TaxTMI 
TaxTMI 
2026 (7) TMI 1542
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....ly registered with the jurisdictional Central Excise authorities as Large Taxpayer Unit (LTU) holding registration no. LTU/MUM/0118 with LTU, Mumbai. Further, in respect of various services provided by them the appellants are holding Service Tax Registration No. AAACA3622KST002, for their registered office. 2.2 During the course of EA-2000 audit of accounts of the appellants conducted in the month of April/May, 2008, the departmental authorities have noticed that the appellants have collected 'lease rental charges' from their dealers/distributors on account of supply of 'tinting machines' which were used for mixing of base paint with colour shades as per the need of the customers. The department had interpreted that the activity of such leasing of computerized colour mixing machines to various paint & hardware stores is in the nature of taxable service under the category 'Banking and Other Financial Services' as 'leasing services including equipment leasing' was covered its definition; during post negative list regime under the declared service of 'transfer of goods by way of hiring, leasing, licensing etc. without transfer of right to use such goods' provided under Section 66E ....
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....not again transfer the same rights to others, as laid down by the Hon'ble Supreme Court in the case of Bharat Sanchar Nigam Limited Vs. Union of India - 2006 (2) S.T.R. 161 (S.C.). She further submitted that the relevant clauses in the agreement dated 06.03.2009 submitted as part of the appeal papers are : (a) 9.1, 6.1.4, 8.15; (b) Schedule-I; (c) 8.4, 7, 6.4; (d)13.1; (e) 11.2, demonstrating compliance with the aforesaid points of Hon'ble Supreme Court's order are present in the agreement entered with the distributors of the appellants' company. This has also been reiterated in the Education Guide on 'Taxation of Services' issued by Central Board of Excise & Customs (CBEC) dated 20.06.2012 in paragraph 6.6.1. 3.2 Further, she submitted that the allegation of suppression in not sustainable as the entire details have been furnished in their statutory returns and the entire basis of the SCN is based on the information disclosed in their statutory records. Thus, he claimed that demand of service tax by invoking extended period and imposition of penalty is not sustainable. 3.3 In this regard, she also relied upon the decisions of the appe....
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.... the demands for confirmed by the original authority for the entire period i.e., April, 2005 to March, 2015, learned Commissioner (Appeals) in the impugned order dated 13.07.2022 had set aside the demands confirmed by the original authority for the pre-negative list period i.e., prior to 01.07.2012 and upheld the order of the original authority for post negative list period i.e., from 01.07.2012 to 31.03.2015 for confirmation of service tax demand along with interest and penalty. 7.2 From the plain reading of the relevant legal provisions of the Finance Act, 1994, it transpires that for the period relating to the pre-negative list regime i.e., prior to 01.07.2012, the taxability was determined in terms of coverage of an activity under the service tax net by defining taxable services under section 65(105) ibid, which enumerated each of the specified services. On this aspect, the learned Commissioner (Appeals) have already found that the appellants are not collecting management fee/processing fee and there is no collection of monthly EMIs, and hence he has held that the lease agreement entered by the appellants is not an agreement of financial lease, on which service tax is leviab....
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.... paints without tinting i.e., adding the colourants to the paints by use of the leased equipment; the lessee shall keep the equipment, at all times in its possession and control at the premises indicated and accepted by the Lessor, unless otherwise permitted by the lessor in writing etc. The lessee upon completion or termination of the lease period shall return the leased equipment to the lessor in the same condition in which it was handed over, except for the reasonable wear and tear due to efflux of time. Further, clause 8.18 of the said agreement specifically provide for use and operate the leased equipment by the lessee, observing carefulness and maintaining it in good condition, and if repair is required then take the help of engineers and technicians deputed or recommended by the lessor. It is also provided in clause 8.8 that it is for the lessee, who shall allow the lessor or his authorised representative to inspect and repair the equipment, whenever considered necessary. These clearly provide that the identified goods to be provided under lease arrangement was knows to both parties, i.e., the appellant and their dealers/distributors; the said equipment was delivered to the ....
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....ion of allowing another person to use the goods, without giving legal right of possession and effective control, not being treated 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. On careful perusal of the aforesaid clarification issued by the Ministry of Finance, it transpires that where any goods/equipment is given under a lease arrangement, wherein both possession and effective control of such goods/equipment have been handed over to the lessee, then it would be categorised as 'deemed sale, leviable to VAT and service tax will not be charged on such activities. In the pre....
