TMI Blog2022 (3) TMI 1588X X X X Extracts X X X X X X X X Extracts X X X X ..... by Section 65(91) of the Finance Act, 1994 and taxable service under section 65(105)(o) of the said Act? - HELD THAT:- After taking note of the agreement Commissioner has in the impugned order, analyzed the agreement, and have concluded that the condition at d of the Board Circular by referring to the decision in case BHARAT SANCHAR NIGAM LTD. (BSNL) VERSUS UNION OF INDIA [ 2006 (3) TMI 1 - SUPREME COURT] , is not satisfied and hence the transaction in terms of operating lease cannot be said to be one of deemed sale as per Article 366 (29A) (d) of the Constitution of India. Commissioner has concluded in the impugned order by referring to the various clauses in the agreement that there was no transfer of the right to use. However while doing so his emphasis is more on the transfer in the property of the vehicle(s) - the transfer of right to use cannot be equated to transfer in the property of vehicles . The intent of the transaction undertaken needs to be determined in terms of the various clauses of the agreement. Since as per the terms of the agreement as stated in the above table, we find that the conditions as laid down by the Hon ble Apex Court in case of BSNL are satisfied, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HELD THAT:- Since extended period of limitation cannot be invoked, penalty imposed under Section 78 cannot be sustained in view of the decision of the Hon ble Apex Court in case of UNION OF INDIA VERSUS M/S RAJASTHAN SPINNING WEAVING MILLS AND COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE VERSUS M/S. LANCO INDUSTRIES LTD. [ 2009 (5) TMI 15 - SUPREME COURT] - In respect of the penalties imposed under Section 76 and 77 and for invocation of the Section 80 of the Finance Act, 1994, no pronouncement at this stage and the same needs to be considered by the Commissioner in the remand proceedings while determining the service tax demandable. Appeal allowed in part and part matter on remand. - HON BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) AND HON BLE P. DINESHA, MEMBER (JUDICIAL) Shri Darvis Shroff, Sr. Advocate, for the Appellant Shri Shambhoo Nath, Principal Commissioner, Authorised Representative for the Respondent PER: SANJIV SRIVASTAVA These appeals are directed against order in original No 66- 71/VR/COMMR/2018-19 dated 11.06.2018 of the Commissioner GST Central Excise, Mumbai East. By the impugned order, the commissioner has held as follows: ORDER 57.1 For Show cause Notice No. 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso order the recovery of the interest under Section 75 of the Finance Act, 1994 at applicable rate on the duty amount determined in the Order above; (iii) I impose a penalty of Rs.1,12,38,599/- (Rupees One Crore Twelve lakhs Thirty Eight thousand Five hundred Ninety Nine only), on M/s. Orix Auto Infrastructure Services Limited under section 76 read with Section 78B of the Finance Act 1994; 57.4 For SCN No. 1333/Commr./2013-14 dated 16.09.2014: (i) I confirm the demand of Service Tax amounting to Rs.13,66,10,888/- (Rupees Thirteen Crore Sixty Six lakhs Ten thousand Eight hundred Eighty Eight only) (inclusive of Service Tax, Education Cess and Higher Education Cess) on M/s. Orix Auto Infrastructure Services Limited under the provisions of Section 7311) and section 7312) of the Finance Act, 1994; (ii) I also order the recovery of the interest under Section 75 of the Finance Act, 1994 at applicable rate on the duty amount determined in the Order above; (iii) I impose a penalty of Rs.1,36,61,089/- (Rupees One Crore Thirty Six lakhs Sixty One thousand Eighty Nine only), on M/s. Orix Auto Infrastructure Services Limited under section 76 read with Section 78B of the Finance Act 1994; 57.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,896/ - Yes 9,74,46,244/ - Nil 10,000/- 2 433/Commr./2012- 13 dated 17.09.2012 for period April 2011 to March 2012 3,49,51,204/- 5,24,26,806/- Yes No Proposal 34,95,120/- No Proposal 3 918/Commr./2013- 14 dated 18.10.2013for period April 2012 to March 2013 11,23,85,986/- 1,80,87,062/- Yes No Proposal 1,12,38,599/- No Proposal 4 1333/Commr./2013- 14 dated 16.09.2014for period April 2013 to March 2014 13,66,10,888/- Nil Yes No Proposal 1,36,61,089/- No Proposal 5 ST.V/Div VIII/SCN/ Orix/104/15 dated 21.10.2015for period April 2014 to March 2015 14,20,63,518/- Nil Yes No Proposal 1,42,06,352/- 10,000/- 6 ME/COMMR/ORIX/10 /2018 dated 12.04.2018 for period April 2015 to March 2017 62,57,77,634/- Nil Yes No Proposal 6,25,77,763/- 10,000/- 114,92,35,474/- 21,6633,234/- Yes 9,74,46,244/ - 10,5178,923/- 30,000/- 2.1 As per the intelligence gathered, it was revealed that appellant is engaged in providing taxable services of 'Rent-a-cab service' and not discharging the service tax liability thereon, investigations were undertaken. 