9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (4) TMI 445 - AT - Service TaxLevy of service tax - Supply of Tangible Goods service - lease of plant by the Appellant to its customer - transfer of the right to use goods or not - effective control of the plant is not transferred by the Appellant to the customer given that the Appellant itself undertook the operation and maintenance of the plant - HELD THAT - The terms of the lease agreement clearly state that the goods are to be delivered by the Appellant to its customer and on a plain reading of the terms of the agreement consensus-ad-idem as to the identity of the plant is apparent. It is further noted that clause 6 clearly states that the lessee has the right to use the plant during the lease period and clause 7 states that the plant is in physical possession and control of the lessee thereby showing that the right of the customer to use the plant was at the exclusion of the Appellant. Further the Appellant has undertaken not to transfer the plant to another party during the lease period in clause 12. Therefore the terms of the lease agreement cumulatively satisfy the tests regarding transfer of right to use the goods as laid down by Hon ble Supreme Court in BSNL vs. Union of India 2006 (3) TMI 1 - SUPREME COURT . On examination of the terms of the Agreement we also find that the Operation and Maintenance agreement contains distinctive scope rights and liabilities and the rights and liabilities under the Lease Agreement remain separately and independently enforceable. The transfer of full possession and control of the plant to the customer vide the lease agreement is uninfluenced by the existence of the operation and maintenance agreement. Once the plant is in complete physical possession and control of the customer the provision of operation and maintenance services by the Appellant would not alter the nature of the transaction to make it a supply of tangible goods service and such transaction would remain to be a deemed sale . The demand of service tax of Rs.11, 12, 977/- along with interest could not have been raised by invoking of extended period of limitation. As the demands itself are being set aside penalty under Section 78 is also liable to be set aside. Conclusion - The lease of the plant is a deemed sale and not a supply of tangible goods service exempting it from Service Tax. The appeal filed by the Appellant is allowed on merits as well as on limitation.
1. ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment include:
2. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The legal framework involves the interpretation of Article 366(29A) of the Constitution, which defines 'tax on the sale or purchase of goods' to include the transfer of the right to use any goods. The Finance Act, 1994, particularly Sections 65(105)(zzzzj) and 66E(f), defines 'supply of tangible goods' service and declared services, respectively. The judgment heavily relies on the Supreme Court's decision in BSNL v. Union of India, which outlines the attributes of a 'transfer of the right to use' goods. Court's Interpretation and Reasoning The Tribunal analyzed the lease agreement and found that the terms clearly indicated a transfer of possession and control to the customer, satisfying the criteria for a 'transfer of right to use' as laid down in the BSNL case. The Tribunal emphasized that the operation and maintenance agreements were independent and did not affect the transfer of control. Key Evidence and Findings The lease agreement's clauses were pivotal, particularly those specifying the lessee's right to use the plant, the plant's location, and the lessee's control over the plant. The Tribunal noted that the lessee had exclusive possession and control, and the Appellant was barred from transferring the plant to another party during the lease period. Application of Law to Facts The Tribunal applied the legal principles from the BSNL case to the facts, concluding that the transaction was a 'deemed sale' due to the transfer of the right to use the plant. The Tribunal also referenced various judicial precedents supporting the notion that mere operation and maintenance do not alter the nature of the transaction. Treatment of Competing Arguments The Tribunal addressed the Department's argument that the transaction was a supply of tangible goods service by examining the lease agreement and distinguishing the operation and maintenance services. The Tribunal found the Department's interpretation flawed and unsupported by the agreement's terms. Conclusions The Tribunal concluded that the lease constituted a transfer of right to use the plant, thereby qualifying as a 'deemed sale' excluded from Service Tax. The Tribunal also held that VAT and Service Tax are mutually exclusive, and the payment of VAT precludes Service Tax liability. 3. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning The Tribunal cited the BSNL decision: "To constitute a transaction for the transfer of the right to use the goods, the transaction must have the following attributes:... The transferee should have a legal right to use the goods-consequently all legal consequences of such use including any permission or licenses required therefor should be available to the transferee;... For the period during which the transferee has such legal right, it has to be the exclusion of the transferor..." Core Principles Established The judgment reaffirms that a transaction involving the transfer of possession and control of goods qualifies as a 'transfer of right to use' and is thus a 'deemed sale' under Article 366(29A). It also establishes that the provision of operation and maintenance services does not negate the transfer of right to use. Final Determinations on Each Issue
|
