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2021 (2) TMI 1099 - HC - Service TaxLevy of Service Tax - supply of tangible goods - transfer of right to use or not - petitioner was providing material handling object, namely, cranes to Bharath Heavy Electricals Limited (BHEL), the sixth respondent herein, on transfer of right to use basis - Section 4 of the Tamil Nadu Value Added Tax Act, 2006 - HELD THAT - The petitioner has rendered service. It was supplying tangible goods, viz. 10T Mobile Cranes numbering 11/12 on daily rental basis. These material handling equipments were hired by the sixth respondent BHEL as per the agreement dated 07.12.2011. The terms of the agreement which has been extracted above indicate that the petitioner has not transferred the Mobile Cranes to the sixth respondent BHEL. On the other hand, the petitioner has provided its driver for operating the Cranes. It was under the supervision of the sixth respondent BHEL. The agreement further states that crew of the petitioner who worked during the first shift shall not be engaged in the second shift - Under the agreement, the petitioner was merely required to supply required number of cranes for the purpose of material handling and for the purpose of loading/unloading. The facts that the lifts will be operated by the drivers of the petitioner and that the crane will not be parked inside the 6th respondent BHEL premises after the stipulated working hours make its clear that it is the petitioner who was in effective control of these material handle equipments / cranes. Further, the agreement also indicates that trip register should be maintained by the petitioner's driver and that in case the loss of original trip register, the sixth respondent BHEL should not entertain the claim of the petitioner. In RASHTRIYA ISPAT NIGAM LTD. VERSUS COMMERCIAL TAX OFFICER, COMPANY CIRCLE, VISAKHAPATNAM 1989 (12) TMI 325 - ANDHRA PRADESH HIGH COURT , the the Andra Pradesh High Court came to a conclusion that the transfer of right to use goods necessarily involves delivery of possession by the transferor to the transferee and transfer to effective control. There is neither transfer of effective control nor transfer of possession over the material handling equipments / cranes in favour of the sixth respondent BHEL under the agreement - Petition allowed - decided in favor of petitioner.
Issues Involved:
1. Validity of the impugned orders dated 16.02.2015 by the Appellate Deputy Commissioner (CT), Vellore. 2. Determination of whether the petitioner’s service constitutes a "transfer of right to use" under Section 4 of the Tamil Nadu Value Added Tax Act, 2006. 3. Applicability of service tax under Section 65(105)(zzzzj) of the Finance Act, 1994 and Section 66(E)(f) of the Finance Act, 2012. Issue-wise Detailed Analysis: 1. Validity of the Impugned Orders: The petitioner challenged the common order dated 16.02.2015 by the Appellate Deputy Commissioner (CT), Vellore, which dismissed the petitioner’s appeals against the assessment orders for the years 2012-2013 and 2013-2014. The court examined whether the impugned orders were justified based on the facts and legal arguments presented. 2. Determination of "Transfer of Right to Use": The petitioner, an unregistered dealer under the Tamil Nadu Value Added Tax Act, 2006, provided cranes to BHEL on a rental basis. The primary contention was whether this arrangement constituted a "transfer of right to use" the cranes, thereby attracting tax under Section 4 of the Tamil Nadu Value Added Tax Act, 2006. The petitioner argued that the agreement with BHEL was a contract of service for the supply of tangible goods, not a transfer of right to use, as effective control over the cranes remained with the petitioner. The court considered various clauses from the agreement, highlighting that: - The cranes were operated by the petitioner’s drivers. - The cranes were not parked inside BHEL premises after working hours. - The petitioner maintained control over the cranes, including responsibilities like obtaining pollution certificates and maintaining trip registers. Citing the Supreme Court’s guidelines in Bharath Sanchar Nigam Limited vs. Union of India, the court noted that for a "transfer of right to use" to occur, there must be a transfer of effective control and possession. The court found that these conditions were not met, as the petitioner retained control over the cranes. 3. Applicability of Service Tax: The petitioner argued that the service provided fell under the definition of supply of tangible goods for use, as per Section 65(105)(zzzzj) of the Finance Act, 1994, and Section 66(E)(f) of the Finance Act, 2012, which would make it liable for service tax instead of VAT. The court noted that the fifth respondent, Commissioner of Service Tax, supported this view, reiterating that the petitioner was liable to pay service tax for the service rendered. Conclusion: The court concluded that there was no "transfer of right to use" the cranes as the petitioner retained effective control over them. Therefore, the demand for tax under Section 4 of the Tamil Nadu Value Added Tax Act, 2006, was not justified. The impugned orders by the Appellate Deputy Commissioner (CT), Vellore, were quashed, and the writ petitions were allowed with consequential relief. No costs were imposed.
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