TaxTMI 
TaxTMI 
2026 (6) TMI 1229
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....scharging the appropriate service tax under STGU Service and had not filed ST-3 returns, investigation was initiated and relevant records were called for scrutiny by the Central Excise department. Upon verification of the documents, the department was of the view that the appellant had allegedly failed to remit the appropriate service tax within the prescribed time and had thereby evaded payment of service tax. Accordingly, a Show Cause Notice dated 24.10.2013 was issued proposing demand of duty for STGU Service and Transport of Goods by Road Service, along with interest for the period 2008-09 to 201112, and proposing imposition of penalties under the provisions of the Finance Act, 1994 (FA 1994). After following due process, the Ld. Commissioner as per the impugned order confirmed the demands as proposed in the Show Cause Notice and imposed penalty under Section 78 and under Section 77(1)(a) of the FA 1994. Aggrieved thereby, the appellant is before this Tribunal in the present appeal. 3. The learned Advocate Shri J. Shankarraman appeared for the appellant and Ld. Authorized Representative Shri M. Selvakumar appeared for the respondent. Submissions made by the Appellant 3....
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....ssion and control. Mere provision of an operator, therefore, does not alter the nature of the transaction. H. The invoices also describe the arrangement as rental/hiring of DG sets. Since the sets were kept at the customers' premises for use as per their requirement, the transaction clearly answers the description of deemed sale, on which VAT was rightly paid. I. Amounts recovered towards diesel/oil reimbursement do not form part of any taxable service. In such cases, diesel was procured on behalf of the customer, though the supplier's invoice stood in the customer's name. J. The contention that the customers lacked control merely because they could not sub-let the DG sets is misconceived. Transfer of the right to use is a deemed sale; it does not require transfer of ownership. Absence of a right to further alienate the goods does not negate possession or effective control. K. The Department's Circular dated 23.08.2007 also clarifies that once a transaction is treated as sale and subjected to VAT/sales tax, service tax is not leviable on the same transaction. Payment of VAT is a strong indicator of the real nature of the arrangement. L. ....
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....) of the Service Tax Rules, 1994. The assessee did not dispute this liability and had already made payment prior to issuance of notice. D. The assessee's plea that service tax was inapplicable because VAT had been paid was not accepted. Mere payment of VAT does not determine the true nature of the transaction where the contractual terms show that possession and control remained with the assessee. E. The assessee neither obtained service tax registration nor self-assessed and paid the tax due, until departmental investigation commenced. In view of the contractual terms and the failure to disclose the taxable nature of the transactions, the conduct amounted to wilful suppression of material facts with intent to evade payment of service tax. F. Accordingly, the extended period under the proviso to Section 73(1) was rightly invoked for recovery of service tax. The Ld. A.R. prayed that the appeal may be rejected. Analysis 4. We have heard the parties and carefully perused the appeal. The issue before us is whether hiring DG sets by the Appellant to their customers amount to STGU service. 4.1 We find that the demand is for the period from 2008-09 to....
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.... control the decision of a quasi-judicial authority. However the position as further explained in Collector Vs Dhiren Chemical Industries [2002 (139) E.L.T. 3 (S.C.)], and by a Bench of five Hon'ble Judges in Commissioner of Central Excise, Bolpur Vs Ratan Melting & Wire Industries [2008-TIOL-194-SCCX-CB], is that Board circulars and administrative instructions issued for proper administration, uniformity, and procedural standardisation are binding on departmental authorities so long as they are not inconsistent with statutory provisions or contrary to judicial interpretation. Hence once the issue is found covered by the Circular in favour of the appellant, and does not suffer from any vice as stated, the same has to be implemented. Para 4.4.3 of the Circular reads as follows: "4.4 Supply of Tangible Goods Services: 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 equipm....
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....pon without examining the factual situation in the appeal and how it fits the decision on which reliance is placed. 7.1 The corpus juris currently prevalent in India derives its historical foundation from English law. Over time, the doctrine of precedents in England has evolved to attain the status of law, transcending its original function as merely a source of law. English common law, being entirely judge-made, consists of authoritative judicial decisions that are to be adhered to consistently in subsequent cases. In this regard, it is pertinent to observe that a Full Bench of the Hon'ble Gujarat High Court, in the matter of State of Gujarat Vs Gordhandas Keshavji Gandhi and Ors [AIR 1962 GUJ 128], deliberated upon the interpretation of the term "law" as employed in the phrase "law in force immediately before the appointed day" contained in Section 87 of the Bombay Reorganisation Act of 1960. Hon'ble Justice Bhagwati, in his judgement, which forms part of the majority opinion, examined whether judicial precedents can be considered as law within the specified context. Relevant excerpts are provided below. "127. The next question to which I must address myself is whethe....
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....rtain Courts invested with binding authority. There is no rule founded either in statute or in common law which requires implicit and unquestioning obedience to the individual precedent of another Court under any circumstances. When a Court regards itself as bound by the individual precedent of another Court, it does so only on grounds of judicial comity and propriety. . . . . The evolution of the doctrine in India has been, as I have pointed out, different from the evolution in England and much of the rigidity which affects the doctrine as it prevails in England is absent in India. This difference in the operation of the doctrine in the two countries -- which is by no means inconsiderable -- again throws into hold relief the true basis and operation of judicial Precedents and illustrates the validity of this principle based on judicial comity and judicial decorum. . . . If judicial decisions are law, they must be binding on Courts as law and their binding effect should not depend on the insecure foundation of judicial comity and judicial decorum. The Courts are constituted to administer law and under their constitution, they are bound to administer law as a matter of legal obligat....
