 65(105)(zzzy). In the present matter, we are not concerned with the merits of Shipowners', which was affirmed on appeal by this Court in Union of India v. Indian National Shipowners' Association and Anr. [2010 (14) SCC 438 = 2011 (21) S.T.R. 3 (S.C.)]. This Court explicitly restricted itself to the interpretation of Section 65(105)(zzz) while leaving the other observations on interpretation of the law, "open to be considered at length at an appropriate stage" [2010 (14) SCC 438, para 7]. We note however, the analysis of Section 65(105)(zzzzj) of the Bombay High Court, where the High Court observed : "38. Entry (zzzzj) is entirely a new entry. Whereas Entry (zzzy) covers services provided to any person in relation to mining of mineral, oil or gas, services covered by Entry (zzzzj) can be identified by the presence of two characteristics namely (a) supply of tangible goods including machinery, equipment and appliances for use, (b) there is no transfe....
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.... by the seller at the cost of the buyer and that the ownership of the equipment will rest with the respondent forever. Clause 5.6 further clarifies that the buyer has no right to adjust, clean, handle, replace, maintain, remove or modify the measurement equipment. Clause 5.10 guarantees that the seller shall have the right of entry at all hours to the Measurement Equipment and associated apparatus at the Buyer's premises. The pipelines are also part of the "Seller's Facilities" under the agreement and are constructed and maintained by the respondent at the cost of the customer. Thus, the ingredient of not transferring the ownership, possession or effective control of the goods under Section 65(105)(zzzzj) is satisfied. 24. The crux of the dispute is whether the supply of tangible goods - the SKID equipment - is for the use of the purchaser. In determining as to whether the provisions of Section 65(105)(zzzzj) are attracted, it is necessary to distinguish between the rights and obligations of the respondent (as the seller of gas) and of their purchasers, from the issue of whether the measurement equipment (SKID equipment) is supplied for the use of the purchaser of gas, wit....
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....eck the meter in the presence of the representatives of the buyer. If according to the seller, the existing measurement equipment is not working satisfactorily it would be replaced at the cost of the buyer. These provisions indicate that the supply, installation and maintenance of the measurement equipment is exclusively carried out by the seller. The buyer has contractual remedies against the seller in terms of the GSA. These remedies to the buyer as a purchaser of gas are distinct from the issue as to whether the equipment for which gas connection charges are recovered is used by the buyer. 26. Under Section 65(105)(zzzzj), the taxable service is provided or to be provided in relation to the supply of tangible goods for the use of another, without transferring the right of possession and effective control. The expression "use" has been defined in Black's Law Dictionary : "Use, n. Act of employing everything, or state of being employed; application, as the use of a pen, or his machines are in use. Also the fact of being used or employed habitually; usage, as, the wear and tear resulting from ordinary use. Berry-Kofron Dental Laboratory Co. v. Smith, 345 Mo. 922, ....
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.... sine qua non for determining the ability of the consumer to use the goods. Therefore, the expression "use" also signifies the application of the goods for the purpose for which they have been supplied under the terms of a contract. 28. The terms of the GSA indicate that the supply, installation, maintenance and repair of the measurement equipment is exclusively entrusted to the respondent as the seller. These provisions have been incorporated in the GSA to ensure that a buyer does not calibrate or tinker with the equipment. It is an incident of ownership and control being vested with the respondent. The purpose of the SKID equipment and its utility, lie in its ability to regulate the supply and achieve an accurate verification of that which is supplied; in the present case the supply of goods by the respondent to its buyers. This enures to the benefit of the seller and the buyer. The seller is concerned with the precise quantification of the gas which is supplied to the buyer. The buyer has an interest in ensuring the safety of its facilities and that the billing is based on the correct quantity of gas supplied and delivered under the GSA. To postulate, as did the Tribuna....
