2014 (7) TMI 932 - AT - Service Tax

Transfer of tangible goods - service of Equipment Hire - Pipes rented out to farmers - Held that - when pipes are handed over to farmers for use, it is natural that the assessee will not have control over its use that transfer of goods involve transfer of possession and effective control. Moreover it is the responsibility of the department to show that appellants have rendered a service which obligation has also not been fulfilled in this case. Renting of immovable property - Held that - Demand relates to the period prior to the amendment of definition of service carried out in 2010 and therefore show-cause notice is time-barred. In view of the fact that there was a dispute about the liability and there were different opinions and retrospective amendment was brought in, appellant was entitled to bona fide belief and therefore the extended period could not have been invoked. As regards the service relating to Equipment Hire, assessee does not have any evidence in respect of this demand and therefore instead of remanding the matter prolonging the litigation he would prefer to pay the amount with interest and does not want to contest the demand. This is only on the ground that appellant does not want to undertake the search for documents etc. Appellants suggestion not to contest the demand for service tax in respect of Equipment Hire amounting to ₹ 49,148/- plus interest and request for waiver of penalty by invoking provisions of Section 80 of Finance Act 1994 is reasonable. the demand for service tax of ₹ 49,148/- with interest is confirmed as not contested. Demand for service tax on Immovable Property Renting is set aside on the ground of limitation. Decided partly in favour of assessee.

Summary

Issues:
1. Demand of service tax on renting out pipes for agricultural operations.
2. Demand of service tax on renting out tangible goods.
3. Demand of service tax on renting immovable property.
4. Demand of service tax on equipment hire.
5. Applicability of penalty waiver under Section 80 of Finance Act 1994.

Analysis:

1. The appellant, engaged in manufacturing RPVC pipes & fittings, received amounts for hiring out pipes for agricultural operations, vehicle hire, and building rentals. A service tax demand of Rs. 8,51,552/- was imposed, alleging that renting out pipes amounted to the provision of service of supplying tangible goods. The appellant argued that they had paid VAT on the transactions, providing evidence of VAT assessment and payment. The tribunal found that the evidence presented was sufficient, as the transfer of goods to farmers for use indicated a lack of control over their use by the appellant. The department failed to establish that a service was rendered, leading to the demand being set aside.

2. Regarding the renting of immovable property, the demand was challenged on the grounds of limitation due to a retrospective amendment in the definition of services. The tribunal acknowledged the dispute and differing opinions, concluding that the appellant had a bona fide belief, and thus the extended period for demand could not be invoked. Consequently, the demand related to immovable property renting was set aside based on the limitation argument.

3. The demand related to equipment hire lacked evidence, and the appellant opted not to contest it to avoid prolonging litigation. The tribunal accepted the appellant's decision to pay the amount of Rs. 49,148/- with interest, waiving penalties under Section 80 of the Finance Act 1994. The demand for service tax on equipment hire was confirmed as not contested, considering the appellant's preference to settle the matter without further dispute.

4. In summary, the tribunal set aside the demand for service tax on immovable property renting due to limitation issues. The demand related to the provision of service of renting tangible goods was set aside on merit, and the demand for equipment hire was accepted as not contested by the appellant. Penalties were entirely waived invoking Section 80 of the Finance Act 1994. The appeal was decided in favor of the appellant based on the above considerations.