TaxTMI 
TaxTMI 
2026 (6) TMI 955
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....us customers for renting of such equipment for specific period on rental basis. As per such agreements, the Appellant deploys the equipments at the customers' site, for specified period, during which the responsibility of the equipment entirely and exclusively rests with the customer. In short, the customers take possession and control of the equipment, whereas the ownership remains with the Appellant. 2.2 Few of the important terms of the agreement entered into by the Appellant with BSC-C&C JV are summarized below - * 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. (Clause 4) * The equipment delivered on rent by the Appellant, shall be at the sole risk of the Customer. (Clause 7.1) * The equipment shall be under the possession, control and custody of the Customer during the tenure of the agreement (Clause 2.2). * The equipment will be returned to the Appellant on expiry of the contract period. (Clause 9.4) ....
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.... reasonable cause for non-payment of service tax. 2.6 Against the said order, the appellant is before us. 3. The ld.Counsel appearing on behalf of the appellant submits that the issue regarding the underlying transaction being a deemed sales is no longer res-integra and the said issue is decided in favour of the appellant-assessee. She also submits that Section 65(105)(zzzzj) of the Finance Act,1994, defines the taxable service of 'supply of tangible goods' as follows: "Section 65. Definition - .... (105) "Taxable service" means any service provided or to be provided - ..... "(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;" Therefore, an activity would qualify as a service of supply of tangible goods, where the right of possession and effective control of the underlying goods is not transferred. 3.1 However, in the instant case, the appellant transferred the effective control, possession and custody of the goods, which is apparent ....
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..... Nagpur (vice-versa), 2017 (48) STR 476 (Tri. - Mumbai) Transfer of right to use: 3.2 She submits that vide the 46th amendment, Article 366(29A) of the Constitution of India, the ambit of 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". 3.3 Accordingly, various State VAT Acts were amended to enhance their ambit. Section 2(39) of the WBVAT Act, 2003 defined the term 'sale' as follows: "(39) "sale" means any transfer of property in goods for cash, deferred payment or other valuable consideration, and includes, - ...... (c) any 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,; ...." 3.4 Even Section 2(g) (iv) of the Central Sales Tax, 1956 contained pari materia provision to Section 2(39) of WBVAT Act, 2003. Therefore, whenever there is a transfer of right to use any goods, the same would be subject to levy of VAT/CST under. ....
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....ore, the instant transaction qualifies as a 'transfer of right to use the goods' i.e., a deemed sale, falling within the ambit of 'sale' chargeable to VAT/CST. Since the possession and effective control of the equipment are transferred to the Customers, the transaction would fall outside the ambit of service tax. 3.6 She further submits that the service tax and VAT are mutually exclusive. She submits that in the instant case, the demand of service tax is not sustainable since VAT has been duly paid by the appellant. Based on the aforementioned submissions, she submits, since the underlying transaction is a deemed sales, the Appellant has rightly deposited VAT or CST thereon. This is evident from the invoices issued by the Appellant as well as the CA Certificate. She submits that it is a settled law that VAT and service tax are mutually exclusive. In support of her contention, he relies on the following decisions : (a) Imagic Creative Pvt. Ltd. v. Commr. of Central Taxes - 2008 (9) S.T.R. 337 (S.C.) (b) Oil India Ltd. v. CC & CE (Appeals), Guwahati, 2024 (9) TMI 1793 - CESTAT Kolkata (c) Oil India Ltd. v. CCE & CGST, Guwahati, 2025 (4) TMI 957 - CESTAT ....
