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TMI Blog2024 (1) TMI 452X X X X Extracts X X X X X X X X Extracts X X X X ..... service. The said show cause notices were adjudicated vide Orders-In-Original against which the appellant filed an appeal before the Commissioner (Appeals) who vide impugned order upheld the demand and dismissed the appeal filed by the appellant. Therefore, the present appeals filed by the appellant. 2. Shri R. Krishnan, Learned Counsel appearing on behalf of the appellant submits that the appellants have two different modules for renting of the equipment. First, the appellant go and install dehumidifier at the customer's premises thereafter the customers has complete possession and control of the equipment and operate the same at his will with their employees during the entire renting period and second where the customer requires a machine to be operated and controlled by the appellant and appellant's own technicians for the entire renting period so that is to say, the control and possession of the machine is actually with the appellants and not with the customers. Accordingly for the transaction covered by module one, the appellants pay VAT because the VAT is on transfer of right to use the goods where possession and control is given to the customer which is liable to VAT being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." 4.1 From the plain reading of the above definition it can be seen that the services can be classified under supply of tangible goods for use service only when right to possession and effective control of the equipment is not transferred to the service recipient. In the present case as per arrangement between the appellant and the service recipient, since after giving the equipment on hire to the service recipient, the right to possession and effective control is with the service recipient who possessed the equipment and operated the same with their own employee. It is also undisputed fact that the appellants have discharged the VAT considering the same as deemed sale under Article 366 (29A) of Constitution of India. Therefore, the hiring of equipment under this fact cannot be classified as supply of tangible goods for use service in terms of Section 65 (105) (zzzj) of Finance Act, 1994. This issue has been considered time and again in various cases. In the most relevant case i.e. UFO Moviez Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cating authority and in their appeal memo has made submission on clause of agreements i.e. in terms of Clause 1B of the agreement the equipment is delivered to the theatre owner; in terms of Clause 1D the Theatre owner would put a person well versed with handling of equipment; Clause 5J where the theatre owner is required to get all permissions for installation of DCE; Clause 5K as per which the theatre owner shall be responsible for all injuries, losses and damages cause to the equipment and shall also indemnify the appellant against any loss or damage arising to or in connection with the equipment for the reason other than normal wear or tear; Clause 16A as per which the appellant has transferred the right to use of DCE exclusively to the theatre owner and the theatre owner shall have effective control of the DCE and shall be free to make its own use for theatrical exhibition purpose at its sole discretion. The Ld. Senior Counsel appearing on behalf of appellant has argued by citing case laws that agreement should be read as a whole and not few clauses in isolation to decide the nature of service. 6.1 Further the fact that 600 theatres had exhibited the IPL matches and none of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008-TRU, dated 29-2-2008 Circular in Para 4.4 also states that "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". It is not in dispute that the appellant were paying VAT since 2006 and the services of "supply of tangible goods" came into service tax net later. The subject DOF was issued before the enactment and intended that the "proposed service" would not include the transaction on which VAT is "Payable or paid". The theaters are free to choose which movie to be displayed, the number of shows, the timing of shows, weather to play a movie or not and also have operational control over equipment. From these facts, it prima facie appears that the theatre were having absolute authority to run the Cinema Equipments as per their liking with no right of the appellant to interfere or to be forced by the appellant to run the Equipments as per their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of IPL matches or local advertisements have happened in the past and pass a speaking order after giving an opportunity of being heard. The appellant is at liberty to make all submissions before the adjudicating authority. 6.4 With regard to CENVAT credit on capital goods we find that it is not disputed that the appellant and theatre owner had joint partnership agreement to exhibit the advertisement and the proceeds were to be shared in the ratio of 75 : 25 or as the case may be. The advertisers were into agreement with the appellant for such advertisement. Further we find that as per Rule 2(a) of Cenvat Credit Rules, 2004 specified capital goods used for providing output service would be eligible for credit. In this case the capital goods are specified capital goods and has been used for providing the output services of the appellant namely content delivery services and sale of space for advertisement service. It is not in dispute that equipments are used for providing the output services of the appellant. We also find that there was no contract or agreement between the theatre owners and the persons whose advertisements were exhibited in cinema theaters. Only the appellant had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gital Cinema Equipment on merit as well as on limitation. 7. As a result, we pass following order. (i) Demand of Cenvat credit and consequential interest and penalty commensurate to said demand on capital goods i.e. Digital Cinema Equipments is set aside on merit as well as on limitation. (ii) The matter relating to demand of service tax for normal period on lease rentals of Digital Cinema Equipments is remanded for reconsideration, on merit to the adjudicating authority. The demand of service tax on lease rentals and corresponding interest and penalty for the extended period is set aside being time-bar. 8. The appeal is disposed of in the above terms." 4.1 The above decision of the Tribunal has been approved by the Hon'ble Supreme Court wherein the Hon'ble Apex Court has given the following observation: "2. In the facts of the present case as it is not disputed that the respondent had regularly paid amount towards VAT liability in respect of the subject goods during the relevant period, the question of claiming service tax thereon does not arise. 3. Accordingly, in the facts of the present case, the civil appeal is dismissed. 4. Pending applications stand disposed o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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