TMI Blog2019 (8) TMI 427X X X X Extracts X X X X X X X X Extracts X X X X ..... d as deemed sale of the goods, and thus has to be treated as service only. It is also the contention of the Department that after introduction of the negative list based tax regime, the activity of the supply of goods without transfer of right liable to tax by virtue of Section 66E (f) of Finance Act. The similar issue come up for consideration before this Hon ble Tribunal in case of M/S. GIMMCO LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, NAGPUR (VICE-VERSA) [ 2016 (12) TMI 394 - CESTAT MUMBAI] . The issue involved in that case was regarding the renting of earth moving equipments to various Customers by the M/s Gimmco Limited and based on the clauses in the agreement, there was restriction of use by the lessee as skilled workers to operate the equipment was being provided by the lessor and maintenance and repair of the equipments were also by the lessor and it has been held that there is no service involved in this case. It is evidently clear that the some of the activities of regarding the maintenance and washing of work-wear rented to the clients, by the appellants will not mean that effect control as been retained by the appellant - in the instant case, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o provided by the appellant. Further a statement of Shri Manas Kumar, Business Unit Manager of the appellant was also recorded under Section 14 of the Central Excise Act as made applicable to the service tax matter vide Section 83 of the Finance Act. On scrutiny of document submitted by the appellant and submissions made and deposition made by Shri Syed Ali Raja and Shri Manas Kumar, Department concluded that the service provided by the appellant is covered under the category of service of supply of tangible goods classifiable under Section 65 (105) (zzzzj) of the Act prior to 01/07/2012 and thereafter under Section 65 (b) (44) read with Section 69 (f) of the Act. In the impugned order, it was, therefore, held that the activity involves supply of tangible goods, without transferring the right of effective control, which amounted to providing of taxable service for their clients that period prior to 01/07/2012 being activity of supplying of tangible goods ad defined under Section 65 (105) (zzzzj) of the Act and after 01/07/2012 under the definition of service, as per the Section 65 (b) (44) of Finance Act read with Section 67 (e) (f) of the Act, ibid. 3. Ld. Advoca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services provided by the appellant was taxable under the aforementioned provision of the Finance Act, 1994. In the SCN, the essential features of the decision of the apex court in the case of Bharat Sanchar Nigam Vs UOI reported in 2006 (2) STR 161 (SC) was also discussed to allege that the transaction was not covered under supply of tangible Goods. 3.5 For the period after 01/07/2012 that is after the introduction of Negative List of Services, it was alleged that the identified service was neither covered by the Negative List nor by the Mega exemption notification. It was further alleged that Section 65B(44) defines Service to include a declared service. The activity is well covered under clause (f) of Section 66E of the Act, 1994 and hence taxable. 3.6 It was also alleged that the appellant was carrying out several services for the customer and hence that will be considered as bundle of services, it will be considered as provision of single service having highest rate of Tax under Section 65F(3)(b). They also invoked the larger period for demanding the Tax. The Adjudicating Authority (hereinafter also referred to as Commissioner) formulated 8 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer of effective control. (iv) In Para 8.6 of the Order, he observes that the transaction between the appellant and customer does not fulfil the ingredients enumerated in BSNL and Rashtriya Ispat Nigam case. (v) He, therefore, held that the activity undertaken by the appellant was taxable service for both the periods i.e. prior to 1/07/2012 as activity of supplying Tangible Goods as defined under Section 65(105)(zzzzj) of the Act and after 01/07/2012, under the definition of service defined under Section 65B(44) read with section 66E(f) of the Act. (Para 9 of the OIO at internal page 22) He allowed the CENVAT Credit on the input/input service. He also allowed benefit of Notification 6/2005 dated 01/03/2005 for exemption from duty if the total service provided was less than ₹ 10 lakhs for the year 2010-2011. He also allowed the Cum-Tax benefit. He therefore confirmed the reduced demand of ₹ 92,22,321/- imposed a penalty of the same amount under section 98 of the Act and a penalty of ₹ 10,000/0 under section 77(1)(a) ibid. 5. Ld. Advocate pleaded that the appellant had fulfilled all the conditions enum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shment. The appellant is required to give delivery as per specification provided by the clients customer. Once the garments are delivered, it is for the customer to satisfy any legal requirements which may be demanded by any authority. The appellant has no obligation to fulfil any compliance except the size of the garment. Any other compliance has to be undertaken by the customer without any interference by the appellant. For example, if the user is a hospital and they, by law, require to use only white dress, it is for the customer to ensure that. The appellant is neither responsible nor required to fulfil the said condition. It is entirely for the customer to ensure that. There is no covenant in the agreement which binds the appellant to ensure compliance of any requirement of law other than what is mentioned in the Agreement. Thus, this condition is also fulfilled. The fourth condition is that for the period during which the transferee has such legal right, it has to be the exclusion to the transferor this is the necessary concomitant of the plain language of the statute - viz. a transfer of the right to use and not merely a licence to use the goods; it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoices issued to them. Representative invoices are submitted in Paper Book. 8. It is submitted that once it is decided that the transaction is a transaction of sale, then no other argument is required for claiming that the transaction is not a transaction of Supply of Tangible Goods under section 65(105)(zzzzj) of the Finance Act, 1994. The said section is worded as below: 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 the right of possession and effective control of such machinery, equipment or appliances. 