2018 (5) TMI 1420 - AT - Service Tax

Levy of Service tax - Supply of Tangible Goods Service - renting-out heavy duty cranes to various parties engaged in the construction of Delhi Metro - Held that - The facts of the present case reveal that the appellant has supplied machinery on hire along with the operators. The customer is free to make use of the equipment along with the operator for activities as per necessity - It is further evident from the record of the case that the appellant has also paid VAT/ST on the consideration received considering the same as deemed sale of goods. The levy of Service Tax on the transaction as well as levy of VAT considering the transaction as deemed sale will be mutually exclusive. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the consideration received by the appellant for renting out heavy-duty cranes is liable to Service Tax.
- Whether the activity falls under the category of "Supply of Tangible Goods Service."
- Whether the possession and control of the equipment were effectively transferred to the customers.
- Whether the case laws cited by the appellant support their argument.
- Whether the impugned order justifying the demand for Service Tax is valid.
- Whether the circulars and definitions provided by the CBEC are applicable to the case.
- Whether the appellant's payment of VAT/ST on the consideration received indicates a deemed sale of goods.
- Whether the decision in the case of Chhattisgarh Earthmovers is applicable to the present case.

Analysis:
The appeal in this case was against an Order-in-Original regarding the liability of Service Tax on the consideration received by the appellant for renting out heavy-duty cranes for construction activities. The department contended that the activity falls under the category of "Supply of Tangible Goods Service" under the Finance Act, 1994. The appellant argued that they transferred the right of possession and control of the equipment to the customers, making it a deemed sale of goods. The appellant also cited case laws supporting their position, emphasizing the transfer of possession and control to the users.

The Circular by the CBEC clarified the scope of levy of the Tangible Goods Service, emphasizing the transfer of possession and control for the levy of Service Tax. The appellant's payment of VAT/ST on the consideration received indicated a deemed sale of goods. The Tribunal referred to the case of Chhattisgarh Earthmovers, where it was observed that absolute possession over the machinery by the client, despite the operator supplied, does not dilute the transfer of possession and control. The Tribunal set aside the impugned order, following the decision in the Chhattisgarh Earthmovers case, and allowed the appeal with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing the transfer of possession and control of the equipment to the customers, which aligned with the definition of a deemed sale of goods. The decision was based on the interpretation of the relevant provisions and case laws, ultimately setting aside the demand for Service Tax.