News Update

ACC appoints IRS officer Ravi Singh as Addl Private Secretary to Power MinisterUSA favours 'reciprocal' free trade: Treasury ChiefShillong Customs seizes 800 kg of ganja concealed in especially-designed cavity in a truckCBEC Chairperson calls for speedy GST Awareness CampaignINTERPOL drive against illicit firearms - 149 arrested across EuropeGreen Bond Market Has Grown Healthy In 5 Yrs: IREDAIndia turning into hub of international arbitration: Chief Justice of IndiaTaliban forces kill over 100 Afghan soldiersGST Council looking for applicants to fill up CSSS postsEmerging economies account for 75% of global growth: FMDuty Credit Scrip can be utilised/debited for payment of Custom Duties in case of EO defaults - Para 3.18(a) of FTP 2015-20 amendedServices Exports from India Scheme - Eligible period extended up to 31.3.2017W.e.f. 01.06.2017 only those applications for grant of gold dore would be considered where the applicant refinery holds a valid licence from BISGlobal forex remittances shrink but India continues to be No 1International prices soar; Less availability of milk products this summer: GovtMGNREGA - One crore assets geotaggedInter-Ministerial Delegation going to participate in Basel conventionsRailways to organise Global Technology Conference on SafetyST - Once activity undertaken of supply of food to its workers at subsidized rate is understood to be part of Petitioner’s industrial obligation, it is unthinkable that same can be construed as service: HCGoods, after a tour of service abroad, imported by or along with a unit of the Army, Navy, Air Force or CRPF exempted from BCD, CVD & SAD subject to specified conditionsUS Fed Paper says GST may boost India's GDP by over 4%Garib Kalyan Yojana- If tax paid by Mar 31, declaration can be filed by May 10Removal of Cyprus as notified jurisdiction u/s 94A - CBDT clarifies removal notfn to have retro effect11th Civil Services Day: PM cautions officers against excessive use of social mediaApex Court questions Govt decision to link Aadhaar with PANUSD 250 bn Tax Bill - Australian Federal Court rules against ChevronCricket Betting case - CBI chargesheets IRS officer & others
 
Renting of equipment - since transaction is one of 'transfer of right to use' which is deemed sale and VAT is payable, no ST : CESTAT

By TIOL News Service

MUMBAI, FEB 17, 2017: BOTH, the assessee and the Revenue are in appeal before the CESTAT against the order passed by the CCE, Nagpur which confirmed the demand of Rs.67.39 lakhs and imposed penalties and dropped the demand of Rs.1.46crores respectively.

The facts of the case is that the assessee is engaged in renting of earthmoving equipment, such as Caterpillar, Excavators, etc. to various customers.

The department was of the view that the activity of renting of earthmoving equipment would come under the purview of service tax under the taxable service category of "Business auxiliary service" for the period prior to 16.05.2008 and under the category of "supply of tangible goods for use" with effect from 16.05.2008.

A notice demanding service tax of Rs.2,13,10,930/- for the period 2005-06 to 2009-10 was issued.

The AA confirmed the demand of service tax under the category of "Supply of tangible goods for use" for the period from 16.05.2008 amounting to Rs. 67,39,694/- while dropping the demand raised for the period prior to 16.05.2008 under the category of "Business Auxiliary Service".

After considering the submissions made by both sides, the CESTAT observed thus -

+ Revenue's contention is based on the clauses in the agreement relating to restrictions of use by the lessee, provision of skilled operator by the lessor and maintenance and repairs of the equipment by the lessor. Merely because restrictions are placed on the lessee, it cannot be said that there is no right to use by the lessee.

+ Responsibilities cast on the hirer clearly show that the right of possession and effective control of the equipment rest with the hirer; otherwise the hirer cannot be held responsible for misuse/abuse, safe custody/security, liability to settle disputes with third parties in relation to use etc.

+ Further, the agreement provides for charging of VAT at 12.5% on the monthly invoice value which shall be payable by the hirer. These terms and conditions stipulated in the agreement, lead to the conclusion that the transaction envisaged in the agreement is one of "transfer of right to use" which is a deemed sale under Section 2(24) of the Maharashtra Value Added Tax Act, 2002. The Finance Minister's speech and the budget instructions issued by the C.B.E& C also clarify that if VAT is payable on the transaction, then service tax is levy is not attracted.

Adverting to the Andhra Pradesh High Court decision in the case of G.S. Lamba & Sons v. State of A.P. - 2012-TIOL-49-HC-AP-CT, the Bench concluded that the assessee's activity of giving various equipment on hire does not fall under the category of "supply of tangible goods for use", hence the same is not liable to service tax w.e.f. 16.05.2008.

In the matter of the Revenue appeal, the CESTAT observed -

"…Commissioner dropped the demand of the period prior to 16.05.2008 mainly on the ground that the service is of "Supply of tangible goods for use" which came into effect on 16.05.2008, therefore, prior to that date the service was not taxable. However, we, in our above findings, held that the service in question is not the service of "Supply of tangible good for use". In this position the main ground of the Commissioner for dropping of demand does not exist and not relevant. Though the ld. Commissioner in a passing reference mentioned in the impugned order that the service prior to 16.05.2008 does not fall under the "Business Auxiliary Service" but not given the detailed findings. Therefore, when the main ground for dropping of demand does not exist. The issue relates to demand prior to the period 16.05.2008 needs reconsideration ."

Conclusion -

++ Assessee Appeal was allowed.

++ Revenue Appeal is allowed by way of remand

(See 2017-TIOL-485-CESTAT-MUM)


POST YOUR COMMENTS