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2024 (12) TMI 531 - AT - Service TaxClassification of service - service of supply of tangible goods or not - giving a Gas Engine on rent basis to Gujarat Insecticides Ltd - HELD THAT - The appellant have given Gas Engine on rent to M/s. Gujarat Insecticides Ltd under an MOU dated 04.01.2011. It is the submission of the appellant that they have transferred effective control and right to possession to M/s.Gujarat Insecticides Ltd., they have also paid the VAT on the said rental amount. Therefore, the transaction is of deemed sale. On the basis of the aforesaid undisputed fact, since, the appellant have discharged the VAT on such transaction, it is deemed sale in terms of Article 366 (29A) of Constitution of India. From the definition of input service which is effective from 01.07.2012 as per clause (ii) of Clause (a) of sub section (44) of Section 65B of the Finance Act, 1994 the deemed sale within the meaning of Clause (29A) of Article 366 of the Constitution is excluded from the definition of the service that means it is in the negative list. Accordingly, the same is not liable to service tax. The impugned order is set aside - appeal allowed.
Issues:
Whether the appellant provided a service of 'supply of tangible goods' by renting a Gas Engine to a company under an MOU. Whether the transaction qualifies as a deemed sale and is exempt from service tax. Interpretation of the definition of 'input service' under Section 65B (44) of the Finance Act, 1994. Analysis: The case revolved around the appellant providing a Gas Engine on rent basis to a company under an MOU and whether this constituted a service of 'supply of tangible goods.' The appellant argued that since they transferred effective control and right to possession to the company and paid VAT, the transaction should be considered a deemed sale, making it exempt from service tax. The tribunal noted that the appellant had indeed given the Gas Engine on rent and transferred control to the company, paying VAT on the rental amount. As per the Constitution of India, if a transaction is deemed a sale, it falls outside the definition of 'service' for the purpose of service tax liability. The tribunal considered the definition of 'input service' under Section 65B (44) of the Finance Act, 1994, which excludes deemed sales from the ambit of taxable services. The tribunal concluded that post-01.07.2012, the legal position regarding the supply of tangible goods for use clarified that renting a Gas Engine, on which VAT was paid and deemed a sale, was not liable to service tax. The judgments cited by the appellant were considered, but the tribunal emphasized the legal clarity post-2012 regarding the taxability of such transactions. The tribunal, after considering the submissions and records, found that the appellant's transaction of renting the Gas Engine constituted a deemed sale as per the Constitution of India. The tribunal highlighted that since the appellant had discharged VAT on the transaction and the transaction fell under the definition of a deemed sale, it was not liable for service tax. The tribunal referred to the effective date of the definition of 'input service' and the exclusion of deemed sales from the definition post-2012. Consequently, the tribunal set aside the impugned order and allowed the appeal in favor of the appellant. The decision was pronounced in open court on 03.12.2024.
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