2.2 On the scrutiny of the information furnished by the appellants and submissions made by them in the statements recorded revenue alleged: Appellant enter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax due on the services provided by it and to file the ST-3 returns periodically. However, it deliberately failed to do so and thereby willfully contravened the above provisions with intent to evade payment of due service tax. It also appeared that the entire value of the taxable services received by the Appellant, had escaped assessment of Service tax, due to suppression of the above facts and willful contravention of the various provisions of chapter V of the Act and the Rules made there under, with intent to evade payment of service tax therefore, they were liable to assessment under proviso to Section 73(1) of the said Act. 2.3 Alleging the above, a Show Cause-cum-Demand Notice No. 182/COMMR/2011-12 dated 21.10.2011, was issued to the appellant asking them as to why: i) Service Tax amounting to Rs.24,36,15,610/- (including Education Cess and H. Ed. Cess ) for the taxable value of the services rendered under the category of Rent-a Cab Scheme Operator Service for the period 01.04.2006 to 31.03.2011 should not be demanded and recovered from them under proviso to Section 73(1) of the Act read with Section 68 of the said Act and Rule 6 of the ST Rules and Service Tax (Determination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Aggrieved by the impugned order appellants have filed these appeals. 2.8 Revenue has also filed an appeal against the above order stating that the adjudicating authority has erred in allowing the abatement claimed by the appellants for the period prior to 30.06.2012. Revenue has stated as under:- 5.3 However, it appears that the Adjudicating authority has erred in inferring that abatement was admissible for the period prior to 01.07.2012. The Adjudicating authority erred in observing that the abatement is admissible on 'Rent-a-Cab services' to the assessee without any condition under Sr. No. 3 of Notification No. 1/2006-ST dated 01.03.2006; that once it was held that the services provided by the Noticee are covered under the category of 'Rent-a-Cab services', the just benefit of abatement could not be denied to the Noticee; that the impugned Notices did not provide the reasons for denying the benefit of abatement to the Noticee. 2.9 Against the Revenue appeal, the appellants have filed cross objections. 3.1 We have heard Shri Darvis Shroff, Advocate for the appellant and Shri Shamboo Nath, Principal Commissioner, Authorized Representative for the Revenue. 3.2 Argui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 232 of the Appeal paper-book. The Learned Commissioner has completely misread the various clauses of the operating lease agreement which clearly is unsustainable. The said agreement has to be read as a the Appellant have elaborately dealt with how the Learned Commissioner has erred in his understanding of the various clauses of the operating lease agreement (Annexure-3 Page 188-209). The Appellant at Para 22 - Page 50 of grounds of appeal have shown how all the five attributes laid down by Supreme Court in case of Bharat Sanchar Nigam Limited Vs Union of India [2006 3 SCC 1] are fully satisfied in the operating lease transaction. A lease transaction does not necessitate the transfer of ownership. The Learned Commissioner has been influenced by the fact that the Appellant continues to retain the ownership and in the process has mixed up the concept of deemed sale with that of a normal sale transaction. The operating lease transactions of the Appellant fall under sub-clause (d) of Article 366(29A) 1.e. transfer of right to use goods which does not pre-condition transfer of ownership. Further, in the case of operating lease transactions of the Appellant, the vehicle given on lease is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax and where the VAT has been duly discharged. Appellant, as well as the Department were in knowledge of the facts even before issuance of the above referred SCNs. In light of several communications exchanged between the Department and the