2025 (7) TMI 1142 - AT - Service Tax

Classification of service - Cash Van Rent Income - supply of tangible goods services or not - Invocation of extended period of limitation - Cum duty benefit- HELD THAT - The Cash Van required by the bank was to be specially designed for safe carriage of cash. It provides finer details like make of the vehicle internal fittings as well as external modifications. It even prescribes preference for ex-service man as driver/ stand by driver after proper police verification. The contract obligates the owner of the cash van to provide alternate vehicle in case of failure break down or servicing etc. of the existing one and also the stand by driver in case of need. Normal working hours of the cash van were specified with caveat to use the vehicle on Sundays/holidays and even on late hours if needed without extra charges. For payment of charges proper log book to be maintained for recording the kilometres which are to be counted from the reporting branch/office. Owner of the vehicle to bear all running expenses such as diesel engine oil lubricant maintenance charges driver s salary etc. In the case of K P Mozika Vs. ONGC 2024 (1) TMI 443 - SUPREME COURT the issue before the Apex court was whether in hiring of cranes truck mounted all terrain hydraulic cranes trailers etc. was there transfer of right to use goods? In this case the contract envisages that when a crane is defective another crane of similar specification must be offered as a replacement by the contractor. Therefore the contract does not remain confined to only those cranes described in the agreement but the contractor has an obligation to replace the crane. As per the contract the contractor must make adequate and proper arrangements for fuel lubricant and other consumables etc in relation to the cranes and other items. The contractor shall look after the repair and maintenance of the cranes. In the instant case it is observed that Sr. No 10 the contract provides that the owner should have service tax registration. Specially designed vehicles have been contracted to be provided by the owner to the bank. The vehicle owner is under obligation to make alternate vehicle available to the bank in case of failure break down or servicing etc. - it transpires that the present case is a case of permissive use of cash van and not the transfer of right to use. Consequently it is found that the instant case is not covered as deemed sale as claimed by the appellant and falls under service tax under supply of tangible goods service . Otherwise also the appellant has not produced any evidence during proceedings of the case that they have paid any VAT on the said the transactions treating the same as deemed sale. Invocation of extended period of limitation - HELD THAT - The department has established that the appellant neither disclosed to the department the fact of providing these services to the bank(s) nor did they take registration for the said service. They also did not file prescribed the ST-3 returns Thus there was no occasion for the department to know the activity of the appellant - the extended period of limitation is available to the department. The show cause notice is not barred by limitation. Contention to allow cum duty benefit - HELD THAT - At Sr. 4 of the terms and conditions of the agreement it is clearly mentioned that no service tax will be paid which means that the value of service received by the appellant includes the element of service tax also. - We therefore allow this plea of the appellant and remand the matter to the adjudicating authority for quantifying within 8 weeks from the receipt of this order the service tax liability afresh by giving cum duty benefit. Needless to say interest and penalty shall be re-determined after quantifying the tax liability. Appeal is partly allowed by way of remand.

Summary

ISSUES:

Whether the provision of "Cash Van" with driver to banks constitutes "Supply of Tangible Goods Service" under Section 65(105)(zzzzj) of the Finance Act, 1994.Whether the service provided by the appellant falls under "transportation of cash" service or "supply of tangible goods" service.Whether the possession and effective control of the cash van is transferred to the bank, thereby constituting a "deemed sale" attracting Sales Tax/VAT instead of Service Tax.Whether the extended period of limitation for demand of service tax is invocable due to suppression of facts by the appellant.Whether the appellant is entitled to cum-duty benefit while quantifying service tax liability.

RULINGS / HOLDINGS:

The provision of cash vans with drivers does not amount to transfer of right to use goods but amounts to a permissive use; hence, the service falls under "Supply of Tangible Goods Service" as per Section 65(105)(zzzzj) of the Finance Act, 1994.The appellant's contention that the service is "transportation of cash" is rejected as the contract and facts show that the control over the cash van remains with the owner, who bears all running expenses and liabilities, and the bank does not have effective control.The possession and effective control of the cash van is not transferred to the bank; therefore, the transaction is not a "deemed sale" attracting Sales Tax/VAT but a taxable service under Service Tax law.The extended period of limitation is invocable since the appellant suppressed the provision of cash van services and failed to obtain service tax registration or file returns, thereby justifying the demand beyond the normal limitation period.The appellant is entitled to cum-duty benefit as the contract explicitly states "no service tax will be paid," indicating that the consideration includes service tax; hence, the matter is remanded for fresh quantification of service tax liability with cum-duty benefit.

RATIONALE:

The Court applied the legal framework under Section 65(105)(zzzzj) of the Finance Act, 1994, and relied on the Supreme Court's test for transfer of right to use goods as expounded in Bharat Sanchar Nigam Limited case, which requires satisfaction of five attributes including transfer of possession and effective control.The Court distinguished the present contract from cases involving transfer of right to use by emphasizing that the vehicle owner retains control, bears expenses, provides driver and standby driver, and is responsible for maintenance and insurance, thus constituting permissive use rather than transfer of right to use.The Court referred to the Supreme Court decision in K P Mozika Vs. ONGC, which held that where the user does not face legal consequences of using goods and control remains with the supplier, the transaction is a service and not a deemed sale.The Court rejected reliance on judgments concerning classification of security services with cash vans, noting that those cases dealt with different issues and that the present case concerns classification under "Supply of Tangible Goods Service."The extended limitation period was upheld based on the principle that suppression of facts and failure to register or file returns justifies invoking extended period under the Finance Act.The Court allowed the cum-duty benefit plea based on contractual terms explicitly including service tax in the consideration, directing remand for recalculation of tax, interest, and penalty accordingly.