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TMI Blog2024 (8) TMI 521X X X X Extracts X X X X X X X X Extracts X X X X ..... RAJ-EXCUS-000- PR.COM-018-15-16 dated 01.02.2016 Rs.1,68,50,207/- 1.3 The brief facts leading to the present dispute are that the Appellants was engaged in providing construction services, supply of tangible goods for use, site formation services, business auxiliary services, works contract services etc. The Appellants was a proprietorship concern during the period FY 2009-10 and later on converted in to a partnership firm. The projects which were being undertaken by the proprietorship concern were continued in the partnership firm. 1.4 A search was conducted at the registered premises of the Appellants. After the investigation it was alleged that the Appellants has provided services in the nature of site formation services, supply of tangible goods for use services, mining services etc. to various service recipients and demand of service tax as mentioned above was raised by issuing two separate show cause notices. 1.5 After considering the reply filed by the Appellants, Ld. Commissioner has confirmed the demand of service tax as raised in the show cause notices along with interest and penalties. 2. We have heard Ld. Advocates Shri Jigar Shah and Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ech Rock Products & Aggregates Ltd. had awarded work order to them for supply of crushed stones of specified size for that they had carried out various activities such as mining of boulders/ stones and crushing the same in required size, that mining activity widely covers all activities relating to extraction of minerals from mines; that thus, under Section 65(105)(zzzy) of the Finance Act, 1994, any service provided in relation to extraction of minerals, falls under the definition of mining service; that they had carried out various activities like mining of boulders, cutting, crushing the boulders and loading the same for transportation; that the demand of service tax under the category of mining service as defined in Section 65(105)(zzzy) of the Finance Act, 1994 is not sustainable as they had not carried out any activity like drilling, blasting, excavation and raising boulders/ stone which are directly or indirectly in relation to mining activity; that the activity undertaken by them of crushing of boulders in to smaller size stones amount to manufacture; that in the present case, they were engaged in business of mining of boulders and crushing of stone to a particular size and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... izing of coal takes place, they continue to remain ICML's property and not that of either CESC or CPL. The sale of coal and consequently the title thereof passes on to CESC/CPL only at the delivery point specified in the respective agreements, which is after completion of sizing of the coal. There is therefore no production or processing of goods for and on behalf of any client or customer, as required under Section 65(19)(v) of the Act. 8. In terms of Section 65(19) of the Finance Act, 1994 any activity that amounts to "manufacture" within the meaning of Section 2(f) of the Central Excise Act is excluded therefrom. Section 2(f) of the Central Excise Act defines the term "manufacture" to include, inter alia, any process "incidental or ancillary to the completion of a manufactured product". This Bench of the Tribunal in the case of Avian Overseas Pvt. Ltd. Vs. CCE,C&ST, BBSR-II, 2009 (15) STR 540 (T-Kol) has held that activity of mining and producing coal is covered under the definition of "manufacture" under Section 2(f) of the Central Excise Act and demand of service tax thereon under the Act is not sustainable. 8.1 Sizing of coal is an incidental and ancillary process to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definition of the word 'manufacture' extend the process of crushing of lime stone to be a manufacturing process. 11. It is open for the revenue to establish that the process involved in the present case, i.e. crushing of lime stone, extracted from the mines, into lime stone chips is a process of manufacture. The question whether a particular process is a manufacture or not has to be judged and determined having regard to the facts and circumstances of each case and having regard to the well-known test laid down by the Supreme Court in a number of decisions. The Supreme Court in Union of India v. Delhi Cloth and General Mills Co. Ltd. [1977 (1) E.L.T. (J 199) (SC) = AIR 1963 SC 791], Empire Industries Ltd. v. Union of India [1985 (20) E.L.T. 179 (SC) = AIR 1986 SC 662), South Bihar Sugar Mills v. Union of India [1978 (2) E.L.T. (J 336) (SC) = AIR 1968 SC 922] has held that taxable event under the excise law is manufacture and liability to duty is attracted, the moment there is transformation of goods in new commodity commercially known as distinct commodity, on account of one process or several processes. Manufacture would certainly cover transformation, but where transformat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat lime stone chips of a particular size are prepared as per the order placed by the buyer. The concept of manufacture has to be viewed considering the emergence of a new marketable product. The lime stone chips of specific size is a new product brought about by crushings of lime stone lumps. The operation of crushing brings into existence a new product which has a different name, character and use. Process in this case is 'manufacture' of lime stone chips which are excisable goods liable for duty under Chapter 25 of the Central Excise Tariff Act, 1985 at the rate of 12 per cent. The Collector, Central Excise, is right in levying duty on lime stone chips." The above decision of Hon'ble High Court of Madhya Pradesh is affirmed by Hon'ble Supreme Court as reported in 2002 (143) ELT 483 (SC). 4.3. Therefore, in view of above we hold that the demand of service tax under the taxable category of mining is not sustainable in the present case. 4.4. For the demand of service tax under the category of supply of tangible goods for use is concerned, we find that Ld. Commissioner has not examined the terms of the work orders issued to the Appellants. Ld. Commissioner has confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han 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 any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. This issue has been considered in various judgments time and again. Some judgments are cited below: Quippo Energy Pvt. Ltd Vs CST 20220-VIL-937-CESTAT-AHM-ST "4. Heard both the sides and perused the records. To appreciate the rival contentions, it would be appropriate to first reproduce Section 65(105) (zzzzj) of the Act, which defines the Taxable Service -"Supply of Tangible Goods" which is as follows :- "Section 65(105)(zzzj) - "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 the effective control of such machinery, equipment and appliances." Service tax on the supply of tangible goods was introduced w.e.f. 16.05.2008 vide Notification No. 18/2008-ST. dated. 