TMI Blog2024 (2) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... Disha ; and Raahi ) were entered into prior to 15-5-2008; and the tankers were also delivered to the assessee prior to introduction of the new taxable service STGU ; the taxable event of supply of tangible goods for uses has taken place prior to introduction of the taxable service; and that though hire charges for the actual use were remitted subsequently and periodically, no Service Tax is leviable. In the case of M/S. GIMMCO LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, NAGPUR (VICE-VERSA) [ 2016 (12) TMI 394 - CESTAT MUMBAI] Mumbai bench has held the transaction involved was a transfer of right to use Transit Mixers and not transport service and the petitioners had transferred the right to use goods to Grasim. If we apply the ratio of the above decision to the facts of the present case, the transaction involved herein is transfer of right to use which is a deemed sale and not supply of tangible goods for use service. Allahabad bench has in the case of M/S EXPRESS ENGINEERS SPARES PVT. LTD. VERSUS COMMISSIONER, CENTRAL GOODS SERVICE TAX, GHAZIABAD AND SH. NARESH KUMAR GUPTA (DIRECTOR) VERSUS COMMISSIONER, CENTRAL TAX, GST CENTRAL EXCISE, MEERUT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs 8,11,735/- + Ed Cess 16,234/- + S H Ed Cess Rs 8,117/-) (Total Rupees Eight Lakh thirty Six Thousand Eighty Six only) being service tax short paid during the period 2008-09 to 2010-11 against the taxable service of Supply of Tangible Goods service should not be demanded from them under proviso to sub-section 73 of the Finance Act, 1994 along with appropriate interest under Section 75 of the Act. (ii) penalty should not be imposed upon them under section 77 (1) (a) of the act in contravention of the provisions of Section 69 of the Act, read with Rule 4, 5 of the Rules. (iii) penalty should not be imposed upon them under section 78 of the act for suppression of facts with intent to evade payment of service tax. 2.3 The show cause notice was adjudicated as per order in original No (ST-168/2013) 87 of 2015 dated 21.12.2015 holding as follows : 1. I confirm the demand of Service Tax amounting to Rs 8,36,086/- (including Ed. Cess S H E Cess) (Rupees Eight Lakh thirty Six Thousand Eighty Six only) on the party under the provisions of Section 73 (2) of the Act. However as the party has deposited the same vide GAR7 No 1011 and 1028 both dated 13.05.2015, I order appropr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 154 (T-Bang)] V R Auto Guages (P) Ltd. [2003 (160) ELT 828 (T-Del)] Jaipur Jewellery Show [2017 (49) STR 313 (T-Del)] ACE creative LKearning Pvt Ltd. [2022 (63) GSTL 337 (T-del)] ITW Signode (India) Ltd. [2015 (322) ELT 699 (AP)] Vedanta Aluminium Ltd [2016 (331) ELT 408 (Cal)] Northern Operating Systems Pvt Ltd. [2022 (61) GSTL 129 (SC)] Shree Rajasthan Syntex ltd. [2015 (318) ELT 626 (SC)] Dalveer Singh [2008 (9) STR 491 (T-Del)] Jain Carrying Corporation [2019 (24) GSTL 376 (T-Del)] Natraj Stationary Products (P) Ltd [2017 (348) ELT 568 (t-Chand)] Vaspar Concepts (P) Ltd [2006 (199) ELT 711 (T-Bang)] Jer Ring Gears Pvt Ltd. [2005 (186) ELT 73 (T-Bang)] Anand Metal Industries [2005 (187) ELT 119 (T-Del)] Westinghouse saxby Farer Ltd. [2021 (376) ELT 14 (SC)] Ambuj Hotels real Estate Pvt Ltd. [2019 (24) GST 389 (T-All)] Ispat Industries Ltd. [2006 (199) ELT 509 (T-Mum)] Bripanil Synthetics (P) Ltd. [2006 (203) ELT 11 (Kar)] 3.3 Arguing for the revenue learned authorized representative reiterated the findings recorded in the impugned order. 4.1 We have considered the impugned order alo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 (172) ELT 24 9SC), has held at Para 5, as under: 5. We find that the High Court has merely referred to the decision in R.K. Jain s case (supra) without even indicating as to applicability of the said decision and as to how it has any relevance to the facts of the case. It would have been proper for the High Court to indicate the reasons and also to spell out clearly as to the applicability of the decision to the facts of the case. There is always peril in treating the words of a judgment as though they are words in a Legislative enactment and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case. Circumstantial flexibility, one additional or different fact may make a difference between conclusions in two cases . 