2024 (2) TMI 199 - AT - Service Tax

Recovery of Service tax alongwith interest and penalties - Supply of Tangible Goods - appellant had provided the excavators JCB machines without transferring right of possession effective control on the same, to their service recipients for which they received the monthly hiring charges - HELD THAT - In case of PETRONET LNG LTD VERSUS COMMISSIONER OF SERVICE TAX 2013 (11) TMI 1011 - CESTAT NEW DELHI , Delhi Bench held Since we have concluded that the transactions in issue, covered by the long-term charter agreements and the short-term charter agreement in respect of the tankers - Disha ; Raahi ; and Trinity Glory amount to transfer of the right of use with possession and effective control, by owners in favour of the assessee; that the transactions are therefore covered by the exclusionary clause of Section 65(105)(zzzzj); that the long-term charter agreements (in respect of - Disha ; and Raahi ) were entered into prior to 15-5-2008; and the tankers were also delivered to the assessee prior to introduction of the new taxable service STGU ; the taxable event of supply of tangible goods for uses has taken place prior to introduction of the taxable service; and that though hire charges for the actual use were remitted subsequently and periodically, no Service Tax is leviable. In the case of M/S. GIMMCO LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, NAGPUR (VICE-VERSA) 2016 (12) TMI 394 - CESTAT MUMBAI Mumbai bench has held the transaction involved was a transfer of right to use Transit Mixers and not transport service and the petitioners had transferred the right to use goods to Grasim. If we apply the ratio of the above decision to the facts of the present case, the transaction involved herein is transfer of right to use which is a deemed sale and not supply of tangible goods for use service. Allahabad bench has in the case of M/S EXPRESS ENGINEERS SPARES PVT. LTD. VERSUS COMMISSIONER, CENTRAL GOODS SERVICE TAX, GHAZIABAD AND SH. NARESH KUMAR GUPTA (DIRECTOR) VERSUS COMMISSIONER, CENTRAL TAX, GST CENTRAL EXCISE, MEERUT 2022 (1) TMI 564 - CESTAT ALLAHABAD held he finding in the impugned order that since the appellant was responsible for the maintenance and repair of the diesel generator sets, the appellant has retained effective control, cannot also be sustained because once the control and possession of the diesel generator sets was transferred to the customers, mere maintenance or repair work will not change the nature of the transaction. Since it is found that the facts of the case in hand, as noted in the impugned order, are identical to the above referred decisions, the issue stands settled by these decisions in favour of the appellant. As the issue is decided on the merits of case itself in favour of the appellant, it is nor necessary to consider the issue on limitation. As the demand of service tax cannot be sustained so the demand of interest and penalties imposed also need to be set aside. Appeal allowed.

Summary

Issues Involved:
1. Demand of Service Tax
2. Penalty under Section 77(1)(a)
3. Penalty under Section 78
4. Applicability of Extended Period of Limitation

Summary:

1. Demand of Service Tax:
The appellant, registered for "Mining service" under Section 65(105)(zzzy) of the Finance Act, 1994, also provided "Supply of Tangible Goods Service" under Section 65(105)(zzzzj) without registration and without paying service tax of Rs. 8,36,086/- for the period 2008-09 to 2010-11. The Commissioner (Appeals) upheld the demand for service tax along with interest and reduced the penalty under Section 77(1)(a) to Rs. 10,000/-. The appellant argued that they provided equipment with operators under the recipient's control, thus falling outside the scope of "Supply of Tangible Goods Service." The tribunal found that the appellant had provided the excavators and JCB machines without transferring the right of possession and effective control, thus falling within the scope of taxable service under Section 65(105)(zzzzj).

2. Penalty under Section 77(1)(a):
The original order imposed a penalty of Rs. 2,44,000/- under Section 77(1)(a) for not obtaining registration. The Commissioner (Appeals) reduced this penalty to Rs. 10,000/-. The tribunal did not find it necessary to address this issue separately as the demand of service tax itself was not sustained.

3. Penalty under Section 78:
The original order imposed a penalty equal to the service tax amount (Rs. 8,36,086/-) under Section 78 for suppression of facts with intent to evade payment of service tax. The tribunal, citing various case laws, found that the appellant's service did not fall under "Supply of Tangible Goods Service" and thus, the demand of service tax, interest, and penalties were not sustainable.

4. Applicability of Extended Period of Limitation:
The show cause notice was issued invoking the extended period of limitation. The appellant argued that the extended period was not applicable based on several judicial precedents. The tribunal, deciding the case on merits in favor of the appellant, did not find it necessary to consider the issue of limitation.

Conclusion:
The tribunal allowed the appeal, setting aside the demand of service tax, interest, and penalties imposed. The decision was pronounced in open court on 31 January 2024.