2019 (4) TMI 1696 - AT - Service Tax

Taxability - Supply of Tangible Goods Service - supply of machines to its own unit - demand of service tax with interest and penalties - distinct persons or not - HELD THAT - As per the definition of Supply of Tangible Goods , the same would be taxable only when the services are provided by a person to another person. Where the supplier and recipient of the machines in question is the same identity, it cannot be said that there were two different persons, to be regarded as provider and recipient of services - thus, no service tax liability would arise in respect of machines supplied by them to their own unit at Rudrapur. Supply of Bailing Press Machine to a third party person - HELD THAT - The payment or non-payment of VAT is not one of the requisite condition of the definition of Supply of Tangible Goods. It is settled law that no condition or requirement, which is not a part of the definition can be introduced by the adjudicator. No doubt the payment of VAT would establish the transaction to be a deemed sale and thus not covered by the definition but non-payment by itself does not lead to the contrary, especially when it stands established from the agreement entered between the parties that the supply was alongwith possession and effective control of the machines - Demand set aside alongwith penalty. Appeal disposed off.

Summary

Issues:
1. Service tax demand confirmation for the Financial Year 2009-10 to 2010-11 under the category of "Supply of Tangible Goods Service".
2. Dispute regarding the demand balance for the Financial Year 2010-11.
3. Interpretation of the definition of "Supply of Tangible Goods" in relation to transactions involving own units and third-party supplies.

Analysis:
1. The Appellate Tribunal CESTAT ALLAHABAD addressed a service tax demand confirmation for the Appellant related to the Financial Year 2009-10 to 2010-11 under the category of "Supply of Tangible Goods Service." The Commissioner (Appeals) remanded a part of the demand for the year 2009-10 to verify the Small Scale Exemption Notification claim. The challenge in the present appeal focused on the balance demand confirmed for the Financial Year 2010-11.

2. Regarding the balance demand for the Financial Year 2010-11, the Appellant's representative argued that a portion of the demand was related to machinery supplied to their own unit without consideration, solely for accounting purposes. Another part of the demand was for supplying a bailing press machine to a third party. The Appellate Tribunal analyzed the agreement clauses and determined that if the right of possession and effective control of the machine is transferred to the recipient, it does not fall under the definition of taxable services.

3. The Tribunal found that no service tax liability would arise for machines supplied to the Appellant's own unit at Rudrapur since the supplier and recipient were the same identity. In the case of supplying the bailing press machine to a third party, the Tribunal emphasized that the transfer of possession and effective control to the recipient exempts the activity from being considered taxable services. The non-payment of VAT, not being a requisite condition of the definition of "Supply of Tangible Goods," does not establish a taxable transaction when possession and control are transferred, as established in the agreement.

In conclusion, the Appellate Tribunal set aside the service tax demand and penalty for the Financial Year 2010-11, ruling in favor of the Appellant based on the interpretation of the "Supply of Tangible Goods" definition and the specific circumstances of the transactions involved.