TMI Blog2019 (5) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to VAT as the appellant are paying the VAT as per the provision of the State Government VAT Act. Thus, the services would not fall under the category of tangible goods for use - appeal allowed - decided in favor of appellant. - Service tax Appeal No. 11493 of 2016 - A/10781/2019 - Dated:- 2-5-2019 - MR. RAMESH NAIR, MEMBER (JUDICIAL) And MR. RAJU, MEMBER (TECHNICAL) For the Appellant: Shri Saurabh Dixit, Adv For the Respondent: Ms. Nitina Nagori, Jt. Commr. (AR) ORDER RAMESH NAIR Briefly stated facts of the case are that during the course of audit it was noticed that appellant has recovered rent charges towards rents of gas cylinders obtained by them from the appellant for the period from 2009-10 to 2012-13. The department was of the view that the said income falls under the Supply of Tangible Goods Service for use without transfer of right of possession/control therefore service tax is required from the appellant. The department issued show cause notice to the appellant proposing the demand of such Service Tax not paid, impugned order confirmed the demand of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT Mumbai (15) Brindavan Bottlers Ltd. 2019 (3) TMI 1428-CESTAT Allahabad He further submits that as per the board s circular no 168/3/2013-ST dated 15/04/2013, the board has laid down the criteria for deciding the transfer of the right to use of goods and according to said circular, the appellant s transaction does not fall under supply of tangible goods for use . He also referred to the board s letter DOF No. 334/1/2008-TRU dated 29/2/2008 wherein it is clarified that for the purpose of goods leviable to sales Tax/VAT, transfer of right to use involves transfer of both possession and control of the goods to the user of the goods. He submits that in the present case also, the possession and effective control has been given to the lessee of the cylinders. Therefore, it is a deemed sale and accordingly, not leviable to Service tax under supply of tangible goods for use . 3. Ms. Nitina Nagori, Ld. Jt. Commr. (AR) appearing on behalf of the Revenue reiterates the finding of the impugned order. 4. Heard both sides and perused the records. We find that the issue to be considered by us is that whether the supply of cylinde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrol is not transferred. Therefore, supply of tangible goods on lease basis with transfer of right to possession and effective control will go out of ambit of taxable services. Moreover this transaction is undisputedly liable to VAT as the appellant are paying the VAT as per the provision of the State Government VAT Act, the board in the DOF letter dated 29/02/2008 (supra), in para 4.4, clarified as below: 4.4 Supply of tangible goods for use: 4.4.1 Transfer of the right to use any goods is leviable to sales tax/VAT as deemed sale of goods (Article 366(29A)(d) of the Constitution of India]. Transfer to right to use involves transfer of both possession and control of the goods to the user of the 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 machinery 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 trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see and hence, the transaction has to be treated as service. 5.2 Revenue s contention is based on the clauses in the agreement relating to restrictions of use by the lessee, provision of skilled operator by the lessor and maintenance and repairs of the equipment by the lessor. Merely because restrictions are placed on the lessee, it can not be said that there is no right to use by the lessee. Such a view of the revenue does not appear to be tenable when we read carefully the provisions of the agreement. Cl. 13 of the agreement provides for Hirer s Covenants. As per Cl. 13.1, the hirer will use the equipment only for the purpose it is hired and shall not misuse or abuse the equipment. Similarly in Cl. 13.3, it is provided that the hirer will ensure the safe custody of the equipment by providing necessary security, parking bay, etc., and will be responsible for any loss or damage or destruction. Cl. 13.5 provides that the hirer shall be solely responsible and liable to handle any dispute entered with any third party in relation to the use and operation of the equipment. Further Cl. 14 dealing with title and ownership specifically provides that equipment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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; (3) in the transaction for the transfer of the right to use goods, delivery of goods is not condition precedent, but the delivery may be one of the elements of the transaction; (4) 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; (5) the approvals, concessions, licences and permits in relation to goods would also be available to user of the goods, even if such licences or permits are in the name of transferor of the goods; and (6) during the period of contract exclusive right to use goods along with permits, licences, etc., vests with the lessee. Applying these principles and examining the terms of the contract, the Hon ble High Court h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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