2017 (11) TMI 979 - AT - Service Tax

Cargo Handling service - supply of coal handling machine (JCB) to M/s Chhattisgarh Power & Coal Benefication Ltd. (CPCBL), Bilaspur - Held that - the respondent is supplying machinery (JCB) for the client in which absolute possession over the machinery is with the client. Supplying operator does not in any way dilute such absolute possession - The statutory definition in terms of Section 65 (105) (zzzzj) of the Finance Act, 1994 is very clear to the effect that for tax liability for the supply of tangible goods should be without transferring right of possession and effective control of such machinery - the exclusion in the tax entry will operate - appeal dismissed - decided against Revenue.

Summary

Issues:
Interpretation of service tax liability under Cargo Handling Service and supply of tangible goods service for the supply of coal handling machine (JCB) to a client.

Analysis:
The Revenue appealed against the order of the Commissioner (Appeals) regarding the service tax liability for supplying a coal handling machine to a client. The Revenue contended that the activity should be liable to service tax under Cargo Handling Service and later under "supply of tangible goods service." The Original Authority had confirmed the service tax demand under the category of supply of tangible goods service. However, the Commissioner (Appeals) set aside this demand, deeming the supply of equipment with the transfer of effective control as a sale under Article 366 (29A) of the Constitution.

The Revenue argued that the respondent retained control over the equipment by providing qualified personnel to operate the machinery. On the other hand, the respondent's consultant pointed out that as per the agreement, absolute possession of the machine was provided to the client, and supplying an operator did not affect this possession. The consultant supported the findings of the impugned order.

Upon hearing both sides and examining the appeal records, the Tribunal found that the respondent supplied the machinery (JCB) to the client with absolute possession over the machinery resting with the client. The provision of an operator did not diminish this absolute possession. Moreover, the respondent had treated the transaction as a deemed sale for VAT purposes as per the agreement. Referring to the statutory definition in Section 65 (105) (zzzzj) of the Finance Act, 1994, the Tribunal noted that the tax liability for the supply of tangible goods should be without transferring the right of possession and effective control of the machinery. In this case, the exclusion in the tax entry applied, leading to the dismissal of the Revenue's appeal.

Therefore, the Tribunal concluded that there was no merit in the Revenue's appeal, and accordingly, the appeal was dismissed.