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....it has to be to 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 right to others. 3.1 This criteria must invariably be followed and applied to cases involving hiring, leasing or licensing of goods. The terms of the contract must be studied carefully vis- a- vis the criteria laid down by the Supreme Court in order to determine whether service tax liability will arise in a given case. It is not possible to either give an exhaustive list of illustrations or judgements on this issue. Cases decided under the Sales Tax/VAT legislations have to be considered against the background of those particular legislative provisions and terms of contract in that case. 3.2 The following case law may also be referred to. These should not be applied mechanically but their applicability to the facts of a given case, the terms of the contract in the given case and the criteria laid down by the Supreme....
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.... examined carefully, against the backdrop of the criteria laid down by the Supreme Court in the Bharat Sanchar Nigam Limited case as well as other judicial pronouncements." 7.8 On the above basis, I had examined various clauses contained in the sample Lease Agreement submitted by the appellants. This sample agreement has been entered into by the appellants with dealer/distributor, and some of the important clauses which are relevant for such examination of 5-point criteria as laid down in the judgment of the Hon'ble Supreme Court in the case of BSNL (supra) are as follows: "6.1 The Lessee has specifically agreed with the Lessor that the Lessee: 6.1.1 Shall not sell the base material without tinting ie. adding the colorants to the base material 6.1.2 Shall display the retail sale price of the paint on addition of the colorants, for the shades required, as fixed by the Company at a prominent and conspicuous place in the Lessee's premises for the information of the consumer. 6.1.3 Shall issue a cash receipt / printed computer slip which shall contain, inter-alia a. address/identification mark of the Lessee b.name of the ....
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....pment only to tint and sell the products of the Lessor and of no other company. 8.8. The Lessee shall allow the Lessor through its authorised representative(s) to inspect and repair the equipment(s) whenever considered necessary by the Lessor. 8.14. The Lessee shall return the leased equipment at its cost upon termination of the lease in the same condition in which it was at the time of commencement of lease, reasonable wear and tear due to efflux of time excepted. 8.15. The Lessee shall keep the equipment, at all times in its possession and control at the premises indicated and accepted by the Lessor, unless otherwise permitted by the Lessor in writing. 8.18. The Lessee shall use and operate the equipment carefully and maintain the same in good condition and repair for which the Lessee shall take the help of Engineers and Technicians deputed / recommended by the Lessor only and to act in conformity with the instructions or operation manual given by the manufacturer and/or the Lessor. 9.1 It is hereby agreed that the Delivery of Equipment's shall be taken by the Lessee at such place as the parties may mutually agree and the Lessee shall ....
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.... "2. M/s. Arval India Pvt. Ltd. provides motor vehicles, identified by their corporate customers, on lease for specified periods and which may, on exercise of option by the lessee, incorporate maintenance and repair (denominated as 'fleet management') during the tenor of the agreement. The consideration, to be paid at regular intervals specified in the lease agreement, is sought to be brought within the authority to levy service tax under Finance Act, 1994. The impugned order has upheld the taxability while discarding the proposal to invoke the extended period beyond eighteen months computed backwards from the relevant date, which is under challenge by the assessee-appellant. There is no dispute that the tax liability on 'fleet management' has been discharged as provider of 'management, maintenance or repair service' and on commission received from insurance companies as provider of 'business auxiliary services' while, claiming the transaction to be 'deemed sale', the 'lease rental' was not offered up as consideration for rendering taxable service. A portion of the confirmed demand pertains to the period prior to 'negative list&....
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....n the market space. Though the appellation was not varied, subsequent amendments extended the scope of tax to cover all users of every kind of automobile for carriage of persons without the right of ownership. In other words, the substitution of ownership by usage, that was restricted only by certain minimal limitations to distinguish from the former, was no longer an activity beyond the pale of tax. ** ** ** 12. Impliedly, neither did the taxing powers vested in the Union extend either to 'sale' or 'deemed sale' nor did all of the several 'deemed sales' incorporated in the constitutional amendment include some component that was not 'deemed sale' outside the pale of taxation in List-II in the Constitution of India. The impugned order has erred in presuming so. In 'works contracts', there is an aspect that is beyond the taxing powers of the States which could, under Parliamentary sanction, be taxed by the Union. In both 'sales' and 'services', the taxable event is determined by the existence of 'buyer/recipient' and 'seller/provider' with the conclusion of the contractual obligation as the def....