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TMI Blog2013 (7) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 10-9-2012 dismissed the writ petition and directed the appellant to avail the appellate remedy provided for in the law within a period of one month. Accordingly the appellant has filed the present appeal within the time stipulated in the said order of the Hon'ble High Court. 2. The appellant is inter alia engaged in renting of earthmoving equipment such as Caterpillar, Excavators, etc to various customers. The appellant did not discharge any service tax liability on the said activity. The department was of the view that the activity of renting of earthmoving equipment would come under the purview of service tax under the purview of service tax under the taxable service category of "business auxiliary service" for the period pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " and the appellant is in fact discharging VAT liability accordingly. The transaction involved is one of "deemed sales" and therefore, service tax can not be levied on the same transaction under the category of "supply of tangible goods for use". (b) At the time of introduction of service tax levy on "supply of tangible goods for use", the hon'ble Finance Minister, in para 156 of the Budget Speech for the year 2008-09 had clearly stated that the levy would fall on "right to use goods, in case where VAT is leviable". In the Budget instructions vide Circular MF (DR) 224/1/2008-TRU dated 29-2-2008, it was clarified that "supply of tangible goods for use and leviable to VAT/sales tax as deemed sale of goods, is not covered under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red into with one of their customers M/s Avtar & Company. (ii) As per clause 8 of the said agreement, the appellant provides one skilled operator for the operation of the equipment at site. The said operator is under the control of the appellant as the hirer cannot make any payment to the skilled operator without the written consent of the appellant other than for food or travel expenses. (iii) As per clause 10 of the agreement, routine maintenance and repairs of the equipment will be carried out by appellant's personnel only and the hirer cannot even issue any spare parts/lubricants/consumables without the written consent of the appellant. The hirer of the equipment has to spare the equipment for routine mainten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y considered the submissions made by both the sides. 5.1 Section 65(105) (zzzzj) defines the taxable service in respect of 'supply of tangible goods for use as follows:- "Taxable service" means any service provided or to be provided to any person, by any other person in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances." While the appellant contends that when they have transferred is right to use which is a deemed sale, the revenue's contention is that the right of possession and effective control remained with the appellant and hence, the transaction has to be treated as servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for misuse/abuse, sage custody/security, liability to settle disputes with third parties in relation to use etc. Further cl. 4.3 of the agreement provides for charging of VAT at 12.5% on the monthly invoice value which shall be payable by the hirer. These terms and conditions stipulated in the agreement, in our view, lead to the conclusion that the transaction envisaged in the agreement is one of "transfer of right to use" which is a deemed sale under section 2(24) of the Maharashtra value Added Tax, 2002. The Finance Minister's speech and the budget instructions issued by the CBEC also clarify that if VAT is payable on the transaction, then service tax levy is not attracted. 5.3 A similar issue arose for consideration before the hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the right to use goods, delivery of goods is not condition precedent, but the delivery may be one of the elements of the transaction; (4) the effective or general control does not mean always physical control and even if the manner, method, modalities and the time of the use goods is decided by the lessee or the customer, it would be under the effective or general control over the goods; (5) the approvals, concessions, licences and permits in relation to goods would also be available to user of the goods, even if such licences or permits are in the name of owner(transferor) of the goods; and (6) during the period of contract exclusive right to use goods along with permits, licences, etc., vests ..... X X X X Extracts X X X X X X X X Extracts X X X X
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