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2025 (3) TMI 1136 - AT - Service TaxLevy of service tax - lease agreements for fitouts constituted a deemed sale or service - renting of immovable property service or not - HELD THAT - The Commissioner examined all the relevant factors required be examined for determining whether a deemed sale had taken place or not in the light of the decision of the Supreme Court in Bharat Sanchar Nigam Ltd 2006 (3) TMI 1 - SUPREME COURT . The Commissioner noted that the goods were available for delivery and that the goods were also identifiable. The Commissioner also noted that the fitouts and equipments were leased out to TATA Consultancy Service and CMC Limited for the use and enjoyment to the exclusion of the right of ASF Buildcon. The Commissioner also noted that these fitments and equipments were essential to the use/occupation/ enjoyment of the leased premises. Conclusion - The lease agreement under consideration for fitouts would amount to a deemed sale contemplated under article 366(29A) of the Constitution and indeed ASF Buildcon had also paid VAT on this amount. Once a deemed sale took place the issue of dominant nature as raised by learned authorized representative appearing for the department would not arise and this fact has also been examined by the Commissioner in the impugned order. There is therefore no infirmity in the impugned order - The appeal filed by the department deserves to be dismissed and is dismissed.
ISSUES PRESENTED and CONSIDERED
The primary issue considered was whether the lease agreements for fitouts constituted a "deemed sale" under Article 366(29A) of the Constitution, thereby exempting the transaction from service tax under the Finance Act, 1994. The Tribunal examined whether the amounts received for leasing fitouts should be included in the value received for renting immovable property, thus attracting service tax. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The legal framework centered around Article 366(29A) of the Constitution, which defines "tax on the sale or purchase of goods" to include the transfer of the right to use goods. The Tribunal also referenced the Supreme Court's decision in Bharat Sanchar Nigam Limited, which outlined attributes for a transaction to qualify as a "transfer of right to use goods." Additionally, the Tribunal considered precedents from various cases, including Quick Heal Technologies Limited and G.S. Lamba & Sons, which clarified the concept of deemed sales and the transfer of the right to use goods. Court's Interpretation and Reasoning The Tribunal interpreted the lease agreements as constituting a transfer of the right to use goods, thus qualifying as a "deemed sale" under Article 366(29A). It emphasized that the agreements provided for separate invoicing for the lease of fitouts and the lease of immovable property, indicating distinct transactions. The Tribunal reasoned that since VAT was paid on the fitouts, the transaction was outside the purview of service tax. Key Evidence and Findings The Tribunal noted that the agreements included distinct provisions for the lease of fitouts, which were essential for the use and enjoyment of the leased premises. The fitouts were leased to TATA Consultancy Service and CMC Limited, with exclusive rights to use them, satisfying the conditions for a deemed sale. Application of Law to Facts The Tribunal applied the principles from Bharat Sanchar Nigam Limited, identifying that the fitouts were available for delivery, identifiable, and transferred for exclusive use, fulfilling the criteria for a transfer of the right to use goods. The Tribunal concluded that the transaction was a deemed sale, attracting VAT instead of service tax. Treatment of Competing Arguments The department argued that the dominant nature of the transaction should include the value of fitouts in the rental of immovable property. However, the Tribunal rejected this, emphasizing the separate agreements and the established legal principle that VAT and service tax are mutually exclusive. Conclusions The Tribunal concluded that the lease agreements for fitouts constituted a deemed sale, exempting them from service tax and affirming the Commissioner's order to drop the service tax demand. SIGNIFICANT HOLDINGS Core Principles Established The Tribunal reaffirmed that transactions involving the transfer of the right to use goods qualify as deemed sales under Article 366(29A), exempt from service tax if VAT is applicable. The decision emphasized the mutual exclusivity of VAT and service tax. Final Determinations on Each Issue The Tribunal upheld the Commissioner's decision, confirming that the lease of fitouts was a deemed sale, and dismissed the department's appeal. It concluded that the transaction was outside the scope of service tax under the Finance Act, 1994.
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