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TMI Blog2024 (7) TMI 309X X X X Extracts X X X X X X X X Extracts X X X X ..... to use. To examine this issue, it would be appropriate to refer to the instructions issued by the Ministry of Finance at the time of introduction of service tax levy on STGU and the various terms and conditions of agreement entered into between the appellant and its clients. The labour employed in such manner is working directly under the control and supervision of their clients and performing the operation of the equipment as per the directions of their clients. The contractual obligations also provide that procurement and availability of fuel for operations of equipment was always rest with their clients. From the above nature of the transactions entered into by the appellants with their clients, prima facie, we find that the activities undertaken by the appellants is in the nature of supply of generating sets/ equipment on rental basis or lease basis, for a specified period as agreed upon by both the parties i.e., appellants and their clients. In undertaking such act, the appellants have also paid the applicable VAT/Sales Tax as per the local State laws. The factual matrix indicate that the generating set/equipment are used to provide the electrical power required for undertaki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amod Kumar Maurya, Authorized Representative for the Respondent ORDER These appeals have been filed by M/s Aggreko Energy Rental India Pvt. Ltd., Pune (herein after referred to as appellants for short) against Order-in-Original No. PUN-SVTAX-000-COM-023-024-16-17 dated 18.11.2016 and Order-in-Original No. PUN-EXCUS-001-COM-24/18-19 dated 27.12.2018 (herein after referred together as impugned orders ) passed by Commissioner, Service Tax, Pune and Commissioner of Central Excise GST, Pune-I, respectively. 2.1. Briefly stated, the facts of the case are that the appellants herein are inter alia, engaged in the business of import of D.G. Sets, temperature control and allied equipment and providing such equipment on lease/hire basis to their customers situated in India. These equipments were purchased by the appellants by importing it from their associated company situated in United Kingdom, and storing it in its various warehouses located across India and thereafter given on rental/lease basis to its customers as per their requirement. For the purpose of such activity of leasing of equipment, the appellants were registered with the jurisdictional authorities and were paying VAT/CST on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e services provided during October, 2019 to March, 2015 and during April, 2015 to June, 2017 are liable to service tax as STGU service. Accordingly, three show-cause notices dated 23.04.2015, 20.04.2016 and 18.04.2018 as per the Finance Act, 1994, were issued to the appellants as follows. The further details of its adjudication, confirmation of demand and appeal are given in the form of table as give below:- SCN reference Order-in-Original Appeal Ref. Period of dispute Service Tax demand confirmed in Order-in-Original (in Rs.) No.ST(Audit)/ST/02/1516 dated 23.04.2015 No. PUN-SVTAX-000-COM-023024-16-17 dated 18.11.2016 Appeal No. ST/85299/2017 01.10.2009 to 31.03.2014 30,71,81,864/- VGN(30)STC/Range- V/SCN-Aggreko/11/ 2015 dated 20.04.2016 April, 2014 to March, 2015 6,47,73,118/- No.06/P-I/COMMR/ 2018-19 dated 18.04.2018 PUN-EXCUS-001-COM-24/18-19 dated 27.12.2018 Appeal No. ST/86364/2019 April, 2015 to June, 2017 12,52,37,545/- 2.3 Learned Commissioner of Service Tax/Central Excise GST, Pune-I vide impugned orders dated 18.11.2016 and 27.12.2018 had confirmed the adjudged demands; besides he had imposed penalty on the appellants under Sections 76 and 78 of the Finance Act, 1994. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vities are independent services and in no manner influence the nature of hiring/leasing activity of the equipment undertaken by the appellants. 3.2 Learned Senior Advocate further submitted that in the present case, undisputedly the appellants have paid VAT as the transaction amounts to deemed sale and effective control and possession of equipment was transferred to their customers. Hence, VAT was rightly applied on these transactions and service tax cannot be imposed on such transactions. The provisions relating to transfer of right to use the goods is covered under the provisions of Section 2(24) of the Maharashtra Value Added Tax Act, 2002. In terms of the above statutory provisions, the activities carried out by the appellants as a dealer who is registered under this Act and where the goods are transferred by a person to other for their right to use to goods for a period, the same shall be liable for payment of VAT at the rates specified in the Schedules. The appellants fulfill the various guidelines prescribed by the Hon ble Supreme Court in BSNL case, viz., (i) there must be available for delivery; (ii) there must be a consensus ad idemas to the identity of the goods; (iii) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the negative list regime is aligned with the position of law as prevailing during the earlier periods and further justifies the stand of the appellants that the present transactions, being deemed sale under the provisions of clause (29A) of the Article 366 of the Constitution read with provisions of Maharashtra VAT Act shall not be treated as service. 