Equipment Rental in Film Industry Qualifies as Deemed Sale with Right to Use, Not Service Under Section 66

HC ruled that renting cinematographic equipment constituted a deemed sale with transfer of right to use, not a taxable service under Section 66 of Finance Act, 1994. The agreement demonstrated transfer of both possession and effective control to the hirer, evidenced by inspection rights, damage reporting obligations, and equipment condition acknowledgments. The transaction qualified as deemed sale under Article 366(29A) of Constitution, involving transfer of right to use goods for valuable consideration. HC quashed the original order that had incorrectly interpreted the agreement terms regarding possession and control transfer. The case established that where right of possession and effective control transfers, service tax cannot be levied as it falls outside the scope of taxable services. .....

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