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Judgment
Issue,Period,"Taxable Value
(Rs.)","Service Tax/Credit
Amount(Rs.)","Finding in
Impugned Order
Availment of
CENVAT credit
on invoices issued
on premises other
than registered
premises","October 2007 to
March 2012",-,"3,34,35,238",Demand dropped
Provision of tool
kits to associated
companies. As per
the notice, the
Appellant is liable
to pay service tax
under the category
of “supply of
tangible goods for
useâ€.(STGU)",2011-12,"59,87,599","6,16,723","Demand
confirmed on the
ground that
ownership over the
tool kits remained
with the Appellant,
even though VAT
was paid on the
transaction
(iii) The entire premise of confirmation of demand is solely based on one factor, namely that the ownership of the kits was not transferred. Article",,,,
366(29A)(d) of the Constitution does not require transfer of ownership. If a specific transaction involves transfer of ownership /title, then there is no",,,,
requirement to invoke the deeming provision (‘transfer of right to use goods’) because such a transaction is chargeable to VAT, as sale of",,,,
goods. In the present case, there is no factual dispute that against the provision of kits, the Appellant was raising VAT invoices on the associated",,,,
companies and was discharging VAT;,,,,
(iv) Payment of VAT on supply goods is also a factor to determine whether the transaction is that of sale. In this regard, reliance has been placed on",,,,
the clarification issued by the Department on February 29, 2008, wherein the taxable category of “supply of tangible goods for use†was clarified",,,,
and its distinction with deemed sale under sales tax was brought out; and,,,,
(v) On import of ‘Baking Oven’ from its foreign associated company, the Appellant discharged Customs Duty and paid the freight charges. The",,,,
order has confirmed the demand of the service tax on the entire amount paid by the Appellant, including the freight charges. The only finding in the",,,,
impugned order is that the ownership of the baking ovens continued to be with foreign supplier, on account of which the transaction qualifies as a",,,,
service involving STGU. The Department has not established as to why the possession and control over the baking ovens continued to be with the,,,,
foreign companies, when the same were clearly imported and were in the exclusive possession of the Appellant.",,,,
Shri Arun Thapliai learned Authorized Representative appearing the Department, however, supported the impugned order and submitted that the",,,,
demand has been confirmed in accordance with the provisions of the Finance Act.,,,,
The submissions advanced by the learned counsel for the appellant and the learned Authorized Representative of the Department have been,,,,
considered.,,,,
Two issues arise for the consideration; the first is whether the tool kits provided by the appellant to associated companies would be a service of,,,,
“supply of tangible good for use†STGU and would be a taxable service contemplated under section 65(105)(zzzzj) of the Finance Act, which is",,,,
any service provided to any person, by any other person, in relation to supply of tangible goods without transferring right of possession and effective",,,,
control; and the second issue is whether service tax would be leviable on rental charges for baked oven under STGU.,,,,
First Issue,,,,
The finding recorded by the Principal Commissioner on this issue is as follows:,,,,
“I find from the perusal of the invoices issued in this matter that the invoices have been issued for charges towards rental of LKG for,,,,
certain days. The notice had rented the tool kits to its associate companies for a period of time and recovered rental charges against the,,,,
services so provided. The rental income towards such supply of the tool kits cannot be termed as deemed sale as claimed by the notice as the,,,,
ownership of the tool kits remained with the noticee, hence I conclude that the services rendered by the noticee are covered under the ambit",,,,
of the definition of “Supply of Tangible goods for use†and are liable to service tax under Section 65(105)(zzzzj) of the Act ibid.â€,,,,
(emphasis supplied),,,,
The Principal Commissioner has held that the tool kits supplied by the Appellant to its associated companies would amount to STGU service, as the",,,,
ownership of the tool kits remained with the appellant. 9. Section 65(105)(zzzzj) of the Finance Act, defines taxable service as follows:",,,,
“65(105)(zzzj) “taxable service†means any service 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.â€",,,,
It would be seen from the aforesaid definition that the following criteria is required to be fulfilled for a transaction to qualify as STGU service:,,,,
(i) There must be a supply of tangible goods, including machinery/ equipment/ appliance;",,,,
(ii) The supply must be for use;,,,,
(iii) The right of possession and effective control over such goods must not have been passed on to the transferee.,,,,
There is no dispute with the regard to the first two conditions. The dispute revolves around the third condition, namely whether the transaction",,,,
between the Appellant and the associated companies involves transfer of right of possession and effective control. This is for the reason that any,,,,
transaction involving transfer of ‘right to use’ would result in a “deemed saleâ€, which would be beyond the purview of service tax.",,,,
In this connection it would be pertinent to refer to article 366(29A) of the Constitution. This article deals with tax on the sale or purchase of goods.,,,,
It provides:-,,,,
“(29A) tax on the sale or purchase of goods includes-,,,,
(a) …………,,,,
(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;,,,,
and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or",,,,
supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made;â€",,,,
(emphasis supplied),,,,
The aforesaid article of the Constitution empowered the State to levy sales tax/ VAT on transactions in the nature of “transfer of the right to,,,,
use any goodsâ€, which before the insertion of this article by the 46th amendment to the Constitution, were not exigible to sales tax as such transaction",,,,
were not covered by the definition of “sale†in the Sale of Good Act†1930.,,,,
Pursuant to the aforesaid amendment, the Central Sales Tax was also amended to include the ‘transfer of right to use goods’ within the",,,,
Reference Code,Issue,Clarification,,
(1),(2),(3),,
036.03/ 23-8-07,"Whether spare parts sold by a
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.",,