3.5 In support of above views, he placed reliance on the following judgments: (i) Rashtriya Ispat Nigam Ltd. Vs. Commercial Tax Officer 1989 (12) TMI 325-Andhra Pradesh High Court (ii) State of Andhra Pradesh Vs. Rashtriya Ispat Nigam Ltd. 2013 (31) S.T.R.513(S.C.) (iii) G.S. Lamba Sons Vs. State of Andhra Pradesh 2015 (324) E.L.T. 316 (A.P.) (iv) UFO Moviez India Ltd. Vs. Commissioner of Service Tax-V, Mumbai 2018 (11) G.S.T.L. 391 (Tri. Mumbai) affirmed by Hon ble Supreme Court in Civil Appeal No.181 of 2022 (v) Bharat Sanchar Nigam Ltd. (BSNL) Vs. Union of India 2006 (2) S.T.R. 161 (S.C.) (vi) Quippo Energy Pvt. Ltd. Vs. Commissioner of Service Tax, Ahmedabad 2022 (12) T.M.I. 1440 CESTAT- AHMEDABAD (vii) Gujarat Powerfield Pvt. Ltd. Vs. Commissioner of Service Tax, Ahmedabad 2023 (9) T.M.I. 868 CESTAT- AHMEDABAD (viii) Subhash Lig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016 and 27.12.2018, the learned Commissioner had recorded his findings that the services provided by the appellants are covered under the category of services of Supply of Tangible Goods for Use (STGU). In identically worded findings in both the above referred orders, the learned adjudicating authority had concluded that the right to transfer the property in the generating set/equipment had not been transferred by the appellants to their clients. He also referred to the contractual arrangements in the present case and the ratio laid down by the Hon ble Supreme Court in the case of BSNL (supra) and Commissioner of Service Tax, Ahmedabad Vs. Adani Gas Ltd. 2020 (8) TMI 789 Supreme Court, for confirmation of the adjudged demands in both the above referred orders. The relevant paragraphs of the impugned orders, which are identical in wordings and paragraph numbers, are extracted and given below: 27/22.7. I further find that crucial factor to determine the transfer of right to use of goods is the point of signing of the contract. Transfer of right to use, transfer of custody and transfer of effective control and possession all are governed by the terms of a written contract. I rely on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he terms and conditions laid down under the agreement made between M/s Bharat Oman Refineries Ltd., and noticee is already reproduced in foregoing para. From these conditions it cannot be said that the noticee have given 'transfer of right to use the goods'. From the above mentioned legal position, clarification received from the Board, legal interpretation in the cases of similar nature and the factual position of the transactions made with their customers and terms and conditions mentioned in the contract, I find that the noticee cannot to be said to have transferred of the right to use the goods to their customers. Therefore, even though they are paying VAT on the transactions, the activity carried out by the noticee are squarely covered under the definition of taxable service prior and after 01-07-2012 being 'Supply of Tangible Goods' without transfer of the right to use of goods. I find that in the instant case only on the basis of transfer of custody and merely having transfer of license to use the goods the noticee is arguing that there is transfer of the right to use the goods which in my opinion is not sustainable as per terms of agreement and test laid dow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n; or (iii) a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (c)fees taken in any Court or tribunal established under any law for the time being in force Negative list of services. Section 66D: The negative list shall comprise of the following services, namely: (a) services by Government or a local authority excluding the following services to the extent they are not covered elsewhere .. Declared services. Section 66E : The following shall constitute declared services, namely: (a) renting of immovable property; (b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion certificate by the competent authority; xxx xxx xxx xxx (e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; (f) transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods; The Constitution of India Article 366 . In this Cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... une, 2017. In view of both the periods i.e. before the negative list regime prior to 01.07.2012 and after introduction of negative list regime w.e.f. 01.07.2012 are covered in these cases, we have carefully examined the relevant legal provisions that existed both the above relevant time period. We find that the key aspect to be considered for identifying whether a particular activity would be subject to levy of service tax or not, is the fact of supply of tangible goods or transfer of goods without transferring the right of possession or by way of hiring, leasing, licensing or any such manner without transfer of right to use such goods. 