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....he factual context of the 'use' in the two cases is substantially different. In present matter, the agreement to supply gas, and the measurement equipment and pipelines only involves two parties - the respondent and the ultimate customer. Having said that, we are not expressing any opinion on the correctness of the decision in Meru Cab. 37. We find ourselves in agreement with the findings of the Adjudicating Authority. The extent of the refund of gas connection charges collected from industrial, commercial and domestic consumers by the respondent depends on their usage. From the internal note dated 13 July, 2007 and the tabulation of customers provided above, it is evident that the percentage of funds refunded varies from customer to customer, while the remaining amount is retained by the respondent. In any case, as regards the domestic customers, no deposit receipts have been provided and instead, the respondent has relied on the tabulation of the refund of deposit to industrial consumers to support their contention. Thus, the argument of the respondent that these gas connection charges collected from industrial, commercial and domestic consumers constitute a refundable s....
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.... Finance Act, 1994 for the purpose of levy of service tax as held by Member (Technical) or otherwise as held by Member (Judicial). ⮚ Can payment of sales tax/ vat be the necessary test for non levy of service tax, Member (J) has held so whereas Member (T) do not agree with the said preposition. (Order pronounced in open court on-20.01.2025) Sd/- (P.K. CHOUDHARY) MEMBER (JUDICIAL) Sd/- (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) Per : Hon'ble Mr. R. Muralidhar, Member (Judicial) Interim Order No. 14/2025 05-06-2025 In respect of this appeal the Point of Difference and point referred made to me as third Member, as under:- "POINTS OF DIFFERENCE In view of the above, taking note of the facts that Member (Judicial) has opined for setting aside the impugned order and Member (Technical) has held against upholding the impugned order, following questions have referred to Hon'ble President for referring the matter to Third Member for resolution in difference of opinion recorded:- ⮚ Whether the services provided by the appellant would be classifiable as Supply of Tangible Goods Services as defined by Section 65 (105) ....
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....e retaining control of such spare parts. When such spare parts are being used by the buyer, the Appellant is paying VAT required on such goods. This shows that the Appellant is retaining full control over the components kept at the premises of their buyers. For taking up this activity, the Appellant is getting consideration on a quarterly basis as can be observed from the agreement relied upon by the Department. Therefore, she submits that the Adjudicating Authority has correctly confirmed the demand and supports the view taken by the Hon'ble Member (Technical). Accordingly, she prays that the appeal may be dismissed as has been held by the Hon'ble Member (Technical). 4. Heard both the sides and perused the appeal paper and submissions made by both the sides during the course of hearing. 5. On the first day of hearing i.e. 03.06.2025, I came across some documentary evidence to the effect that identical issue arose in respect of the same Appellant for the period 2003-2008 and for the period 2008-2009 to September, 2012. The issue in this proceeding had reached this Tribunal. Vide Final Order Nos.70660-70662/2019 dated 25.03.2019 this Bench had held as under:- "6. Havi....
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....up in the written synopsis filed at the time of final arguments. Had this important and relevant information been brought to the knowledge of the Division Bench, they would taken up necessary action to verify as to whether any further proceedings have been initiated against the earlier Final Order or not. 11. Since arguments have been made on merits, I also take up the same for giving to my conclusion. The relevant portion of the agreement is extracted below:- 12. From the above extracts, it can be seen that CST @ of 2% is required to be paid by the Appellant which the buyer has confirmed that it will be paid by them to the Appellant. It can also be seen that on the payment for quarterly consideration Rs.99,634/-, 2% CST is applicable. 13. A copy of the invoices raised by the Appellant is extracted below:- 14. From the above invoice, it is seen that the Appellant has billed for the services provided for the period 01.07.2016 to 30.09.2016. On an amount of Rs.7,33,231/- the Appellant has charged CST/VAT @ 2% amounting to Rs.14,664.62. 15. The relevant portion of CBIC Circular No.334/1/2008-TRU dated 29.02.2008, is extracted below:- "4.4 SUPPLY OF TANGIBLE GOO....
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....? Service station during the servicing of vehicles is liable to payment of service tax? Whether exemption can be claimed on the cost of consumables that get consumed during the course of providing service? Service tax is not leviable on a transaction treated as sale of goods and subjected to levy of sales tax/VAT. Whether a given transaction between the service station and the customer is a sale or not, is to be determined taking into account the real nature and material facts of the transaction. Payment of VAT/sales tax on a transaction indicates that the said transaction is treated as sale of goods. (Emphasis supplied) 41.Thus, for all the reasons stated above, it is more than apparent that the supply of diesel generator sets to the customers would not amount to STGU service for the period from 1-4-2011 to 30-6-2012, or a declared service from 1-7-2012 to 2014-15. The orders passed by the Commissioner (Appeals), therefore, cannot be sustained." 18. The above factual evidence clarifies that as per the Agreement, the Appellant is required to pay VAT/CST of deemed sales basis and the Appellant is raising invoices accordingly. The CBEC Circular clarifies when the VA....
