2014 (10) TMI 566 - AT - Service Tax

Waiver of pre deposit - Renting of equipments - right to use - appellants leased out the vacuum insulated storage tanks to the customers - Assessee paid VAT on the lease/rent received by them - Held that - Possession has been transferred and one of the requirements of the definition of supply of tangible goods service is that possession and effective control should not have been transferred. If the possession is not transferred, the liability for any damage would be on the supplier. Another point according to the learned AR supports the case of the Revenue is the fact that appellant can have free access at all times to the equipment in buyer s premises. If the effective control and possession are with the appellants, then there is no need for this clause at all. If effective control is with the appellant then there is no need to have a clause in the agreement empowering them to have access to the premises to take care of the equipment. The discussion above would show that appellant has made out a case prima facie on merit. Accordingly, there shall be waiver of pre-deposit of the adjudged dues and stay against recovery for a period of 180 days - stay granted.

Summary

Issues:
1. Whether the activity of leasing vacuum insulated storage tanks amounts to the supply of tangible goods subject to service tax liability.

Analysis:
The case involved the appellant engaged in the manufacturing and selling of industrial gases, leasing vacuum insulated storage tanks to customers without storage facilities for the gases. The dispute arose when service tax was demanded from the appellant for the period from April 2011 to June 2012, amounting to Rs. 13,05,334, claiming the activity as the supply of tangible goods.

The appellant argued that possession and effective control of the tanks remain with the customer as per the terms of the agreements, thus not falling under the definition of 'supply of tangible goods service.' On the other hand, the Revenue contended that the facility fee collected indicated the supply of tangible goods, emphasizing the need for the buyer to ensure the equipment against risks.

The definition of taxable service under consideration included services related to the supply of tangible goods without transferring possession and effective control. The tribunal analyzed the submissions and found merit in the appellant's argument. It was noted that the possession not being transferred meant the liability for any damage would be on the supplier, indicating that the possession and effective control were not with the appellant. Additionally, the clause allowing the appellant free access to the equipment at the buyer's premises supported the view that effective control was not transferred.

The tribunal concluded that the appellant had made a prima facie case on merit, leading to the waiver of pre-deposit of the adjudged dues and a stay against recovery for 180 days. The decision highlighted the importance of analyzing possession and effective control in determining the liability for service tax in cases involving the supply of tangible goods, such as equipment like storage tanks.