2021 (9) TMI 71 - AT - Service Tax

Nature of activity - service or deemed sale - supply of workwear on rent / lease basis as per the requirement of each customer - period involved is 2015 16, 2016 17 and April 2017 to June 2017 - HELD THAT - The issue as to whether the activity of renting of workwear is a service or deemed sale has been analyzed by this Tribunal in the appellant s own case 2020 (11) TMI 14 - CESTAT CHENNAI for a different period, where it was held that work wear does not amount to supply of tangible goods so as to attract service tax. The demand raised cannot sustain and requires to be set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the activity of renting workwear amounts to a service or deemed sale for the purpose of taxation.

Analysis:
The appellant, a subsidiary of Lindstrom OY Finland, leases workwear to clients under specific agreements. The terms include delivering, washing, and servicing customized workwear, with the appellant retaining ownership and exclusive rights for servicing. The dispute arose when the department claimed the activity as a service subject to service tax, while the appellant argued it was a deemed sale, already subject to VAT. The Tribunal had previously ruled in the appellant's favor for an earlier period, stating that workwear rental does not constitute a supply of tangible goods attracting service tax. The current case pertained to the period 2015-2017.

The appellant contended that the right of possession of garments was transferred to clients, but ownership remained with the appellant until redemption. The appellant maintained the garments and provided services essential for their maintenance. Citing the Supreme Court judgment in BSNL Vs. Union of India, the appellant argued that the activity should be considered a deemed sale, not a service. The department, represented by Ms. T. Sridevi, supported the findings in the impugned order.

The Tribunal referred to its previous decision and the Commissioner (Appeals) order, both concluding that workwear rental does not amount to a supply of tangible goods or services for service tax purposes. The terms of the agreements highlighted the appellant's ownership, control, and maintenance responsibilities over the workwear, leading to the conclusion that the activity did not constitute a service. Following the precedent and analysis of the Chandigarh Bench, the Tribunal set aside the impugned order, allowing the appeal with consequential relief, if any. The demand raised by the department was deemed unsustainable, and the impugned order was overturned.