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2021 (2) TMI 83 - AT - Service TaxTaxability - supply of tangible good for use or not - tool kits provided by the appellant to associated companies - supply of tangible goods without transferring right of possession and effective control - Levy of service tax on rental charges for baked oven under STGU. Whether the tool kits provided by the appellant to associated companies would be a service of “supply of tangible good for use”- STGU and would be a taxable service contemplated under section 65 (105)(zzzzj) of the Finance Act, which is any service provided to any person, by any other person, in relation to supply of tangible goods without transferring right of possession and effective control? - HELD THAT:- There is no dispute with the regard to the first two conditions. The dispute revolves around the third condition, namely whether the transaction between the Appellant and the associated companies involves transfer of right of possession and effective control. This is for the reason that any transaction involving transfer of “right to use‟ would result in a “deemed sale”, which would be beyond the purview of service tax. The term “transfer of right to use goods‟ was interpreted by the Supreme Court in BHARAT SANCHAR NIGAM LTD. (BSNL) VERSUS UNION OF INDIA [2006 (3) TMI 1 - SUPREME COURT], wherein five attributes for a transaction to constitute a “transfer of right to use goods‟ were highlighted - It is, therefore, clear that sales tax/VAT can be levied if there is a transfer of possession and effective control in goods, while for levy of service tax there is no transfer of possession and effective control. The submission of the appellant that tool kits were in possession of the associated companies with the right to use the kits to the exclusion of appellant and the appellant could also not have passed the right to any other person has not be controverterd in the impugned order nor has any material been provided by the learned Authorized Representative of the Department to controvert this fact - it is not possible to sustain the finding recorded by the Principal Commissioner. Whether service tax would be leviable on rental charges for baked oven under STGU? - HELD THAT:- This issue relates to levy of service tax under the category of STGU on the tools imported by the appellant. The appellant had imported “baking oven” from its foreign associated companies. The appellant claims that it discharged the applicable customs duty and freight charges were also paid by the Appellant. It would be seen that the Principal Commissioner has confirmed the demand by holding that “the ownership” of the baking oven continued with the foreign supplier, as a result in which the transaction would qualify as a service involving STGU - There is no discussion in the order passed by the Principal Commissioner as to why the possession and control of the baking oven continued to be with foreign companies. According the Appellant, the baking ovens were imported and they were in exclusive possession of the Appellant. Thus, when the possession and exclusive control over the imported goods was in the hands of the Appellant, the transaction would qualify as deemed sale by foreign companies. The Principal Commissioner was, therefore, not justified in holding that the transaction would result in levy of service tax under the category of STGU. Appeal allowed - decided in favor of appellant.
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