9.3 On analysis of the above legal provisions during the relevant period, we find that in order to fall within the definition of taxable service, following three conditions are required to be satisfied: (i) there should be a supply or transfer of goods for use; (ii) The transfer of goods must be by way of hire or lease or licences for using the goods; and (iii) The right of possession and effective control of such goods must not have been passed on to the transferee. Once all these aforesaid three conditions are satisfied, the provisions of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the proposed service. Whether a transaction involves transfer of possession and control is a question of facts and is to be decided based on the terms of the contract and other material facts. This could be ascertainable from the fact whether or not VAT is payable or paid. The above instructions clearly provide that such levy under STGU is only in respect of transactions of allowing another person to use the goods, without giving legal right of possession and effective control, by treating the same as service. The detailed explanatory notes brought out by the Finance Ministry, TRU at the time of introduction of the above levy under STGU makes it clear, that such levy on the newly proposed services is leviable subject to the same not being subjected to Sales tax/VAT. Hence, the exclusion specifically provided in the scope of levy of service tax on STGU squarely applies in the present case. 9.6 We also find that the above explanatory instructions have correctly reflected the Budget Speech of the Hon ble Union Finance Minister laying down the policy with respect to the introduction of levy of service on specified services including STGU, when he introduced the budget proposals be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clients, the appellants had provided erection, commissioning, installation at the site of the client and decommissioning at the end of the rental/lease period. For these services, the appellant had separately charged their clients and have also paid applicable service tax thereon. In terms of the contract, the equipment supplied on rental/lease basis is to be insured by their clients. As this equipment are for use at the site of the clients, the approval of the State Electricity authorities for obtaining their permission in the name of the client, was obtained by the client themselves. The appellants have only facilitated obtaining the said approval as the said permission is being issued in the name of their customers and not in the name of the appellants. We also find that the generating sets could be operated by the clients themselves, but wherever the clients required to provide assistance in supplying of such operators, the appellants have hired such labour from the external manpower supply agency. The labour employed in such manner is working directly under the control and supervision of their clients and performing the operation of the equipment as per the directions of thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below: AGREEMENT THIS AGREEMENT No.: BRP/O M/59 13832 C001 AS is made on this day of 5th, October 2010 between BHARAT OMAN REFINERIES LIMITED, incorporated In India registered under Companies Act 1956 having Its registered office at 'A' Block, Office Complex, Gautam Nagar, BHOPAL 462023 (Madhya Pradesh) and Refinery at Bina, Dist. Sagar (Madhya Pradesh) (hereinafter referred to as the Owner which expression, unless the context requires otherwise, shall include its successors and permitted assignees) First Party, and AGGREKO ENERGY RENTAL INDIA PVT LIMITED, a company Incorporated In India and registered under Companies Act 1956, having its registered office at 404 Lunkad Skystation, Viman Nagar, Pune 411 014 India (hereinafter referred to as the Contractor , which expression, unless the context requires otherwise, shall Include its successors and permitted assignees) Second Party: WHEREAS A. The Owner requires the services of temporary generators plus ancillary equipments to be installed, commissioned, operated and maintained at the BORL Refinery Sites as defined below. B. The Contractor is engaged in the business of providing such equipment and services on hire basis and ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edule 1 Schedule of Rates. However the Onward Transport Charges and Return Transport Charges for the Temporary Boiler Plant will be charged at actuals and reflected in the total Freight Charges accordingly. xxx xxx xxx xxx 3.5 The Contractor shall submit to the Owner an Invoice detailing the amounts payable to the Contractor hereunder. The Owner shall pay each invoice submitted by the Contractor: 3.5.1 In respect of Hire Charges and O M Charges; within 15 days of the date of the Invoice; and 3.5.2 In respect of Onward Transport and Mobilization Charges prior to mobilization of the Plant and immediately upon receipt by the Owner of the respective Invoices and Bank Guarantee. If