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TMI Blog2024 (2) TMI 671X X X X Extracts X X X X X X X X Extracts X X X X ..... in the definition of Supply of Tangible Goods . After 01.07.2012, changes have been effected in the service tax law and all services falling under declared service (66B) is subject to levy of service tax. Section 66E of the Finance Act, 1994 deals with the concept of declared services. Clause (f) to Section 66E states that transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer or right to use such goods is a declared service. It means a lease agreement which does not have the character of transfer of right to use goods is taxable service - In the present case, the possession of the aircraft is transferred to the appellant who has taken delivery of the same. So also, the air craft is operated by the crew employed by the appellant. Appellant has to undertake maintenance and repair of the air craft and has to take insurance for the risk of loss etc. These would go to show that the effective control over such goods is also transferred to the appellant. The demand cannot sustain and requires to be set aside - Appeal allowed. - MS. SULEKHA BEEVI C.S., MEMBER (JUDICIAL) AND MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) Mr. S. Durai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services has been discarded. With effect from 01.07.2012, as per Section 65B (44) a definition was introduced for service . Further, w.e.f 01.07.2012, the transactions of nature of transfer of goods by way of leasing without transfer of right to use goods is a declared service under Section 66E(f). However, in the show cause notice, the provisions pertaining to the negative list regime (after 01.07.2012) has not been invoked at all. Both the show cause notice and impugned order has not considered the provisions of Section 65B (44) read with Section 66E (f). It is also argued by the learned counsel that show cause notice is deficient with regard to details of the allegations as to how the demand has been raised. In cases of lease, where the transaction is in the nature of right to use goods it is a deemed sale and levy of service tax is excluded. The Hon ble Apex Court in the case of Bharat Sanchar Nigam Ltd. (BSNL) Vs Union of India 2006 (2) STR 161 (SC) has laid down certain factors to determine whether a transaction involves transfer of right to use goods. This was affirmed by the Board as per clarification circular No.198/8/2016-ST dt. 17.08.2016. These factors have not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reflected in their audited financial statements. The issue is purely interpretational in nature which has been decided in favour of the assessee in many cases. Therefore, the penalties cannot be imposed and extended period cannot be invoked. 6. The Ld. A.R Sri M. Ambe appeared for the Department and supported the findings in the impugned order. It is submitted by the Ld A.R that there is only temporary use of the air craft by appellant and is also paying monthly rentals. Merely because the crew was not supplied along with air craft, it cannot be said that the transaction does not fall within the ambit of Supply of Tangible Goods Service . Ld. A.R prayed that the appeal may be dismissed. 7. Heard both sides. 8. The issue is whether the appellant is liable to pay service tax under Supply of Tangible Goods Service for the period May 2008 to January 2013. For better appreciation, the definition of Supply of Tangible Goods Service under Section 65 (105) (zzzzj) as it stood prior to 01.07.2012 is reproduced as under : taxable event is providing service to any person, by any other person in relation to supply of tangible goods including machinery, equipment and applianc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircraft is registered in India shall be as per the guidelines issued under Aircraft Rules, 1937 or by the DGCA. 10. From the agreement, it is seen that it is a dry lease agreement and the crew is not supplied along with the air craft. The aircraft is delivered to appellant and is in the lawful possession of appellant. The entire staff / crew of the air craft is employed by the appellant and the air craft is also operated as per the registrations and licenses applied and issued to the appellant. It cannot be then said that the possession and effective control is not transferred to the appellant. Thus for the period prior to 01.07.2012, the transaction does not fall within the definition of Supply of Tangible Goods . After 01.07.2012, changes have been effected in the service tax law and all services falling under declared service (66B) is subject to levy of service tax. Under sub-section (44) of Section 65B an activity which constitutes merely (i) a transfer of the title in goods or immovable property, by way of sale, gift or any other manner or such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of Article 36 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actors to test whether a transaction is a pure lease or a lease in the nature of right to use of goods (deemed sale). The Board vide circular dated 17.08.2016 has issued instructions adopting the same. Relevant part of Board circular reads as under : 2. The matter has been examined. I am directed to draw your attention to the fact that in any given case involving hiring, leasing or licensing of goods, it is essential to determine whether, in terms of the contract, there is a transfer of the right to use the goods. Further, the Supreme Court in the case of Bharat Sanchar Nigam Limited v. Union of India, reported in 2006 (2) S.T.R. 161 (S.C.), had laid down the following criteria to determine whether a transaction involves transfer of the right to use goods, namely, - a. There must be goods available for delivery; b. There must be a consensus ad idem as to the identity of the goods; c. The transferee should have a legal right to use the goods - consequently all legal consequences of such use, including any permissions or licenses required therefor should be available to the transferee; d. For the period during which the transferee has such legal right, it has to be to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the ingredients of Supply of Tangible Goods Service requiring exigibility to service tax by the Finance Act, 1994 are not present in this transaction. In consequence, the monetary consideration paid by the appellants to EAT cannot be considered as value of Supply of Tangible Goods Service and tax demanded on the same as has been done in the impugned orders. 14. In the above case, the period prior and after 01.07.2012 has been considered. Similarly, in the case of Heligo Charters Pvt. Ltd. (supra) the Tribunal had occasion to consider the demand of service tax on lease agreement of helicopter. In the said case, the assessee was responsible for maintenance of the helicopter as per the DGCA regulations by qualified engineers so as to keep the helicopters always in airworthy conditions and also engage experienced and licensed air crew for operating the helicopters. The department was of the view that legal right of possession and effective control over the helicopters during the lease period was not with the assessee. The demand was under BSS. Department was of the view that since helicopters are infrastructure for the assessee s business, the demand was made under Business S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 and, hence, outside the purview of Service Tax. According to the Department, from the 'lease agreements', it is evident that this not a mere case of transfer of right to use, as the helicopters construe infrastructure of the Appellants area of business/commerce and, hence, the foreign lessors by supplying this infrastructure to the Appellant, have provided infrastructure support service to the Appellant, which is taxable as support services of business or commerce under Section 65 (105) (zzzq) read with sections 65(104c) of the Finance Act, 1994 during period prior to 1.7.2012 and as taxable service not covered by negative list during period w.e.f. 1.7.2012. It is on this basis, that the Commissioner, in the impugned order, has confirmed service tax demands totaling ₹ 18,84,25,686/- against the Appellant under Section 73(1) of the Act along with interest on it under Section 75 of the Act and imposed penalties totaling ₹ 6,34,01,884 (Rs.4,94,65,906/- + ₹ 1,38,95,978/- + ₹ 40,000/-) under Section 76/78 and 77 of the Act. The Appellants contention, on the other hand, is that since leasing of helicopters from the two overseas lessors involves transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear expenses for provisions, insurance of the vessel, cost of licenses, maintenance repair and overhead cost, dry docking cost etc. (iv) The owners were to obtain and maintain marine and war risk insurance for the vessels with the Appellants name co-assured. (v) Master and the crew operating the vessels were required to work under direct control and instructions of the Appellant and the Appellant was authorized to issue directions to the Master for transportation of LNG to any part of the World. (vi) The Appellant would exercise control over the vessel through the Master, other officers and the crew. The Master shall follow the orders and directions issued by the Appellant for the purpose of filing bills of lading by signing the same. (vii) The Appellant would control the Vessels by issuing appropriate instructions and sailing directions to the Master and the Master is required to maintain a log of the voyage which the Appellant and their agent may inspect as and when required. The main point of dispute in this case was whether the Appellants time charter agreements with the consortium of owners with the above mentioned terms and conditions, represented supp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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