9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (12) TMI 1440 - AT - Service TaxClassification of services - Supply of Tangible Goods Service - leasing out Power Generating and Heat Recovery Equipments to various parties under various Lease Agreements - transaction between the Appellant and its customers would involve the transfer of right of possession and effective control or a transfer of right to use or not - HELD THAT - The appellant supplies Power Generating Equipments / gas genset (Plant) to Customers on standby charges and variable charges basis under the agreement. We find that during the subsistence of the agreement, the lessee alone has the right to use the Plant and even the Appellant cannot trespass that right of the lessees/ customers. The Lessees fix the pattern in which the plant is to be used and the time when it will function. All the permission to be obtained from the statutory authorities to be obtained such as Electrical, Pollution, CCR have to be taken by the Customers, the lessee shall ensure the safety of the plant in a manner similar to its own plant. Customers have to provide fuel, Jacket water feed water, the site and other facilities. On going through the clauses of agreement, it is found that the appellants had handed over the Goods‟ possession to the lessee as also the right to use. Therefore the transaction of appellant does not satisfy the condition of without transferring right of possession and the effective control of such machinery, equipment and appliances . Hence the activity does not fall under the definition of Supply of tangible goods for use . The adjudicating authority has held that since as per contract the equipment will remain sole property of equipment provider and skilled manpower supplied by the Appellant are responsible for maintenance operations of gas genset/plant, it is clear that the legal right and effective controls rests with the appellant - There is separate service agreement entered between the Appellant and customer under which various services are provided on which service tax has been discharged by the Appellant. Once the control and possession of gas genset/equipments was transferred to the customers, mere supply of manpower for maintenance will not change the nature of the transaction. All these factors are to be taken into consideration while determining the nature of service. Therefore finding of the impugned orders in present matters legally not correct. The transfer of right to use gas genset/ plant on lease charges basis is a deemed sale in terms of Article 366(29)A of the Constitution, which is exclusive from service. Since the nature of transaction under dispute is deemed sale, no service tax can be demanded, as held in various judgments and relied upon by the Appellant in the present matter. The demand raised cannot sustain and requires to be set aside - Appeal allowed.
Issues Involved:
1. Classification of services provided by the appellant. 2. Applicability of VAT versus Service Tax on lease charges. 3. Transfer of right to use goods and its implications under service tax laws. 4. Interpretation of agreements between the appellant and its customers. 5. Adjudicating authority's interpretation of agreements and legal provisions. Issue-wise Detailed Analysis: 1. Classification of Services Provided by the Appellant: The appellant is engaged in providing services classified under Management, Maintenance or Repair Service, Erection, Commissioning or Installation Service, and Manpower Recruitment or Supply Agency Services. The primary issue is whether the lease charges for Power Generating and Heat Recovery Equipment should be classified under "Supply of Tangible Goods Service" as defined under Section 65(105)(zzzzj) of the Finance Act, 1994, and thus subject to service tax. 2. Applicability of VAT versus Service Tax on Lease Charges: The appellant argued that VAT was paid on the lease charges as the transaction amounted to a deemed sale with effective control and possession transferred to their customers. The appellant contended that since VAT was applied, service tax should not be imposed on these transactions. They cited provisions under the Gujarat VAT Act, 2003, and the Central Sales Tax Act, 1956, which support the view that the transfer of the right to use goods is subject to VAT and not service tax. 3. Transfer of Right to Use Goods and Its Implications Under Service Tax Laws: The department viewed that the lease charges collected were for providing "Supply of Tangible Goods Service" and thus required service tax. The appellant countered that the definition of service under Section 65B(44) of the Finance Act, 2012, excludes transactions deemed as sales under Article 366(29A) of the Constitution. The appellant supported their position with various judgments, asserting that the transfer of the right to use goods constitutes a deemed sale, not a service. 4. Interpretation of Agreements Between the Appellant and Its Customers: The tribunal examined the agreements, noting that the customers had the right to use the equipment exclusively, provided necessary resources, and bore responsibility for the equipment's safety and permissions. The agreements indicated that the effective control and possession were transferred to the customers, supporting the appellant's claim that the transaction was a transfer of the right to use goods. 5. Adjudicating Authority's Interpretation of Agreements and Legal Provisions: The adjudicating authority held that since the equipment remained the appellant's property and the appellant supplied skilled manpower for maintenance, the legal right and effective control rested with the appellant. However, the tribunal found that the agreements' terms and conditions, including the transfer of control and possession to the customers and the separate manpower service agreements, indicated otherwise. The tribunal concluded that the transactions were deemed sales, not services, and thus not subject to service tax. Conclusion: The tribunal set aside the impugned orders, ruling that the transactions were deemed sales under Article 366(29A) of the Constitution and subject to VAT, not service tax. The appeals were allowed with consequential relief as per law. The decision was pronounced in the open court on 06.12.2022.
|
