TMI Blog2016 (12) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The assessee’s activity of giving various equipments on hire does not fall under the category of “Supply of tangible goods for use”, hence the same is not liable to service tax w.e.f. 16.05.2008. Now coming to the Revenue’s appeal, we find that the Ld. Commissioner dropped the demand for the period prior to 16.05.2008 mainly on the ground that the service is of “Supply of tangible goods for use” which came into effect on 16.05.2008, therefore prior to that date the service was not taxable. However, we, in our above findings, held that the service in question is not the service of “Supply of tangible goods for use”. In this position the main ground of the Ld. Commissioner for dropping of demand does not exist and not relevant. Though the Ld. Commissioner in a passing reference mentioned in the impugned order that the service prior to 16.05.2008 does not fall under the “Business Auxiliary Service” but not given the detailed findings. Therefore when the main ground for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view that the activity of renting of earthmoving equipment would come under the purview of service tax under the taxable service category of business auxiliary service for the period prior to 16-5-2008 and under the category of supply of tangible goods for use with effect from 16-5-2008 and accordingly issued a notice dated 23/25-8-2010 demanding service tax amounting to ₹ 2,13,10,930/- for the period 2005-06 to 2009-10 along with interest thereon under the provisions of Section 73 read with Section 75 of the Finance Act, 1994. The notice also proposed to impose penalties under Sections 76, 77 and 78 of the said Finance Act. While adjudicating the said show cause notice, the Ld. Commissioner confirmed the demand of service tax under the category of supply of tangible goods for use for the period from 16-5-2008 amounting to ₹ 67,39,694/- along with interest thereon and also imposed penalties on the assessee under Section 77, Rule 7C of the Service Tax Rules, 1994 and Section 78 of the said Finance Act. However, he dropped the demand of ₹ 1,45,71,236/- raised for the period prior to 16.05.2008 under the category of Business Auxiliary Service . Hence GIMMCO f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent case and therefore, the transaction has to be held as deemed sales and not as service. He further submits that the demand is time bar, as the assessee, on the basis of Finance Minister s speech, was of bonafide belief that since they are paying the VAT on their transaction, their activity is not liable to service tax. In the light of the above, he pleads for allowing the appeal of the assessee. As regards the Revenue s appeal, he submits that the service is renting of equipments. This renting does not fall any of the sub entries in the definition of Business Auxiliary Service . Therefore the same is not taxable. The Ld. Commissioner rightly dropped the demand for the period prior to 16.05.08. 4. Shri Vikram Kaushik, Ld. Assistant Commissioner (AR) appearing on behalf of the Revenue, in respect of assessee s appeal, strongly refutes the contentions of the assessee and submits as follows :- (i) the transaction is one of supply of tangible goods for use. The effective possession and control of the equipment lies with the assessee as is evident from the agreement dated 20-10-2009 entered into with one of their customers M/s. Avtar Company. (ii) As per clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee of cost, they also provided one skilled operator for operation of the equipment at the site. Therefore combining all the acitivities, the service clearly falls under sub clause (iv) of clause (19) of section 65 as the services are of procurement of goods or service on behalf of client. Hence taxable under Business Auxiliary Servcie . 5 We have carefully considered the submissions made by both sides and perused the records. 5.1 Section 65(105)(zzzzj) defines the taxable service in respect of supply of tangible goods for use as follows : - Taxable service means any service provided or to be provided to any person, by any other person in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances. While the assessee contends that what they have transferred is right to use which is a deemed sale, the Revenue s contention is that the right of possession and effective control remained with the assessee and hence, the transaction has to be treated as service. 5.2 Revenue s contention is based on the clauses in the agreement relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shipping RMC by hiring specially designed Transit Mixers. Under the contracts, the transit mixers are never transferred and effective control over running and using of these vehicles, as well as disciplinary control over the drivers, always remained with petitioners. It was petitioner s responsibility to obtain route permits, to take the risk or loss of transportation, to decide the shifts for the drivers and vehicles, to maintain and upkeep the vehicles in good condition. The petitioners contention was that the contract was for transport service and not the transfer of the right to use the goods. 5.4 The Hon ble High Court observed that the essential requirement of a transaction for transfer of the right to use goods are : (1) it is not the transfer of the property in goods, but it is right to use property in goods; (2) Article 366(29A)(d) read with the latter part of the clause (29A) which uses the words, and such transfer, delivery or supply would show that the tax is not on the delivery of the goods used, but on the transfer of the right to use goods regardless of when or whether the goods are delivered for use subject to the condition that the goods should be in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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