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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 ..... se Act. The process of sizing of coal is also therefore outside Section 65(19) of the Act since it is a process in the manufacture of the final product, sized coal.' Thus, the demand of service tax under the taxable category of mining is not sustainable in the present case. Demand of service tax under the category of supply of tangible goods for use - HELD THAT:- It is found that Ld. Commissioner has not examined the terms of the work orders issued to the Appellants. Ld. Commissioner has confirmed the demand of service tax despite of the fact that he has categorically recorded the submission of the Appellants that effective control and possession of the equipment was transferred to the recipient. It is found that in case of Air Liquide India Holdings Pvt. Ltd. [ 2023 (9) TMI 1495 - CESTAT AHMEDABAD] where it was held that ' 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.' Thus, the demand of service tax under the taxable category of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Advocates Shri Jigar Shah and Shri Amber Kumrawat for Appellants and Shri Rajesh Nathan, Assistant Commissioner, Authorized Representative of the revenue department and perused the records. 2.1 Ld. Advocate has submitted that the demand of service tax under the category of mining services is not sustainable as it would amount to manufacture. During the period of dispute the Appellants were supposed to extract boulders and after sizing them was to supply to the recipients. He submits that in that view of the matter the services are consumed by self what is supplied is boulders after sizing. In such circumstances there is no supply of services by the Appellants. For the demand of service tax under the category of supply of tangible goods for use services, he submits that Ld. Commissioner has not examined the work orders issued to the Appellants. He further submits that there is no discussion or finding by Ld. Commissioner that how the activity of the Appellants would be falling within the definition of supply of tangible goods for use. According to Ld. Advocate the effective control and possession of the equipment was transferred to the recipient and therefore, the present transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne to a particular size and the said sized stones were supplied to M/s. Hi-tech Rock Products Aggregates Ltd. and others; that the boulders/ stones extracted from the mines were crushed and sized in the crusher plant by them which is ancillary to the completion of manufactured products; that therefore, it is submitted that the operation carried out by them is nothing but the manufacturing that are excisable goods attracting NIL rate of duty; that as per the provisions of Section 66D(f) of Finance Act, 1994, any process amounting to manufacture of production of goods is listed in the negative list and therefore, no service tax is payable. 29.1 In this regard, I find that M/s. Krishna themselves have admitted that they have provided mining services, as they have undertaken work of mining of stones/ boulders, extracted from mines. Moreover, on perusal of copies of various contracts available with the seized documents and also copies of some of contracts submitted by M/s. Krishna, alongwith their reply dated 25.01.2016, I find that the work allotted to them pertains to extraction/ mining of stones/ boulders from mines. Moreover, I find from the copies of the seized Bills that the descr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make coal marketable and thus complete manufacture of coal and to make it into excisable goods as per Section 2(d) of the Central Excise Act. The process of sizing of coal is also therefore outside Section 65(19) of the Act since it is a process in the manufacture of the final product, sized coal. 4.2 We further find that in case of S.N. Sunderson (Minerals) Ltd. reported in 1995 (75) ELT 273 (MP) it is observed as under: 9. On a plain reading of Section 2(f)(ii) with Chapter Note 2 of Chapter 25 of the Central Excise Tariff Act, 1985 it is clear that 'manufacture includes any process which is specified in relation to any goods as amounting to manufacture under any section of the Act or Chapter Notes of the Schedule to the Central Excise Tariff Act, 1985. If any process is specified in the section or Chapter Note to be a manufacture then under the definition it shall be a 'manufacture , otherwise not. By artificial definition of the word 'manufacture the Legislature have retained the power to equate any process with 'manufacture by providing accordingly in the section or Chapter Notes of the Schedule to the Central Excise Tariff Act, 1985. Chapter Note 2 of Chapt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut a fundamental change, brings a new substance into existence or a new and different article having distinct name, character or use results from a particular process or particular activity depends on the facts and circumstances of each case because every change in the raw material is not manufacture. 12. Shri Shyamlendu Kumar Chaterjee, Law Officer of M/s. S.N. Sunderson (Minerals) Ltd., Maihar was examined and his statement was recorded under Section 14 of the Act by the Superintendent of Central Excises and Salt Act on 31-8-1989. In answer to questions he has stated that the company is manufacturing lime stone in a particular size by crushing the lime stone in lump form. According to him, the company purchases lime stone in lump form or excavates it from their mines and then crushes it by putting it in crusher machine to obtain the desired sizes of lime stone chips, as per the requirement of the buyer by screening. He has further stated that the company had purchased lime stone in lump form from M/s. R.S. Minerals, Maihar and M/s. Diwan Lime Co. Pvt. Ltd., Maihar. According to him, prior to 1-4-1989 the company had no crusher, so they used to get the lime stone crushed into part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite of the fact that he has categorically recorded the submission of the Appellants that effective control and possession of the equipment was transferred to the recipient. 4.5. We find that in case of Air Liquide India Holdings Pvt. Ltd. vide order number A/12032-12036/2023 dated 13.09.2023 it is held as under: 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 supply should be without transferring r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstitution 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 Appellants 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 value machineries are supplied for u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 94. 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 Appellants 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 Appellants and its customers. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods 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 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 insome 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. 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 = 2017-TIOL-33 38 -CESTAT-MUM 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 Appellants from the Theatre owner. The Appellants is receivin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Theatre owner would put a person well versed with handling of equipment: Clause 53 where 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 Appellants 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 Appellants has transferred the right to use of DCE exclusively to the The at 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 Appellants 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 Appellants. None of these submissions has been taken into account while passing the impugned order. We also find that in addition the Appellants had made various other submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 Appellants to interfere or to be forced by the Appellants to run the Equipments as per their directions or control. The Appellants has also relied upon the order of Tripura HC in case of Bharti Telemedia Ltd. Vs The State of Tripura- 2015-TIOL-2983-HC - TRIPURA-VAT relating to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e all submissions before the adjudicating authority. 6.4. With regard to CENVAT Credit on Capital goods we find that it is not disputed that the Appellants 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 Appellants 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 Appellants 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 Appellants. 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 Appellants had an agreement with such persons to exhibit the advertisements. Thus there is no ground to hold that the Appellants were providing any business supports service to Theater owner. The DCE eq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o said demand on capital goods L.e. Digital Cinema Equipments is set aside on merit as well as on limitation. (ii) The matter relating to demand of service tax for normal period on lease rentals of Digital Cinema Equipments is remanded for reconsideration, on merit to the Adjudicating Authority. The demand of service tax on lease rentals and corresponding interest and penalty for the extended period is set aside being time bar. The Appeal is disposed of in the above terms. (Pronounced in court on 17/08/2017) From the above decision and board circular cited (supra) also from various judgments on the similar issue cited by the Appellants, the issue is no longer res-Integra with consequential relief. 5. Accordingly the demand under supply of tangible goods service in the present case is not sustainable. Hence, the impugned orders are set aside appeals are allowed. 4.6. On the basis of above, we hold that the demand of service tax under the taxable category of supply of tangible goods for use is not sustainable and the same is set aside. 4.7. We also find that it is on record that (Para 5 of order in Original dated 01.02.2016 in appeal No. ST/10860/2016) that the Appellants filed VCES ..... X X X X Extracts X X X X X X X X Extracts X X X X
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