4.6.1 Similarly, the Hon ble Supreme Court in the case of CCE, Bangalore vs Srikumar Agencies 2008 (232) ELT 577 (SC), interalia, held as under: Precedents - Court decision not statute - Reliance thereon without discussion of facts - Decisions not to be relied upon without discussing similarity of facts - Judgments of courts not to be construed as statutes - Circumstantial flexibility, additional or dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntested facts, the agreements for hire for use of the vessels (tankers), Disha and Raahi were entered into on 31-3-2001 and the tankers delivered to the assessee on 9-1-2004 and 16-12-2004 respectively. The short term charter agreement for the tanker Trinity Glory was entered into on 30-4-2009 and the delivery was on 15-5-2009. (B) STGU was enacted as a taxable service w.e.f. 16-5-2008 by introduction of Section 65(105)(zzzzj) in the Act. According to the assessee, since entering into the long-term charter agreements and the supply (delivery) of Disha and Raahi was earlier to introduction of this taxable service, no Service Tax can be assessed, levied or collected on the consideration (hire charges) remitted by the assessee to the owner of these tankers, notwithstanding that such remittances were subsequent to 16-5-2008. This is so, according to the assessee, since the taxable event is the supply of tangible goods. (C) From the statutory provision (extracted in para 9 supra), the following ingredients must be satisfied for a transaction to constitute the taxable service : (i) There should be a supply of tangible goods (including machinery, equipment and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the taxable event occurs on the entering into the agreement followed by delivery of the tankers and not on day-to-day basis as contended by the Revenue. The stipulation as to payment of daily hire charges is only a commercial term relating to computation of the hire charges payable by the assessee to the owners. These clauses do not legitimize the inference that supply occurs on each day the tankers are used. (G) The Supreme Court in 20th Century Finance Corporation and Anr. (supra) clarifies that where goods are available, the transfer of the right to use takes place when the contract in respect thereof is executed; since the contract is executed, the right is vested in the lessee; and the situs of the taxable event of such tax (Sales Tax or VAT, as the case may be) would be the transfer, which legally transfers the rights to use goods. (H) In Art Leading Limited v. CCE, Cochin - 2007 (8) S.T.R. 162 (Tri.-Bang.), the issue was the rate of Service Tax applicable to the taxable banking and other financial services , pertaining to hire purchase contracts. The contracts in issue were entered into prior to 14-5-2003. The rate of Service Tax was enhanced from 5% to 8% w.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... text of the 2006 Rules as well. The proviso to Rule 3(iii) of the Rules, is a specific provision applicable to the taxable service specified and defined in Section 65(105)(zzzzj); and reads : Provided that where the taxable service referred to in sub-clause (zzzzj) of clause (105) of Section 65 of the Act is received by a recipient located in India, then such taxable service shall be treated as taxable service provided from outside India and received in India subject to the condition that the tangible goods supplied for use are located in India during the period of use of such tangible goods by such recipient . According to the assessee, on a true and fair construction of the language of the proviso, where the tangible goods supplied for use cannot be said to be located in India during the period of their use by the recipient of the service, the transaction cannot be treated as a taxable service provided from outside India and received in India. The assessee contended that the tangible goods in issue are oil tankers used for transportation of LNG under cryogenic conditions, from Qatar to the assessee s regasification terminal at Dahej, Gujarat. (ii) During a subst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service is provided at some point of time in India it is enough to be covered in the word during as it appears in proviso to Notification No. 11/2006-S.T., dated 19-4-2006. (vii) The 2006 Rules were issued (by Notification No. 11/2006-S.T., dated 19-4-2006), in exercise of powers conferred by Sections 93 and 94 read with Section 66A of the Act. Rule 3 of these rules sets out provisions specifying in the circumstances in which taxable services provided from outside India and received in India fall would amount to a taxable service, under the Act. Rule 3(i) enumerates specified categories of taxable services, provided or to be provided in relation to immovable property situated in India. Rule 3(ii) specifies taxable services, (other than those specified in Rule 3(i); and the first proviso thereto enjoins that where such taxable services are partly performed in India, it shall be treated as performed in India. Rule 3(iii) enumerates taxable services excluding those specified in Clauses (a), (b) and (c) thereunder. (viii) The proviso to Rule 3(iii) is a specific and distinct provision in relation to STGU, a taxable service enumerated and defined in Section 65(105)(zzzzj). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The separate and distinct treatment specified for the taxable STGU service, in the proviso to Rule 3(iii) of the 2006 Rules, in our considered view clearly signals the statutory intent that tangible goods, for falling within the fold of the reverse charge mechanism, must when supplied for use be located in India during the entirety of the period of their use, by the recipient. The contrary conclusion by the adjudicating authority in para 38.6 of the order cannot therefore be sustained. 38. Legality of imposition of penalties under Sections 76 to 78 : (i) As indicated in the factual narrative set out in paragraphs 6 and 7 (supra), penalties under Sections 76 to 78 of the Act were imposed on the assessee, either by the adjudication order or subsequent corrigenda issued. The assessee challenges imposition of penalties, contending that penalties are liable to be chewed by invocation of the discretion Section 80 of the Act. (ii) It is contended that on 26-2-2009, a letter was issued by the Assistant Commissioner of Service Tax seeking certain documents with regard to the charter agreements. The documents were furnished by the assessee, vide its letter dated 28-2- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws : 5.2 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 can not be said that there is no right to use by the lessee. Such a view of the revenue does not appear to be tenable when we read carefully the provisions of the agreement. Cl. 13 of the agreement provides for Hirer s Covenants. As per Cl. 13.1, the hirer will use the equipment only for the purpose it is hired and shall not misuse or abuse the equipment. Similarly in Cl. 13.3, it is provided that the hirer will ensure the safe custody of the equipment by providing necessary security, parking bay, etc., and will be responsible for any loss or damage or destruction. Cl. 13.5 provides that the hirer shall be solely responsible and liable to handle any dispute entered with any third party in relation to the use and operation of the equipment. Further Cl. 14 dealing with title and ownership specifically provides that equipment is offered by GIMMCO Ltd. only on rights to use basis . Cl. 15 relating to dam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the goods are delivered for use subject to the condition that the goods should be in existence for use; (3) in the transaction for the transfer of the right to use goods, delivery of goods is not condition precedent, but the delivery may be one of the elements of the transaction; (4) the effective or general control does not mean always physical control and even if the manner, method, modalities and the time of the use of goods is decided by the lessee or the customer, it would be under the effective or general control over the goods; (5) the approvals, concessions, licences and permits in relation to goods would also be available to user of the goods, even if such licences or permits are in the name of transferor of the goods; and (6) during the period of contract exclusive right to use goods along with permits, licences, etc., vests with the lessee. Applying these principles and examining the terms of the contract, the Hon ble High Court held that the transaction involved was a transfer of right to use Transit Mixers and not transport service and the petitioners had transferred the right to use goods to Grasim. If we apply the ratio of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decisions referred to above, it clearly transpires that; (i) Whether there is a transfer of right to use or not is a question of fact which has to determine in each case having regard to the terms of the contract under which there is a transfer of right to use; (ii) If with the transfer of the right to use, possession and effective control is also transferred, the transaction falls outside the preview of service tax liability. However, when the effective control and possession is not transferred and it continues to remain with the person who has given the machinery on hire, it would not be open to the authority to levy service tax; (iii) Mere fact that the persons are employed by the owner does not in any manner deter from the fact that the transaction constitutes a transfer of the right to use the tangible goods with possession and effective control; and (iv) The fact that after the operation is over on any given day and the tangible goods come back to the owner is not a material fact for deciding who has the dominion over the tangible goods. 35. The main contention of the Department is that the appellant was responsible for loading, unloading, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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