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TMI Blog2023 (9) TMI 1495X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 334/01/2008-TRU dated 29 February 2008 it is abundantly clear that in a case where there is a transfer of right of use in any goods the same is leviable to Sale Tax / VAT as deemed sale of the goods where the transfer of right to use involves transfer of both possession and control of the goods to the user of the goods, the same is not excigible to service tax under the category of supply of tangible goods service. More or less similar issue in the appellant‟s group company‟s case that is Air Liquid North India Pvt Ltd. [ 2017 (6) TMI 476 - CESTAT NEW DELHI] was considered wherein though the demand was raised under business support service but the transaction was identical and the demand was set aside considering the transaction is a deemed sale in terms of Article 366 (29A) (d) of Constitution Of India. The demand under supply of tangible goods service in the present case is not sustainable - the impugned orders are set aside - Appeal allowed. - HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR AND HON'BLE MEMBER (TECHNICAL), MR. C L MAHAR Shri, Jigar Shah, Advocate for the Appellant Shri, R. K. Agarwal, Superintendent (AR), for the Respondent RAMESH NAIR The bri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect from 16-05-2008 a new category of service was introduced in the Finance Act, 1994 namely supply of tangible goods services under Section 65 (105) (ZZZZJ) which was included under the of service tax accordingly the appellant‟s activity is covered under the service of supply of tangible goods service. Hence, the periodical show cause notices dated 26.06.2013, 09.10.2014, 29.03.2016, 05.10.2018 were issued. The said show cause notices were adjudicated by the adjudicating authority vide orders-in-original dated 30.01.2014, 08.02.2016, 27.01.2017, 30.10.2017 and 27.03.2019. In some of the order in support of appeals bearing No. ST-111-55-4-2018 and ST-10223-2019 and 12757-2019, the orders-in-original were further appealed by the appellants before the first Appellate Authority wherein the same were upheld. Accordingly against all the impugned orders the present appeals are filed. 2. Shri, Jigar Shah Learned Counsel appearing on behalf of the appellant submits that the adjudicating authority and also Appellate Authority have not considered the definition of supply of tangible goods service in proper perspective, therefore, the impugned orders are not sustainable. 2.1 He submits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Agarwal Learned Superintendent(AR) appearing on behalf of the revenue reiterates the findings of the impugned order. He further submits that the appellant have given the equipments to their customers on rental basis therefore the activity is clearly covered under supply of tangible goods service‟ therefore the demand was rightly confirmed. 4. We have carefully considered the submission made by both the sides and perused the records. In the present case the demand of service tax was raised under the head of supply of tangible goods service. The definition of the same during the relevant period is reproduced below: (zzzzj) supply of tangible goods services means any services 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. 4.1 From the reading of the above definition it is clear that the service under supply of tangible goods service will qualify not only by supply of the tangible goods for use simplicitor but with that the important rider attached is the said sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .3 From the above Article of the Constitution particularly under clause (d), the transfer of the right to use any goods for any purpose for cash, deferred payment or other valuable consideration is qualified as sale of goods and there is a liability of sales tax. Therefore, the transaction of the appellant since clearly falls under 366(29A) of the Constitution of India the State Government correctly levied the sales tax and collected the same. it is a settled position that when the transaction is in the nature of sale no service tax can be demanded. This issue has been considered by the board and clarified under circular No. 334/01/2008-TRU dated 29 February 2008 as reproduced below: 4.4 Supply of tangible goods for use: 4.4.1 Transfer of the right to use any goods is leviable to sales tax / VAT as deemed sale of goods [Article 366 (29A)(d) of the Constitution of India]. Transfer of right to use involves transfer of both possession and control of the goods to the user of the goods. 4.4.2 Excavators, wheel loaders, dump trucks, crawler carriers, compaction equipment, cranes, etc., offshore construction vessels barges, geo-technical vessels, tug and barge flotillas, rigs and high val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 66E of the Finance Act, 1994. 4.1 In view of both i.e. before 01.07.2012 and after, supply of tangible goods or transfer of goods without transferring the right of possessions or by way of hiring, leasing, licensing or any such manner without transfer of right to use such goods, were liable to service tax. 4.2 To fall within the definition of taxable service, fallowing three conditions are required to be satisfied (1) there should be a supply or transfer of goods for use; (2) The transfer must be by way of hire or lease or licences for using the goods; and (3) The right of possession and effective control of such goods must not have passed on to the transferee. Once these above three conditions are satisfied, the provisions of the said entry will be attracted. 