call off option is exercised by the owner then the Mobilization and Onward Transport Charges will be adjusted accordingly; and 3.5.3 Installation charges upon commissioning of Phase 1A; and 3.5.4 Demobilization Charges shall be paid 4 weeks prior to the end of the contract; and on receipt of Bank Guarantee for the equivalent amount by the Owner. and 3.5.5 Return Transport Charges shall be paid upon receipt by the Owner of Bill of Laden for the equipment from the Contractor in full and in cleared funds to a ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation or any other enforcement procedure applicable under local law and to inform the Contractor of any threatened attachment, confiscation or any other enforcement procedure without delay, 7.10.4 not to repair, improve, move, interfere with, deface, or otherwise Interact or attempt to interact with the Plant, without the express written consent of the Contractor. xxx xxx xxx xxx 9. TRANSPORTATION 9.1 the Contractor shall be responsible for transporting the Plant and the Contractor's personnel from the Contractor's nominated depot to the Site and following termination of the Contract for transporting the Plant from the Site to the Contractor's nominated depot. 9.2 On both the onward (to the Site) and return (from the Site) journeys the Contractor shall be responsible for all handling, loading and unloading of the equipment and all costs thereof, Including the cost of craneage and Inland transport for all spare parts, consumables and other materials required for maintenance of the Plant throughout the service period. xxx xxx xxx xxx 13. FUEL 13.1 The owner shall be responsible for the supply of Fuel and water to the Plant in accordance with the Fuel Specifications and f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the statutory authority / state licensing authority shall be under bidder's scope. However, BORL would facilitate necessary supports for obtaining the NOC's / clearances. 3. Supply of Plant xxx xxx xxx xxx 4. Logistics Transport xxx xxx 7. Pre Dispatch Inspection xxx xxx 8. Insurance Coverage xxx xxx 9. Permits / Visas / Tickets: xxx xxx 10. Site Preparation / Site Works xxx xxx 11. Erection Dismantling Of Plant xxx xxx 12. Installation of Equipment 13. HV cabling between the Contractor s switchgear and BORL s connection points 14. Fuel oil piping between BORL s tee off point to the Contractor s Temporary Power plaints 15. All reports of successful commissioning of equipment shall be provided to BORL to facilitate the contractor the contractor for obtaining for obtaining onsite start up clearance. 16. Commissioning of Equipment 17. Disposal of Waste 18. Project Planning Management 19. Demobilization 20. Site Supervision 21. Operation and Maintenance 22. Personnel Provision of unskilled labourers, to work under the supervision of the Contractor Technicians during installation, commissioning and operation of the Plant. 23. Load Management 24. Spares and Consumables 25. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of BSNL (supra) which provides certain guidelines for coming to an conclusion on the issue that what are the attributes for treating a transaction as transfer of rights to use the goods?‟ The Hon ble Supreme Court in the said case on this issue inter alia observes as under:- 90 . The entire infrastructure/instruments/appliances and exchange are in the physical control and possession of the petitioner at all times and there is neither any physical transfer of such goods nor any transfer of right to use such equipment or apparatuses. 91 . To constitute a transaction for the transfer of the right to use the goods the transaction must have the following attributes : 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 therefore should be available to the transferee; d. For the period during which the transferee has such legal right, it has to be the exclusion to the transferor this is the necessary concomitant of the plain language of the statute - viz. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... change the nature of the transaction. All these factors are to be taken into consideration while determining the nature of service. Therefore, we are of the view that the finding of the impugned orders in present matters is legally not correct. 11.1 We further find that a reading of the definition of sale‟ under the provisions of Maharashtra VAT Act, 2002 makes it crystal clear that every transfer of property in goods by one person to another in the course of trade or business, includes the transfer of right to use of any goods for any purpose. The said Act also provides levy of tax on the transfer of the right to use any goods. Article 366(29A)(d) inserted by the Constitution (46th Amendment) Act, 1982 on 02.02.1983 also provide for specific meaning attached to the phrase tax on the sale or purchase of goods to included deemed sale i.e., the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. Thus, in our considered view, owing to the reason of the Article 366(29A)(d) of the Constitution of India, transfer of the right to use any goods for any