TMI Blog2017 (6) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... goods for use service”. The circular mentions, that if the item/ instrument has been supplied for use but without any legal right of its possession and effective control, then the use of the item is to be treated as “service” and not the “sale” and in that case service tax will be liable to be paid under the category of “supply of tangible goods for use service” - the subject transactions are to be verified by the original authority, whom we are remanding this matter, then only it can be determined whether there is a “service” or a “sale”. Appeal allowed - part matter decided in favor of assessee and part matter on remand. - Service Tax Misc. Application No.ST/M/55543/2014-ST [DB] in ST/58244/2013-ST [DB] - ST/A/53592/2017-CU[DB] - Dated:- 31-5-2017 - S. K. Mohanty, Member (Judicial) And Ashok K. Arya, Member (Technical) For the Appellant : Mr. B.L. Narasimhan, Advocate Mr. Narendra Singhvi, Advocate For the Respondent : Mr. Amresh Jain, D. R. ORDER Per : Ashok K. Arya Appellant, M/s. J. Mitra and Company Pvt. Ltd. is in appeal against Order-in-Original No. No.61-62/2012-13 dated 31.03.2013 passed by the Commissioner of Central Excise, Delhi-II. Her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sales and services of M/s.Olympus. The service which is being called BAS rendered by the appellant is for their client, namely M/s.Olympus and its consumption is also by their clinet M/s.Olympus, who is based in Singapore. Merely because the promotion of sales and services of M/s.Olympus Singapore PTE Ltd. is for the Indian consumers, it does not mean that BAS rendered by the assessee appellant is consumed within the country, when in- fact they are rendering service to their client, namely M/s.Olympus Singapore PTE Ltd. Thus, consumption of services rendered by the assessee is in foreign land i.e. in Singapore by the service recipient, M/s. Olympus. 5.1 From the facts on record it appears that the subject matter is covered by the Tribunal s decisions in the cases of Paul Merchants Limited vs. Commissioner 2013 (29) STR 257 (Tri.-Del.) and M/s.Gap International Sourcing (India) Pvt. Ltd. vs. CST 2014 TIOL-465-CESTAT-Del. The Tribunal in the case of GAP International (supra) has observed as under:- 8.3 Though the term recipient in respect of a service is not defined in the Finance Act, 1994 or in the rules made thereunder, the gap has to be filled by construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ractitioners (supra) and Association of Leasing and Financial Service Companies (supra) that service tax is a value added tax, which, in turn, is a destination based consumption tax in the sense that it is not a charge on business but is a charge on the consumer. Therefore what constitutes export of service has to be decided strictly in accordance with the provisions of Export of Service Rules, 2005 and for this purpose, in case of services in relation to business or commerce covered by Rule 3 (1) (iii), the term service recipient has to be understood in the sense as explained in para 8.3 above. 8.5 In the context of export of service, once a service, on the basis of Rule 3 (1) (i), 3 (1) (ii) or 3 (1) (iii) of the Export of Service Rules, 2005 has been determined to have been received outside India i.e. consumed outside India, the conditions in Rule 3 (2) regarding their delivery outside India and use outside India are automatically satisfied as, as explained in para 8.1 above, in the context of services, the receipt, consumption and delivery of the service is the same. Therefore the condition regarding delivery of service being outside India and use of service being out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Financial Service Companies (supra), as a service which has not been consumed in India, cannot be taxed in India. 9. In this case, M/s GAP, U.S.A. do not have any branch or project or business establishment in India. The service in relation to procurement of goods being provided by the appellant are entirely meant for M/s GAP, U.S.A. and the service in question, - business auxiliary service, covered by Rule 3 (1) (iii) of the Export of Service Rules, 2005 have obviously been used by M/s GAP, U.S.A. in relation to their business located abroad. Therefore these services have to be treated as delivered outside India and used outside India and since payment for the service has been received in convertible foreign exchange, the same would have to be treated as exported out of India. The impugned order passed by the commission is an absurd order contrary to the provisions of Export of Service Rules, 2005. 5.2 Following the observations made in the case of GAP International Sourcing (India) Pvt. Ltd. (supra) and Paul Merchants Ltd. (supra), in this regard, the impugned order is set aside and the appeal is allowed with consequential benefit, if any. 6. Now we take up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods. 4.4.2 Excavators, wheel loaders, dump trucks, crawler carriers, compaction equipment, cranes, etc., offshore construction vessels barges, geo-technical vessels, tug and barge flotillas, rigs and high value machineries are supplied for use, with no legal right of possession and effective control. Transaction of allowing another person to use the goods, without giving legal right of possession and effective control, not being treated as sale of goods, is treated as service. 4.4.3 Proposal is to levy service tax on such services provided in relation to supply of tangible goods, including machinery, equipment and appliances, for use, with no legal right of possession or effective control. Supply of tangible goods for use and leviable to VAT / sales tax as deemed sale of goods, is not covered under the scope of the proposed service. Whether a transaction involves transfer of possession and control is a question of facts and is to be decided based on the terms of the contract and other material facts. This could be ascertainable from the fact whether or not VAT is payable or paid. The Circular is clarifying that wherever supply of tangible goods for use involves ..... X X X X Extracts X X X X X X X X Extracts X X X X
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