4.3 We find that in the present matter there is no dispute related to the above first two conditions. The disputes, centres around the third conditions, that whether the transaction between the Appellant and its customers would involve the transfer of right of possession and effective control or a transfer of right to use. To examine this issue, it would be appropriate to refer to the agreement entered into between the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reating 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 therefor 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. a transfer of the right to use and not merely a licence to use the goods; e. Having transferred the right to use the goods during the period for w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... includes the transfer of right to use of any goods for any purpose. The Section of the said Act also provides levy of tax on the transfer of the right to use any goods. Article366(29A)(d) inserted by the Constitution (46th Amendment) Act, 1982 on 2-2-1983 also reads as under : 366. (29) tax on income includes a tax in the nature of an excess profits tax; (29A) tax on the sale or purchase of goods includes - (a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (c) a tax on the delivery of goods on hire purchase or any system of payment by instalments; (d) a tax on 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; (e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (f) a tax on the supply, by way of or as part of any service or in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dependent 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. 5. Accordingly, the impugned orders are set aside. The appeals are allowed with consequential relief if any, as per law. 4.5 More or less similar issue in the appellant‟s group company‟s case that is Air Liquid North India Pvt Ltd. (supra) was considered wherein though the demand was raised under business support service but the transaction was identical and the demand was set aside considering the transaction is a deemed sale in terms of Article 366 (29A) (d) of Constitution Of India. In another judgment of UFO Movies Ltd reported at 2017-VIL-774-CESTAT Mumbai ST the tribunal has passed the following order. The relevant order is reproduced as below which was upheld by the Hon‟ble Supreme Court: 5. We have carefully considered the arguments and written submissions made by both sides, 6. We find that the first demand of service tax is on lease rentals collected by the Appellant from the Theatre owner. The Appellant is receiving film in analogue format from the distributors/producers and converting into compre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Theatre owner is required to get all permissions for installation of DCE. Clause 5K as per which the Theatre owner shall be responsible for all injuries, losses and damages cause to the equipment and shall also indemnify the Appellant against any loss or damage arising to or in connection with the equipment for the reason other than normal wear or tear, Clause 16A as per which the Appellant has transferred the right to use of DCE exclusively to the Theat owner and the Theatre owner shall have effective control of the DCE and shall be free to make its own use for theatrical exhibition purpose at its sole discretion. The Ld. Senior Counsel appearing on behalf of appellant has argued by citing case laws that agreement should be read as a whole and not few clauses in isolation to decide the nature of service 6.1. Further the fact that 600 Theatres had exhibited the IPL matches and none of the content was provided by Appellant. None of these submissions has been taken into account while passing the impugned order. We also find that in addition the Appellant had made various other submissions which do not find mention in order and are discussed in later part of this order. The Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 . It is not in dispute that the Appellant were paying VAT since 2006 and the services of supply 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 Theaters are free to choose which movie to be displayed, the number of shows, the timing of shows, weather to play a movie or not and also have operational control over equipment. From these facts, it prima facie appears that the Theatre were having absolute authority to run the Cinema Equipments as per their liking with no right of the Appellant to interfere or to be forced by the Appellant to run the Equipments as per their directions or control. The Appellant has also relied upon the order of Tripura HC in case of Bharti Telemedia Ltd. Vs The State of Tripura-2015- TIOL 2983 HC Tour 2015-VIL-222- TRI relating to identical situation and the Ld. Senior Counsel has argued that the ratio of said judgment would squarel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it is not disputed that the Appellant and Theatre had joint partnership agreement to exhibit the advertisement and the proceeds were to be shared in the ratio of 75: 25 or as the case may be. The advertisers were into agreement with the Appellant for such advertisement. Further we find that as per Rule 2(a) of CENVAT Credit Rules, 2004 specified capital goods used for providing output service would be eligible for credit. In this case the capital goods are specified capital goods and has been used for providing the output services of the Appellant namely content delivery services and sale of space for advertisement service. It is not in dispute that equipments are used for output services of the Appellant. We also find that there was no contract or agreement between the Theatre owners and the persons whose advertisements were exhibited in cinema theaters. Only the Appellant had an agreement with such persons to exhibit the advertisements. Thus there is no ground to hold that the Appellant were providing any business supports service to Theater owner. The DCE equipment at the most can be said to have been jointly used by the Appellant and the Theater owner to provide the servic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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