2024 (1) TMI 137 - CESTAT AHMEDABAD

Classification of service - appellant had leased equipment called as “Gas Genset” to M/s. Gujarat Agrochem Ltd. during the material period along with legal right of possession and effective control - classifiable as an activity of supply of tangible goods for use or the leasing activity? - scope of agreement between the lessor and lessee - HELD THAT:- From the relevant clauses of the agreement, it is clear that during the lease period the right to possession and effective control is completely with the lessee and not with the lessor (appellant). It is also not disputed that the said transaction is the deemed sale in terms of Article 366 29 (A) of Constitution of India which is liable to State VAT - In the present case also the appellant considering the transaction as deemed sale discharged the VAT liability to the state Government. Therefore, the transaction which is a domain of VAT department, the same cannot be liable to service tax.

In the case of GS. LAMBA AND SONS VERSUS STATE OF ANDHRA PRADESH [2011 (1) TMI 1196 - ANDHRA PRADESH HIGH COURT] Hon’ble Andhra Pradesh has held that The existence of goods is identified and the transit mixers operate and are used for the business of Grasim. Therefore, conclusively it leads to the only conclusion that the petitioners had transferred the right to use goods to Grasim.

In the case of GIMMCO Ltd. [2016 (12) TMI 394 - CESTAT MUMBAI], Mumbai Tribunal has held that the transaction involved herein is “transfer of right to use” which is a deemed sale and not “supply of tangible goods for use” service.

Under the identical set of facts it was viewed that the right of possession and effective control has been transferred particularly considering the fact that the lessor have paid the VAT considering the transaction as deemed sale in terms of Article 366 29 (A) of the Constitution of India. Since the same facts and issue involved in the present case, the ratio of above judgments are directly applicable in the present case also.

The demand of service tax under tangible goods for use service in the present case is not sustainable - the impugned order is set aside - Appeal allowed.