purpose, whether or not for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly of tangible goods came into service tax net later. The subject DOF was issued before the enactment and intended that the proposed service would not include the transaction on which VAT is Payable or paid . The another circular dtd. 23.08.2007 issued by the department also clarifies that the payment of VAT/ Sales Tax on the transaction has to be treated as sales of goods and levy of Service tax on such transaction would not arise. The transfer of right to use gas genset/ plant on lease charges basis is a deemed sale in terms of Article 366(29)A of the Constitution, which is exclusive from service. Since the nature of transaction under dispute is deemed sale, no service tax can be demanded, as held in various judgments and relied upon by the Appellant in the present matter. 4.9 Following the cited decisions and our independent observations in the facts of the present cases, we are of the considered opinion that the demand raised cannot sustain and requires to be set aside. 12.2 We further find that the order of the Tribunal in another case involving identical set of facts in Gujarat Power filed Pvt. Ltd. (supra) have held that it is unambiguous that when on supply of tangible good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... digital format for which they are charging digitalization fee from the distributors/producers and are also discharging service tax on the same. The distributors on the other hand are entering into agreements with the theatre owners for exhibition of movies. The agreement between the distributors and theatre owners are based on number of shows. The distributor also enters into a content distribution agreement with the appellant to deliver the digital content in movie theaters and to monitor the number of shows exhibited. The appellant track the number of show with the help of smart card inserted into the DCE as part of the service to distributors. The theatre owner, in order to receive the digital content and exhibit cinema, require Digital Cinema Equipments which are either owned by them or are taken on lease by them. The appellant has leased such equipments to some of the theaters. The appellant in order to fulfil contract with the distributors are inserting smart cards to monitor the number of shows in such DCE. They are also collecting registration fee from theaters for conducting feasibility study which is reimbursement of expenses. The demand against them is on lease of DCE e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded that the DCE equipments could be operated on standalone basis by the Theatre owner for screening of any content which the theatre owner would procure. The appellant had no say in all such actions of the theatre owner. The role of smart card was limited to keeping track of shows to be played and deducting credit which is available on the smart card for running of shows. It was installed on the direction of the distributors who had entered into agreement with the theatre owners for exhibiting their movie and the appellant had no connection with the theatre owner in respect of such smart card. Thus the smart card were not an instrument to control the operation of DCE on behalf of appellant or has no bearing on the agreement between the theatre owner and appellant in case of leasing of DCE Equipments. As far as insurance of the DCE equipment is concerned the Appellant were owners of the equipments and the nature of leasing agreement does not change for the reason that the insurance was done by the appellant. For bringing any service under the category of supply of tangible goods service in terms of Section 65(105)(zzzj) it is imperative to see that such service is in respect of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind that the appellant had regularly been filing their returns and even the department from time to time had initiated enquiry with the appellant which was properly responded. The DGCEI also investigated the issue in 2008-2009 and after response by the appellant vide their letter dated 17-6-2009 no further action was taken which shows that even the revenue appears to have satisfied regarding non-applicability of tax on activities of the appellant. Further it is also not in dispute that the appellant had been paying VAT even before the levy of service tax which is being demanded in the instant case. Even the circular issued in 2008 referred above clearly states that VAT and Service Tax are mutually exclusive. Considering all above factors it appears there is no suppression of fact on appellant s part. It is also observed that the appellant obtained DDQ (Determination of Disputed Question) dated 26-6-2008 from Commissioner of Sales Tax, who held that lease rental is liable for VAT. The appellant accordingly was discharging the VAT liability even before the taxability on Supply of Tangible goods for use . With the above undisputed facts. We are of the clear view that there is no suppr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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