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....es on which VAT already stands paid. Hence, extended period of limitation could not have been invoked. In support of her contention, she relies on the following decisions : (a) Amit Metaliks Limited v. CCE, Bolpur - 2023-VIL-1683-CESTAT-KOL-CE (b) Carzonrent (India) Pvt. Ltd. v. Commr. of ST, Delhi - I - 2017 (50) S.T.R. 172 (Tri. - Del.) (c) Sant Roadlines v. CCE& ST, Panchkula, 2020 (43) G.S.T.L. 206 (Tri. - Chan.) Thus, the extended period of limitation has been wrongly invoked and the demand from 01.04.2008 to 30.09.2011 is liable to be set aside. 3.9 Finally, she prays for setting aside the impugned order by allowing their appeal with consequential benefits. 4. On the other hand, the ld. A.R. for the Revenue supported the impugned order by relying the decision of the Hon'ble Supreme Court in the case of K.P.Mozika Vs. Oil and Natural Gas Corporation Ltd. reported in 2024 (388) ELT 11 (SC). 5. Heard both the parties and considered the submissions. 6. We find that in the case of K.P. Mozika cited by Ld.A.R. for the Revenue, the said decision pertains to the liability to pay Sales Tax/VAT by the appellant for the activity to provide diffe....
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....r, and the right to use the trailer is not transferred to ONGC. Hence, test (c) out of the five tests is not fulfilled in this case." Admittedly, in that case, the right to use was not transferred to ONGC and the contractor fully controls the trailers during the contract period, which is not in the facts and circumstances of the case in hand. Therefore, the said decision is not applicable to the facts and circumstances of this case. 7. We find that the issue involved in this case is examined by this Tribunal in the case of M/s Gainwell Commosales Vs. Commissioner of Service Tax, Kolkata reported in 2025 (8) TMI 931-CESTAT, Kolkata, wherein this Tribunal has observed as under : "16. Therefore, to sum up, a transaction would fall within the ambit of VAT/CST Act if there is a 'transfer of right to use' and in order to satisfy the same, there should be - (1) transfer of right of possession; and (2) transfer of effective control. 17. In order to examine if the agreement by the Appellant with the customers falls within the ambit of 'transfer of right to use', it is pertinent to discuss the relevant clauses of the agreement. A. It is humb....
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....vant portion of the agreement is reproduced below - "4. Operating Assistance 4.1... On Customer's request, TIPL shall provide 1 equipment operator for single shift operation of maximum 10 hours per day. Such Operators deputed by TIPL to operate the equipment shall follow the instructions and directions of the CUSTOMER. 4.2 The CUSTOMER shall be responsible for any claim arising in connection with the operation of the Equipment by operators provided by TIPL. ...." E. Therefore, from the above extracted clauses of the Agreement, it is quite clear that the customer has the option to operate the equipment, and the entire effective control and right to use vests with the customers of the Appellant. F. Also, it is pertinent to note that the agreement contains clause for inspection of the equipments by the Appellant. In this regard, it is submitted that the very fact that the Appellant reserve the right to inspect clearly shows that the possession and effective control has been transferred to the customers. Had the Appellant retained the possession and effective control, the Appellant would not require the customer's permission to inspect. In t....
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....Allahabad in the case of M/s. Express Engineers & Spares v. Commissioner, CGST, Ghaziabad - 2022 (1) TMI 564 - CESTAT Allahabad wherein it was held that "The finding in the impugned order that since the Appellant was responsible for the maintenance and repair of the diesel generator sets, the Appellant has retained effective control, cannot also be sustained because once the control and possession of the diesel generator sets was transferred to the customers, mere maintenance or repair work will not change the nature of the transaction." M. He relied on the following decisions wherein similar proposition of law was upheld - * M/s. Inox Air Products Pvt. Ltd. (Unit-I) v. CCE & CGST, Noida - 2025-VIL-535-CESTAT-ALH-ST * M/s. Gimmco Ltd. v. CCE & S.T. Nagpur (vice-versa) - 2017 (48) S.T.R. 476 (Tri. - Mumbai) N. Further, the Ld. Commissioner (Appeals) has also observed that the operators of the equipment would generally be provided by the Appellant, and even though it gives the option to the customers for appointing operators, prior concurrence of the Appellant is to be obtained. It is humbly submitted that it is a settled position merely because cr....