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....servations must be read in the context in which they appear to have been stated. Judgments of Courts are not to be construed as statutes. 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 Service Tax Appeal No.70472 of 2023 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." In Home Office v. Dorset Yacht Co. (1970 (2) All ER 294) Lord Reid said, "Lord Atkin's speech.....is not to be treated as if it was a statute definition. It will require qualification in new circumstances." Megarry, J in (1971) 1 WLR 1062 observed: ....
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....ems disclosed by the facts; and (iii) judgment based on the combined effect of (i) and (ii) above. For the purposes of the parties themselves and their privies, ingredient (iii) is the material element in the decision, for, it determines finally their rights and liabilities in relation to the subject-matter of the action. It is the judgment that estops the parties from reopening the dispute. However, for the purpose of the doctrine of precedent, ingredient (ii) is the vital element in the decision. This is the ratio decidendi. It is not everything said by a judge when giving a judgment that constitutes a precedent. The only thing in a judge's decision binding a party is the principle upon which the case is decided and for this reason it is important to analyse a decision and isolate from it the ratio decidendi." (emphasis added) However, for completeness it is to be stated that the process of discerning the binding majority opinion from Bench judgements of plural strength, where various judges discuss the same question of law albeit differently, is a distinct one. [See: Constitution Bench judgment consisting of nine Hon'ble Judges in Property Owners Asso....
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.... declared that even an obiter of this Court must be treated as a binding precedent for the High Courts and the courts below. In the process of decision making, this Court takes care to indicate the instances where the decision of the Supreme Court is not to be treated as precedent. It is therefore necessary to be cautious in our dispensation and state whether a particular decision is to resolve the dispute between the parties and provide finality or whether the judgment is intended to and in fact declares the law under Article 141." (emphasis added) 7.7 In this context it is also essential to note that orders/ judgments that are based on dis-similar facts; decisions based on mere assertions (ipse dixit); on legal provisions that are not in pari materia; those which are discretionary in nature or are passed without jurisdiction, do not have precedential value. Similarly, an in limine dismissal of an appeal, by the Apex Court, without giving any detailed reasons, does not constitute any declaration of law or a binding precedent under Article 141 of the Constitution. [See: State of Orissa & Anr. Vs Dhirendra Sundar Das & Ors. - Supreme Court - CIVIL APPEAL NO. 4646 OF 2019, Date....
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....ssue which came up for consideration was whether the supply of diesel generator sets to the customer would amount to STGU service. While the terms of the work order appear similar to those in the current appeal and the Order has persuasive value, it may not be proper to adopt the precedential value of the Order ipse dixit, without examining and discussing the actual terms of the work order in this case. [See: Major Bahadur Singh (supra)]. 9.1 The Order in Agrawal Builders (supra), pertains to the leasing of generators. The Order relies on the singular fact that the appellant had discharged VAT in respect of right to use the DG sets. The terms of the work order and who exercised effective control over the DG sets when it remained with the customer is not discussed. While the payment of VAT can be a supportive factor, however whether the activity is covered by section 65(105)(zzzzj) of the FA 1994, has not been examined and hence is of limited value in deciding the appeal. 9.2 The judgment of the Hon'ble Supreme Court in UFO Moviez India Ltd. (supra), pertains to the leasing of Digital Cinema Equipment to theatre owners with effective control over it and for which Service Tax w....
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....g in Great Eastern Shipping Co. Ltd. Vs State of Karnataka [2020 (32) G.S.T.L. 3 (S.C.)]; Commissioner of Service Tax, Ahmedabad Vs Adani Gas Ltd.; [2020 SCC OnLine SC 682 / 2020 (40) G.S.T.L. 145 (S.C.)], and Commissioner Vs Quick Heal Technologies Ltd., [2022 (63) G.S.T.L. 385 (S.C.)]. It is, therefore, clear that a transaction falls within Article 366(29-A) (d) and would be subject to Sales Tax, if the five attributes are satisfied. However, mere permission to use goods does not, by itself, amount to a transfer of the right to use; it may be no more than a licence to use. 11. On a plain reading of the sample work order reproduced at para 4.2 above along with Section 65(105)(zzzzj) of the FA 1994, and applying the tests laid down in BSNL (supra), we find that the transaction, in the current appeal, was not a mere service arrangement. It was, in substance, a hiring of an identified diesel generator set for consideration, with transfer of the right to use the goods, though without transfer of ownership. 11.1 The work order specifically provided for delivery of the DG set at the customer's factory and stated that the hiring period would commence from the date of delivery. The ....
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....le goods including machinery, equipment and appliances for use, without transferring right of possession and effective control as stipulated under Section 65(105)(zzzzj) of the FA 1994, is not seen satisfied. Hence the demand founded on the contrary assumption is therefore unsustainable. This being so the question of evasion of duty does not arise and the issue of time-bar is settled in favour of the appellant as the department in the circumstances, has failed to establish a case of wilful evasion of duty and the impugned order merits to be set aside on this score. This being so the other issues like interest and penalty etc do not survive. Conclusion 12. On considering the issues and based on our findings the impugned order is set aside. The appellant is eligible for consequential relief, if any, as per law. The appeal is disposed of accordingly. (Order pronounced in open court on 23.06.2026) (Separate order) (AJAYAN T.V.) Member (Judicial) Sd/- (M. AJIT KUMAR) Member (Technical) PER AJAYAN T.V., 13. I have carefully considered the order recorded by my Learned Brother Shri. M. Ajit Kumar, Member (Technical). While agreeing with ....