9. It is submitted that the appellant has made it very clear that this case not only the right of possession of garment was transferred but also it was under the effective control of the Customer/clients. They could use the garment as per their own free will. The supplier had not imposed any restriction on use of the garment. As the appellant remained the owner of the goods, it was his responsibility to take care of the goods, lest it does not last its normal life, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of GIMMCO LTD. Versus COMMISSIONER OF C. EX. S.T., NAGPUR reported in 2017 (48) STR 476 (Tr.-Mum) has quoted with approval the gist of decision of the Hon ble High Court of Andhra Pradesh in the case of G.S. Lamba (The original Order of GS LAMBA has been submitted at the time of hearing) in Para 5.4 as below: 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 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; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned order and states that the Commissioner by elaborate order has held that in the case at hand the appellant has effective control over the equipment supplied by them as no other person is allowed to wash the work-wear and maintenance is also mandatorily required to be done by the appellant. The work-wear supplied to their various customers in terms of agreement remains under the effective control of appellant, and therefore, the question of treating the contract as deemed sale, as claimed by the ld. Advocate is not appropriate and correct. He hence prays for upholding the impugned order in appeal. 18. We have heard Ld. Advocate for the appellant and Ld. DR for Revenue and also perused the appeal records. 19. The appellant is engaged in providing work-wear solution to the various industrial customers in terms of various agreements where there is transfer of effective control to the client. For the better appreciation the issue involved, it will be appropriated to extract the relevant provisions of the agreement entered by the appellant with their customers. A perusal of the agreement which has been placed on appeal record between the appellant and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ................. 22. Ld. Adjudicating Authority has treated this to be a pure service relying on the conditions of the agreement and also various other information available on the website of the appellant. 23. It was held that the work-wear always in the control of appellant and hence there is no transfer of effective control by the appellant hence out of the purview of the deemed sale as per the Article 366 (29A)(d) of the Constitution of India. It is necessary to have transfer of right to use involving both transfer of possession and also effective control of the goods by the user of the goods. The transaction for allowing another person to use the goods without giving legal right of possession cannot be treated as deemed sale of the goods, and thus has to be treated as service only. It is also the contention of the Department that after introduction of the negative list based tax regime, the activity of the supply of goods without transfer of right liable to tax by virtue of Section 66E (f) of Finance Act. On the other hand, we find that Ld. Advocate as relied upon the Hon ble Supreme Court s decision in case of Bharat Sanchar Nigam vs. Union o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The paragraph 4 which is relevant is reproduced as below; 4. The Petitioners' counsel contends that five eventualities to infer the transfer of the right to use goods are not completely present in the transaction between the Petitioners and Grasim. He would urge that the Tribunal was wrong in relying on Clauses (A), (B) and (D) of the contract in concluding that the Petitioners had transferred the right to use Transit Mixers to Grasim. According to him, these clauses would not lead to any such conclusion and that there was no intention to create exclusive right to use the vehicles by Grasim. The clause for providing dedicated fleet of vehicles with Grasim's logo Birla Concrete being painted on them is no indication that the intention was to transfer the right to use Transit Mixers. The RMC is a product with short shelf life and its marketability depends on the quality. So as to assure the product quality to end-user, it was agreed to paint the brand name on the vehicles. The same, however, does not lead to an inference that there is consensus ad idem; and that the Petitioners should keep ready the dedicated fleet of eight vehicles to be used by Grasim. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy of the work-wear always lies with the user. Once the work-wear/clothing is delivered/ handed over to a particular user, it is up to the user how to put the same to use as per his choice. There remains no control of the noticee over the user so as to restrict or compel a user to use the articles of clothing in a particular manner. This proves that the possession and custody of goods practically remains with the user. 26. Accordingly, we find that in the instant case, in terms of agreement work-wear rented out always remains within the exclusive possession of their clients and nobody else can use the those workwear at the same time and hence effective control to lie with the user/ clients. The appellant, therefore, does not have control over the use of the work-wear. Thus the activity is not in the nature of service under the Finance Act in both during the period prior to negative list regime and thereafter as held in the impugned order. The order under challenge is, therefore, not sustainable. 27. In view of above the impugned order is set aside and appeal is allowed. (Order pronounced on 02/08/2019) - - TaxTM ..... X X X X Extracts X X X X X X X X Extracts X X X X
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