2022 (2) TMI 141 - AT - Service Tax

Levy of service tax or VAT - Supply of Tangible Goods Service - supply of mobile gensets by the appellant - consideration charged, as the effective control and possession of gensets was with clients - deemed sales or not - F.Y. 2011-12 to 2015-16 - specific events or where clients required transportable gensets (fixed on vehicle/ trolley) for short-term period, and supplied along with technicians / operators, who run the gensets as per the instructions of the clients - invocation of extended period of limitation - HELD THAT - In view of the Article 366(29A)(d) of the Constitution, transfer of the right to use any goods for any purpose, whether or not for a specified period, for cash, deferred payment or other valuable consideration, has to be considered as deemed sale or purchase of goods - In the instant case it is observed that the appellant have supplied the mobile gensets to his clients for short periods along with technicians and fuel. It is the requirement of the client to use such gensets when there is no electricity or the electricity goes off or as desired by client, and the gensets are put to use to keep or ensure uninterrupted supply of electricity at the clients place/site. Thus, the use of the gensets is purely on the requirement or order of the clients. It is not necessary that the gensets provided to the client is surely put to use or generate electricity for the period of time for which it is hired by the client, but the genset is dedicated/ delivered to the client and is under his effective control and pocession. In view of such condition, the effective control of the gensets is purely in the hands of the clients of the appellant, as the client is at his liberty to run or not to run the gensets hired by him for generation of electricity. In any case, he is liable to pay the hire or lease rent. The CBEC vide Circular No. 198/08/2016-SERVICE TAX, Dated August 17, 2016 has provided that in order to distinguish such transactions as sale of goods or supply of services, it is essential to determine whether, in terms of the contract, there is a transfer of the right to use the goods - admittedly the appellant had duly discharged his liability under the VAT/Sales Tax law as per the VAT/ CST returns submitted in the paper book before this Court, and also it is an admitted fact in the order in original. Therefore, there remains no liability on the part of the appellant under the Service Tax law. Extended period of limitation - HELD THAT - It being an issue of interpretation and no case of concealment found, etc. is made out, accordingly, it is held that extended period of limitation is not available. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the supply of mobile gensets by the appellant falls under the definition of 'deemed sale' in terms of the Article 366 (29A) of the Constitution of India, read with the Sales Tax Law.

Analysis:
The appellant was engaged in supplying generator sets on a rental basis to clients in two ways: fixed gensets and mobile gensets. The Ld. Commissioner held that supply of fixed gensets qualified as 'deemed sale' and was not liable for service tax, while mobile gensets were considered under the category of 'Supply of Tangible Goods Service' and were subject to service tax. The appellant contended that the mobile gensets also constituted 'deemed sale' under Article 366 (29A) and thus should not attract service tax.

The legal framework regarding the taxation of tangible goods and services was discussed. The Ld. SDR supported the service tax demand, while the appellant argued that the activity of supplying mobile gensets constituted 'deemed sale' and should not attract service tax. The appellant cited precedents and legal provisions to support their argument, emphasizing the distinction between VAT and service tax.

The issue at hand was whether the supply of mobile gensets constituted a service or a sale under the relevant legal provisions. The Constitution of India's Article 366 (29A)(d) defines 'deemed sale' as the transfer of the right to use goods for consideration. The Tribunal analyzed the nature of the supply of mobile gensets by the appellant and concluded that the clients had effective control and possession of the gensets during the rental period, meeting the criteria of 'deemed sale' as per legal precedents.

The Tribunal referred to the Apex Court's judgment in Bharat Sanchar Nigam Ltd. case, outlining the criteria for a transaction to be considered a transfer of the right to use goods. It found that all criteria were met in favor of the appellant, indicating that the clients had the legal right to use the gensets to the exclusion of the appellant. The Tribunal also considered a relevant CBEC circular and the appellant's compliance with VAT laws, concluding that the supply of mobile gensets should be treated as a sale of goods, not a taxable service.

In light of the analysis and findings, the Tribunal allowed the appeal, setting aside the Ld. Commissioner's order. It ruled that the appellant was not liable for service tax on the supply of mobile gensets and was entitled to consequential relief. The Tribunal also determined that the extended period of limitation was not applicable in this case due to the interpretational nature of the issue and absence of concealment.