2023 (1) TMI 150 - AT - Service Tax
Recovery of service tax alongwith tax and penalty - Non-payment of service tax - appellant had received ‘supply of tangible goods for use’ (STGU) service from foreign suppliers - reverse charge mechanism - whether the transaction between the appellant and the foreign buyer would involve the transfer of right of possession and effective control or a transfer of right to use? - HELD THAT:- The Constitution empowers the State to levy Sales Tax/VAT on transactions in the nature of transfer of right to use goods, which were earlier not exigible to sales tax as such transactions were not covered by the definition of “sale” as given in the Sales of Goods Act, 1930 - the term “transfer of right to use goods” has neither been defined in the Constitution nor in any of the State VAT Acts or Central Sales Tax Act.
The transaction between the appellant and the foreign buyer would qualify as a transfer of right to use goods with the control and possession over the ISO Tanker passing on to the appellant.
The Andhra Pradesh High Court in RRASHTRIYA ISPAT NIGAM LTD. VERSUS COMMERCIAL TAX OFFICER, COMPANY CIRCLE, VISAKHAPATNAM [1989 (12) TMI 325 - ANDHRA PRADESH HIGH COURT] observed that the transaction does not involve transfer of the right to use the machinery in favour of the contractor. As the fundamental requirement of section 5-E is absent, the hire charges collected by the petitioner from the contractor are not exigible to sales tax.
The impugned order notices that the appellant had taken the ISO containers on lease/rental basis and it had paid an amount of Rs. 4,60,67,566/- to the foreign supplier who did not have any office in India for supply of the containers - The Commissioner fell in error in not appreciating the difference between a ‘sale’ and ‘a deemed sale’ contemplated under article 366 (29A) of Constitution. In ‘a deemed sale’ it is necessary to examine who has the possession and effective control over the goods. Even the Circular dated 29.02.2008, on which reliance has been placed by the Commissioner, emphasises that in the case of ‘a deemed sale’ under article 366 (29A) of Constitution, transfer of right to use involves both transfer of possession and control over the goods. The Commissioner also fell an error in holding that since sales tax/VAT was not paid by the appellant, it would not amount to ‘a deemed sale’. The Commissioner failed to appreciate that since the translation involved sale or purchase of goods in the course of import of goods into India, no sales tax/VAT was required to be paid even if the transaction qualified as ‘a deemed sale’.
The supply of ISO Tankers on lease/rental basis by foreign suppliers to the appellant would amount to a deemed sale under article 366 (29A) of Constitution as the appellant throughout had effective control and possession over the ISO Tankers. The order dated 29.07.2016 passed by the Commissioner, therefore, cannot be sustained - Appeal allowed.