10.05.2008. Further w.e.f. 01.07.2012 in the negative list regime, the transfer of goods, by way of hiring, leasing, licensing or in any such manner without transfer of right to use such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provide as under : - "8.6 By virtue of the agreement, the lessee shall be considered to have possession of the plant and shall have the right to use the plant for the purpose for which it is leased to him." In view of such conditions, the effective control of the gas genset are purely in the hands of customers of the Appellants, as the customers is at his liberty to use the equipments hired by him. It is seen from the agreements that there is no dispute as to the fact that the goods are in the possession of the lessee and is being used by him for the intended purpose without any interference or hurdle from the Appellants. On going through the clauses of agreement, as produced before us, we find that the Appellants had handed over the "Goods" possession to the lessee as also the right to use. Therefore we are of the view that the transaction of Appellants does not satisfy the condition of "without transferring right of possession and the effective control of such machinery, equipment and appliances." Hence the activity does not fall under the definition of "Supply of tangible goods for use". 4.4 Being identical issue involved, we take support from Hon'ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t are its essence and is deciding factor for determination of nature of contract/agreement. As per agreement the equipment is delivered to the customers ; in terms of Clauses of agreements as discussed above customers are required to get all permissions for installation of equipments; Clause of agreements also provide that customers shall be responsible for all injuries, losses and damages cause to the equipment and shall also indemnify the Appellants against any loss or damage arising to or in connection with the; Further the skilled manpower is not supplied by the Appellants under the Lease agreement. There is sperate service agreement entered between the Appellants and customer under which various services are provided on which service tax has been discharged by the Appellants. Once the control and possession of gas genset/equipments was transferred to the customers, mere supply of manpower for maintenance will not change the nature of the transaction. All these factors are to be taken into consideration while determining the nature of service. Therefore finding of the impugned orders in present matters legally not correct. 4.7 We further find that a reading of the definition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipments since year 2007-08. We also find that DOF No. 334/1/2008-TRU, dated 29-2-2008 Circular in Para 4.4 also states that "Supply of tangible goods for use and leviable to VAT/Sales tax as deemed sale of goods, is not covered under the scope 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". It is not in dispute that the Appellants were paying VAT since 2007-08 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 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, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Theaters. The Appellants 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 equipments given to the Theatre owners on the ground that since the effective control and possession of such equipments has remained with the Appellants, hence the services are of "supply of tangible goods for use". We find that the adjudicating authority has held that since as per contract the equipment will remain sole property of equipment provider and he shall bear the cost of normal wear and tear and repairs it is clear that the legal right and effective controls rests with the Appellants. We find that except the above findings the Commissioner has not dwelled upon any of the submission and facts made by the Appellants. The terms and condition of the agreement are its essence and is deciding factor for determination of nature of contract/ agreement. The findings of the impugned order nowhere leads to the conclusion on the basis of this vital aspect. The Appellants b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned the Appellants were owners of the equipments and the nature of leasing agreement does not change for the reason that the insurance was done by the Appellants. For bringing any service under the category of "supply of supply of tangible goods for use" in terms of Section 65 (105) (zzz)) it is imperative to see that such service is in respect of services towards supply of tangible goods for use "without transferring right of possession and effective control". In the present case once the DCE were transferred to Theatre owner the Appellants had no control over running of such equipments which are to be operated by the persons employed/ deputed by the Theatre owner. The Theatre owner had contractual control over such equipments which was in their possession. All these factors are to be taken into consideration while determining the nature of service. It is observed that the Appellants has been paying VAT on such leasing of DCE since year 2006. Further the fact remains that in 2008 they approached the authority for determination of disputed question which ruled that the services are liable for VAT. The adjudicating authority has not given any findings on this aspect when brought be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o observed that the Appellants obtained DDQ (Determination of Disputed Question) dt. 26.6.2008 from Commissioner of Sales Tax, who held that lease rental is liable for VAT. The Appellants 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 suppression of facts with intent to evade payment of Service Tax on lease rentals on DCE, on the part of the Appellants. Therefore we hold that the demand for extended period is clearly time barred. 6.3. As regard demand of service tax on merit for the normal period, we observed in our above discussions that various vital facts and submissions of the Appellants were not properly verified by the Adjudicating Authority, therefore we remand the case relating to lease rentals & registration fees for the normal period with direction to Adjudicating Authority to verify whether the contentions made by the Appellants are correct with regard to the theatre owners having freedom to choose movie, number of shows, timing of shows, to determine whether to play a movie or not and have operational control of the equipment t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id service tax on service of sale of space for advertisement which was provided through the said DCE. It therefore leaves no doubt that credit on Capital goods is available even if they are removed outside from the premises of the Appellants for providing output service. We are therefore of the view that there is no ground for denial of cenvat credit on Capital goods to the Appellants. 6.5. We also find that while invoking extended period for demand of Cenvat Credit on DCE, in para 33 of the order in Original, Adjudicating Authority has admitted that the Appellants have disclosed CENVAT Credit on Capital goods in the return, despite recording this, he has given adverse finding on limitation. Considering the fact that Appellants have been paying VAT from 2006 that too at higher rate than the service tax rate, even before SOTGU Services became taxable service, no malafide can be attributed to invoke extended period for denying cenvat credit. Placing reliance on Dalmia Cements case of the Madras High Court and in view of our above observations, we are of the view that CENVAT credit on Digital Cinema equipment has to be allowed, independent of taxability on lease Rentals of DCE. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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