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....h this letter. Encls:As above. Yours faithfully. Johndon 04.06.2025 Assistant Commissioner (Review) CGST Commissionerate: Ghaziabad Document 2 RUD -5 63 PITY RUPEES- 5.50 Rs.50 INDIA NON JUDICIAL MIINDIA DETTE MAHARASHTRA DETTE -8 APR 2007 M 89276 5.शाम सौ. तैयà¥à¤¯à¤¬ ORCHID GHENT MES & THARMACEUTICALS LIQ D. G WALUJ CONTRACT FOR PARTS MANAGEMENT PROGRAMME CONTRACT This Contract is made on this 21st day of April 2009 between Orchid Chemicals and Pharmaceuticals Limited, a company incorporated in India and having its Corporate office at Orchid Towers, 313, Valluvar Kottom High Road, Nungambakkam, Chennai 600 034 (hereinafter called Orchid" which expression shall mean and includes its Administrators, Executors, Assignees and Successor and Rockwell Automation India Private Ltd., having its registered office at 131, Functional Industrial Estate, Patparganj, Delhi - 110 092 (hereinafter referred to as "Rockwell" which expression shall mean and include its Administrators, Executors, Assignees and Successor) for Parts Management Programme (hereinafte....
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....le items. Prices will be quoted at the time of request to replace equipment that is drawn from inventory. 6. During the Contract Period, verification of the inventory twice in a year will be conducted at Orchid's premises jointly by Orchid or their appointed representative and Rockwell representative at a time mutually decided by Orchid and Rockwell. In the event of any damage or shortfall noticed during the audit, Rockwell shall replenish the same immediately. The intended benefits are to ensure immediate availability of critical spares (zero down time and lead time for procurement), inventory optimization and elimination of inventory obsolescence. 65 This contract shell supersede any other contract done between the party for given scope of services. End of contract 1 At the end of Contract Period, M/s Orchid Pharma has the option of returning the inventory of renewing the Contract or buying the inventory against payment of Rs/2,21,408/- (Rupees Two Lạc Twenty One Thousand Four Hundred Eight Only) and applicable Taxes on the same either as per the terms provided in the proposal or as per mutual Contract at that time. Payment terms The Quarterly billing....
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....PERUMAL KOLL 602106 AMUR NIRAV M RAVAL Phone:(02638)262580 CST No:31826 DT 02-03-1977 IST No:TIN NO 33230620086 Total E. Duty Payable MIL only Total SEVEN I ANH FORTY SEVEN THOUSAND ENTHT HUNDRED NINETY PVF Pulls RXCTTY THẾ Phẩm lạnh ring Charges (Right to 13ce) Invoice Gross Total 80 700010 2100195851 30//2012 Your Purchase Order and Line Rockwell Automation RA Catalogue No PN-C150157 Parta Management At Customer Sin Settlement From: RA Material No Curt Material MeiProduct Dede PMAS-CUSTOMER-SITE RA Order No Ship To APOLLO TYRES LIMITED INDUSTL.GROWTH CENTRE.ORAGADAM AND MATHUIR VILLAGE SINGAPERUIMALKOL1,502105 AttnMR NIRAV M RAVAL Phone:(02568)262580 CST No:31 625 DT 02-03-1977 LST NeTIN NO 33230620086 ECC No:AAACAG500CXXOM005 0800181151 - 700010 01/07/2016 TAX INVOICE Qty 1 Invoice Date 20/0801G Invoice Tima: 15:20:15 Due Date 20/1046 Invoice No J206007247 AACCR3781ASD002 Your Customer ID 30400153 Page Freight Teers Shipping Service CP Payment Terms Ne 30 Days CENTRE.ORAGADAM PIA, Bank Details Bank of America, New Delhi, INDIA, Account No: 24580010 LAICI 110032002, SWIFT! BOFAINAXD....