2019 (2) TMI 311 - AT - Service Tax

Nature of Activity - sale or service? - leasing of generator - service of supply of tangible goods - Central Board of Excise and Customs through Circular No.334/1/2008-TRU, dated 29.02.2008 - Held that - On verification of record and particularly the certificate issued by Chartered Accountant giving details of the registration obtained by the appellant for payment of VAT in respect of right to use of DG sets, it is found that appellants were not covered by the definition of service of supply of tangible goods as clarified by CBEC - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of service tax liability for supply of tangible goods.
2. Applicability of Circular No. 334/1/2008-TRU issued by the Central Board of Excise and Customs.
3. Consideration of VAT payment in determining service tax liability.

Interpretation of service tax liability for supply of tangible goods:
The appeal was directed against an Order-in-Appeal passed by the Commissioner (Appeals) concerning the service tax liability of the appellants for providing services related to the supply of tangible goods, specifically leasing generators. The Revenue issued a show cause notice demanding service tax based on the financial records of the appellants from 2008-09 to 2011-12. The Commissioner (Appeals) confirmed the demand of service tax along with interest and equal penalty, except for the penalty under Section 77 and Section 70 of the Finance Act, 1994, which was set aside. The appellants contested the show cause notice, leading to the appeal before the Tribunal.

Applicability of Circular No. 334/1/2008-TRU:
The learned Consultant representing the appellant referred to Circular No. 334/1/2008-TRU issued by the Central Board of Excise and Customs. The Circular clarified that transactions where goods are supplied for use without legal right of possession or effective control, requiring payment of VAT or Sales Tax, are not covered by the service of supply of tangible goods. The Consultant highlighted that the fact of VAT liability was brought to the attention of the Lower Authorities, but they did not acknowledge it. Additionally, a Certificate issued by a Chartered Accountant confirmed the registration of the appellants with the State VAT Department for the supply of DG sets, indicating VAT payment obligations on the transactions.

Consideration of VAT payment in determining service tax liability:
After hearing submissions from both parties and examining the record, including the certificate from the Chartered Accountant regarding VAT registration for the supply of DG sets, the Tribunal found that the appellants were not within the definition of service of supply of tangible goods as clarified by the CBEC. Consequently, the Tribunal set aside the impugned order and allowed the appeal, emphasizing the significance of VAT payment in determining the service tax liability for the supply of tangible goods.

This comprehensive analysis of the judgment addresses the issues involved in the case, focusing on the interpretation of service tax liability, the relevance of Circular No. 334/1/2008-TRU, and the consideration of VAT payment in determining the appellants' service tax obligations for the supply of tangible goods.