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TMI Blog2025 (3) TMI 507X X X X Extracts X X X X X X X X Extracts X X X X ..... o levy sales tax on deemed sales considering the value of the goods used in works contract. Thereafter, the Constitution of India was amended and a new clause (29A) was inserted in Article 366(definition clause of the Constitution). This clause 29A enlarged the scope of expression "sale and purchase of goods" to include goods used in works contract service and also goods which are supplied on lease giving effective possession and control to the transferee. In 1994 the Central Government, in exercise of the powers under entry 97 (residual entry) of list-1, imposed service tax. The service tax could be imposed under this entry only on such activities which did not fall under the State list. Since the supply of tangible goods by giving effective possession and control is deemed to be a sale as per Article 366 (29A), all such transfers are chargeable to sales tax/ VAT by the State Government - However, where the goods are leased without giving effective possession and control of the goods to the transferee, it was covered under the service tax under section 65 (105)(zzzzd). Thus, there are two types of lease contracts-where the effective possession and control is given to the transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Respondent ORDER P. V. SUBBA RAO 1. M/s Spain Electronotics Limited The appellant filed this appeal to assail the Order in Appeal dated 31.05.2018 Impugned order passed by the Commissioner (Appeals), Central Excise and CGST, New Delhi whereby he upheld the order in original dated 20.06.2017 passed by the Additional Commissioner and rejected the appeal filed by the appellant. The order in original decided the proposals made in two show causes notice dated 05.07.2013 and 15.09.2015 and a statement of demand dated 04.04.2016, the details of which are as follows: Sr. No. SCN Period Amount of service tax Head 1 05.07.2013 2008-09 62,01,346/- Supply of tangible goods service 2 15.09.2015 2013-14 5,78,816/- Works contract service 3 04.04.2016 2014-15 7,13,828/- Works contract service 2. The appellant is registered with the service tax department for providing "erection, commissioning and installation services" as defined under section 65 (105) (zzd) of the Finance Act, 1994 The Finance Act. The appellant was investigated by the anti-evasion wing of the service tax commissionerate and it came to the conclusion that the appellant had also rendered the servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will not be chargeable to service tax under supply of tangible goods service. (iv) So the key issue to be decided is whether the effective possession and control over the DG sets which were supplied by the appellant have been transferred to its client IOCL or otherwise. (v) On this question the Supreme Court in the case of Bharat Sanchar Nigam vs. Union of India 2006(2)STR 161 (SC) laid down five criteria and if all these five are fulfilled the supply amounts to deemed sale by transferring effective possession and control. These are as follows: a. There must be goods available for delivery b. There must be 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 transferee 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 du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was done was essentially sale of DG sets and their installation at the buyers' premises. The Department had wrongly taken this contract for sale of goods as a "works contract service". Merely because some incidental service such as installation and commissioning were also taken up by the appellant, it does not automatically mean that the appellant had rendered "works contract services". (xii) The statement of demand dated 04.04.2016, under the works contract service without any evidence to show that the appellant had rendered any works contract service. The statement of demand has been made assuming 25% growth in the value of the taxable services provided over the previous year. This demand, therefore, cannot be sustained and needs to be set aside. (xiii) Since the demand is not sustainable the interest and penalties also cannot be sustained and, therefore, they need to be set aside. Submissions on behalf of the Revenue 6. Learned authorized representative appearing for the department reiterated the discussion and findings in the order-in-original and order-in-appeal. 7. We have considered the submissions advanced by the learned counsel for the appellant and the learned auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so goods which are supplied on lease giving effective possession and control to the transferee. Article 366 (29A) reads as follows: "Article 366(29A) in Constitution of India "(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 installments; (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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ours per month as per the directions of IOCL and during the operational the fitness certificate and other operations were available to the IOCL and, therefore, third condition is also fulfilled. 19. The fourth condition is that for the period during which the case were transferred the transferee has a legal right to the exclusion of the transferor to use the DG sets. During the period the appellant had transferred the DG set to IOCL, the appellant had no right to use them as well. Therefore, the IOCL enjoyed the legal right to use them for the period of lease. 20. The last requirement is that the goods having been transferred the transferor should have no right to transfer them to somebody as well. It is evident from the agreement that the appellant had no right to transfer the same goods to others as well. The DG sets once installed for a period by the appellant will be under the exclusive control and meant for the exclusive use of IOCL. 21. In view of the above, we find that only VAT could have been charged by the State Government on the DG sets supplied by the appellant to IOCL. No service tax under section 65 (105)(zzzzd) could have been charged. Therefore, the demand in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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