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TMI Blog2018 (3) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... n Qube digital format. The original analog film is digitized i.e. Mastering. From the master copy, virtual print is made depending upon the requirement of the film producer. The appellant charge for Mastering and Virtual Prints from the film producer and pays service tax on the same under Video Tape Production Service. The virtual prints are uploaded by the personnel in the Qube servers located in the theatres where the film producer desires to release the film. The Virtual Print can also be directly uploaded through satellite from the servers located in the appellant's premises to the servers located in the theatres. The appellant had 1099 theatres in their fold through India during the year 2009-10. The appellant provided Digital Projectors and Servers with Qube Digital Technology to the theatre owners on "Right to Use" basis through an agreement called Letter of Undertaking (LOU). In terms of this LOU, the theatre owners have to pay a non-refundable deposit and also pay "Per Show Fee" and in addition the appellant will also have exclusive right of 20 minutes advertising time for every show. The appellant was charging an advance of Rs. 30,000/- towards "Per Show Fee" which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra Pradesh - 2015 (325) ELT 316 (AP). The Ida counsel submitted that the department is relying upon clauses 7, 11, 15 and 22 of the agreement /LOU to contend that the appellant has not transferred effective control to the customers. The Hon'ble High Court of Andhra Pradesh in the above said decision had considered the issue what is effective and general transfer of effective control. It was observed that transfer of effective control does not necessarily require physical transfer of control when the lease / letting out is given with the choice to the customer for selecting the manner and time and nature of use and enjoyment, it is transfer of the right to use goods. The ld. counsel also produced documents of the proceedings before the Commercial Tax Officer and also the proceedings before the Deputy Commissioner (Appeals) in respect of the demand of VAT on the right to use they collected from the customers. In appeal, the Deputy Commissioner (Appeals) had held that the user fee collected by the appellant is subject to levy of VAT, therefore the demand of service tax on the same under the category of Supply of Tangible Goods is not sustainable. 4. With regard to the issue of di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Theatre owner shall immediately return the Equipment installed by RIMT at the Theatre to RIMT. 6. Clause 16 states that the Theatre owner agrees that a suitable non-tamperable label will be pasted on the equipment stating "This Equipment is/are the property of Real Image Media Technologies Pvt. Ltd." 7. In case the equipments are confiscated by any statutory authorities, the Theatre Owner shall indemnify RIMT for the loss arising out of such confiscation (Clause17) 8. Clause 18 states that RIMT will provide adequate technical support on a timely basis, provide software upgrades to QCT 9. CLAUSES 19 (C) and 20 of the Letter of Undertaking state that on termination of the Agreement, the Theatre owner shall return the Equipment to RIMT 6. Ld. AR contended that the above aspects would show that the customers / theatre owners do not have right of possession over the equipment as it has never become the property of the theatre owners at any point of time. The appellant can take repossession of the goods. Therefore, the supply of the goods is without transfer of right of possession. As regards effective control, the above clauses in the agreement would show that the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e judicial decisions, the settled essential requirement of a transaction for transfer of the right to use goods are : (i) it is not the transfer of the property in goods, but it is the right to use property in goods; (ii) 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 existence for use; (iii) in the transaction for the transfer of the right to use goods, delivery of goods is not a condition precedent, but the delivery of goods may be one of the elements of the transaction; (iv) the effective or general control does not mean always physical control and, even if the manner, method, modalities and the time of the use of goods is decided by the lessee or the customer, it would be under the effective or general control over the goods; and (v) the approvals, concessions, licences and permits in relation to goods would also be available to the user of goods, even if such licences or ..... 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