2020 (4) TMI 731 - AT - Service Tax

Nature of activity - deemed sale or service? - service of providing leasing of digital cinema equipments to theatres - supply of tangible goods service or not - HELD THAT - Identical issue decided in the case of M/S. QUBE CINEMA TECHNOLOGIES PVT. LTD. VERSUS GST CCE, CHENNAI NORTH 2018 (5) TMI 887 - CESTAT CHENNAI where it was held that activity does not fall within the definition of service under the Finance Act, 1994 as amended in 2012. The demand cannot sustain - Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the activity of leasing digital cinema equipment constitutes a service for the purpose of service tax liability?
- Whether the activity of leasing digital cinema equipment falls under the definition of 'deemed sale' and is therefore exempt from service tax?

Analysis:
1. The case involved the appellant engaged in leasing digital cinema equipment to theatres, with the Department claiming it to be a 'supply of tangible goods' service subject to service tax. Show Cause Notices (SCNs) were issued for short paid service tax, interest, and penalties, which were confirmed by the original authority, leading to the appeal.

2. The appellant argued that leasing digital cinema equipment should be considered a 'deemed sale' and not a service, as they were already paying VAT on the income received. They cited a previous Tribunal decision in the case of Qube Cinema Technologies Pvt. Ltd., which analyzed a similar issue and held that such activity does not attract service tax as it falls under 'deemed sale,' especially after the introduction of the definition of 'service' in Section 65B(44) post-July 2012.

3. The Tribunal considered the arguments from both sides and referred to the previous decision in the case of Qube Cinema Technologies Pvt. Ltd., where it was established that the transfer of right to use the equipment constituted a 'deemed sale' under constitutional provisions. The Tribunal concluded that the activity of leasing digital cinema equipment involved the transfer of right of possession and effective control, falling under 'deemed sale,' and not within the definition of 'service' under the Finance Act, 1994 as amended in 2012.

4. Based on the analysis and precedent set by the previous decision, the Tribunal held that the demand for service tax could not be sustained. Consequently, the impugned orders were set aside, and the appeal was allowed with any consequential relief. The judgment clarified that the activity of leasing digital cinema equipment was not liable to service tax, affirming the 'deemed sale' nature of the transaction.

This detailed analysis of the judgment showcases the legal reasoning and application of relevant provisions to determine the tax liability concerning the leasing of digital cinema equipment, emphasizing the distinction between 'deemed sale' and taxable services under the law.