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2018 (2) TMI 1896 - AT - Service TaxTaxability - hire charges collected by the appellant for hiring cranes to its customer - C.B.E. C. Circular No. 334/1/2008-TRU, dated 29-2-2008 - HELD THAT - TRU clarification, dated 29-2-2008 makes it clear that service tax will be liable to be paid only in those cases where the legal right of possession and effective control is not transferred - In the present case, we note that such legal right of possession and effective control is transferred. Consequently, the service does not fall within the category of SOTG service. An identical issue has come up before Tribunal in the case of KINETIC COMMUNICATIONS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-I 2016 (2) TMI 1044 - CESTAT MUMBAI in which the Tribunal has set aside the demand for service tax under above category. Appeal allowed - decided in favor of appellant.
Issues involved:
Restoration of appeal dismissed for non-prosecution, Charge of service tax on hire charges for cranes under Supply of Tangible Goods Services (SOTG) category, Interpretation of agreement terms regarding legal possession and effective control, Applicability of service tax based on transfer of legal right of possession and effective control, Reference to C.B.E. & C. Circular No. 334/1/2008-TRU, Decision in the case of Kinetic Communications Ltd. v. CCE, Pune-I [2017 (3) G.S.T.L. 319 (Tri. - Mum.)], Analysis of TRU clarification dated 29-2-2008 on supply of tangible goods service, Comparison with Tribunal's decision in the case of Kinetic Communications, Setting aside of impugned order based on judicial pronouncements. Restoration of Appeal: A Miscellaneous Application was filed for restoration of an appeal dismissed for non-prosecution, leading to the appeal being restored to its original number. The appeal was then taken up for a decision on merits with the agreement of both sides. Charge of Service Tax - SOTG Category: The issue revolved around the Department's attempt to levy service tax on hire charges for cranes under the Supply of Tangible Goods Services (SOTG) category. The appellant argued that the service did not involve the transfer of legal right of possession and effective control, citing an agreement with customers and a relevant circular to support the contention. Interpretation of Agreement Terms: The agreement between the appellant and customers was analyzed, specifically focusing on a clause stating the legal possession of equipment was handed over to the user. This clause played a crucial role in determining the transfer of legal possession and effective control. Applicability of Service Tax: Referring to a TRU clarification, it was highlighted that service tax liability arises only when the legal right of possession and effective control is not transferred. In this case, as per the agreement terms, it was found that legal possession and effective control were indeed transferred, leading to the service not falling under the SOTG category. Judicial Precedents and Tribunal's Decision: The Tribunal referred to a previous case involving a similar issue where the demand for service tax under the SOTG category was set aside. The Tribunal's decision emphasized the importance of legal possession and the right to use in determining the taxability of the service. Relying on this precedent and other judicial pronouncements, the impugned order was deemed unsustainable and set aside, ultimately allowing the appeal. This detailed analysis of the judgment showcases the restoration of the appeal, the arguments regarding service tax under the SOTG category, the interpretation of agreement terms, the applicability of service tax based on legal possession and effective control, the reliance on legal precedents, and the final decision to set aside the impugned order.
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