2013 (6) TMI 541 - AT - Service Tax

Hiring of DG Sets - supply of tangible goods - liable to service tax or VAT - Held that - the possession or ownership of the Diesel Generator sets remains with the appellant and effective control of such machinery though may be with the service recipients, appellant s manpower controls the functioning of such Diesel Generator sets. We also find, in one of the agreements with ICICI Lombard, it is mentioned that appellant is being reimbursed for the diesel which has been used for running the Diesel Generator sets which also indicates that the appellant has an effective control over the machinery. At this juncture, we find that the appellant has not been able to make out a prima facie case for complete waiver of the amounts involved. - stay granted partly.

Summary

Issues involved:
1. Whether the appellant is liable to pay service tax on the supply of tangible goods services.
2. Whether the possession and effective control of the Diesel Generator sets lie with the appellant or the service recipients.
3. Whether the appellant has made out a prima facie case for a complete waiver of the amounts involved.

Analysis:
1. The appellant filed a stay petition seeking the waiver of pre-deposit of a confirmed Service Tax liability, interest, and penalties under the Finance Act, 1994. The adjudicating authority confirmed the demand under the category of supply of tangible goods services, alleging that the appellant had hired out DG Sets and provided tangible goods for their clients' use. The appellant argued that they had paid Sales Tax on the hiring of DG Sets, and the dominant nature of the transaction was the supply of DG sets, not their operation. They contended that the right of possession and effective control of the DG sets rested with the client, making it a sale under relevant tax laws. The departmental authority cited a previous order directing the appellant to deposit a portion of the duty liability, which was confirmed. The Tribunal noted that the possession of the ownership of DG sets remained with the appellant, even though effective control may be with the service recipients, and decided to consider all legal points at the time of final disposal.

2. The appellant supplied Diesel Generator sets to clients for uninterrupted power supply, and agreements were in place with recipients of the services. The Tribunal found that the taxable service under 'Supply of Tangible Goods' involved providing services related to tangible goods without transferring possession and effective control. It was observed that the possession and ownership of the DG sets remained with the appellant, and their manpower controlled the functioning of the sets, despite some control by service recipients. The appellant failed to establish a prima facie case for a complete waiver of the amounts involved due to the contentious nature of the issue. Therefore, the Tribunal directed the appellant to deposit a specified amount within a set period, subject to compliance, allowing a waiver of pre-deposit of the balance amount pending appeal disposal.

3. Considering a previous judgment in a similar case, the Tribunal held that the appellant had not made out a prima facie case for a complete waiver of the amounts involved. Therefore, they directed the appellant to deposit a specific sum within a defined period and report compliance. The application for waiver of pre-deposit of the balance amount was stayed pending the appeal's disposal. The Tribunal maintained consistency in its approach based on the facts presented and the legal arguments made by both parties.