2022 (11) TMI 291 - AT - Service Tax

Classification of services - Supply of tangible goods service - equipment namely drill pipes to M/s Cairn Energy India Private Limited, Gurgaon on rental basis - right of possession and control of equipment was with the appellant - HELD THAT - The appellant is inter-alia engaged in supply of tangible goods service. The appellant has stated that whenever they are providing any equipment along with expert manpower they are paying service tax as can be seen from various invoices raised by them. He pointed out in some such invoices when drill pipes are supplied along with other equipment to be handled by their own personnel then the rent of drill pipes is also included in the assessable value in supply of tangible good service. He pointed out that in the case of supply being made to M/s Cairn Energy no expert manpower was sent along with pipes and it was merely a supply of pipes to M/s Cairn Energy India Private Limited, Gurgaon. The said pipes were used independently by M/s Cairn Energy India Private Limited, Gurgaon and rent was to be calculated on the basis of actual usage of goods in terms of the service order dated 13.08.2009. Merely because a record of actual use of goods is kept it does not amounts to having effective control and possession of the goods. It is also asserted by the appellant that they have paid VAT on the said transaction - the argument of Revenue that in absence of any manpower of appellant at the site where such drill pipes were sent, how effective control and possession could be exercised cannot be accepted. There are no merit in the argument of the Revenue - appeal allowed.

Summary

Issues:
Appeal against demand of service tax, interest, and penalty for supply of tangible goods services.

Analysis:
The appeal was filed by M/s John Energy challenging the demand of service tax, interest, and penalty related to the supply of tangible goods services, specifically drill pipes to M/s Cairn Energy India Private Limited on a rental basis. During an audit, an objection was raised regarding the possession and control of the equipment supplied by M/s John Energy. The appellant argued that the possession and control of the drill pipes were transferred to M/s Cairn Energy India Private Limited when supplied on a rental basis, emphasizing that no expert personnel were sent to operate the equipment. The appellant contended that the mere generation of a Service Entry Sheet (SES) by the user department did not establish possession and control of the goods, especially considering that drill pipes do not require specialized handling like other equipment types.

The appellant highlighted that invoices for equipment supplied along with expert manpower included service tax, whereas in this case, where no expert personnel were provided, the rental charges were based on actual usage by M/s Cairn Energy India Private Limited. The tribunal noted that maintaining a record of actual usage did not equate to effective control and possession of the goods. Additionally, the appellant had paid VAT on the transaction, further supporting their argument that possession and control were not with them due to the absence of their personnel at the site where the drill pipes were used.

The tribunal found no merit in the Revenue's argument, setting aside the demand and allowing the appeal in favor of M/s John Energy. The decision was pronounced in open court on 01.11.2022 by the tribunal members, Mr. Ramesh Nair and Mr. Raju.