Appellant starting from the year 2007(Kindly refer Annexure 13 to Annexure 52, Page no. 295-438), no suppression of facts with intent to evade revenue could be alleged the department was completely aware of the transactions of the Appellant even before issue of the first SCN. In such a case, the invocation of extended period of limitation on the ground that the Appellant has suppressed the facts of lease transactions with the intention to evade the payment of service tax is clearly unsustainable. Further, the Appellant has already submitted copy of operating lease agreement, and relevant supporting documents such as invoice etc. to the department. Article 6 of the said agreement contains the details of insurance and maintenance activity of the vehicles undertaken by the Appellant. Therefore, the entire service tax demand including demand on insurance and maintenance is also time barred for the period up to September 2010. Kindly refer Para 27. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use for failure. Section 80 of the Finance Act, 1994 as applicable during the period covered in the impugned order. The said provision was available till 13 May 2015 before it was omitted by the Finance Act, 2015. Section 80: Notwithstanding anything contained in the provisions of section 76, or section 77{or first proviso to sub-section (1) of section 78 -- removed by Finance Bill, 2014), no penalty shall be imposable on the assessee for any failure referred to in the said provisions, if the assessee proves that there was reasonable cause for the said failure Issue involved in the present case is squarely covered by the decision in the case of Arval India Pvt Ltd [2020 (41) GSTL 528 (T-Mum)]. This decision was again followed by the tribunal in case of Arval reported at [2021 (47) ELT 382 (T-Mum)] 3.3 Arguing for the revenue learned authorized representative while re-iterating the findings recorded in the impugned order submits that: Process of renting a cab under the operating lease is as under : Selection of car by client Operating Lease Agreement Purchase Invoice (mentioning client as a Lessee and Appellant as Lessor ) VAT paid by Lessor car is registered in the name of Lessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the vehicle. In the case of a passenger, he is expected to pay the metered charges, which is usually collected on the basis of the number of kilometers travelled. These are all matters, which are regulated by the Government. Unlike the said scenario, in the case of a rent-a-cab scheme, as is clear from the very fundamental principle underlying the scheme, it is to give the hirer the freedom to use the vehicle as he pleases, which, undoubtedly, implies that he must have possession and control over the vehicle. This is the fundamental distinction between rent-a-cab and a pure case of hiring. No doubt, the learned counsel for the appellant may be correct in saying that, in the case of rent-a-cab also, there is hiring in the general sense. As we have already noted, the word hire is used even in the rent-a-cab scheme. But, what is of fundamental importance and constitutes the distinguishing feature between rent-a-cab and hiring is that, in the case of hiring , undoubtedly, the owner of the vehicle retains control and possession; he either drives the vehicle himself or employs somebody else to drive the vehicle; and the customer merely makes use of the vehicle by travelling in the vehic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in any such manner without transfer of right to use such goods is a declared service and hence liable to service tax. In this regard some representations have been received. 2. The matter has been examined. I am directed to draw your attention to the fact that in any given case involving hiring, leasing or licensing of goods, it is essential to determine whether, in terms of the contract, there is a transfer of the right to use the goods. Further, the Supreme Court in the case of Bharat Sanchar Nigam Limited v. Union of India, reported in 2006 (2) S.T.R. 161 (S.C.), had laid down the following criteria to determine whether a transaction involves transfer of the right to use goods, namely, - a. There must be goods available for delivery; b. There must be a consensus ad idem as to the identity of the goods; c. The transferee should have a legal right to use the goods - consequently all legal consequences of such use, including any permissions or licenses required therefor should be available to the transferee; d. For the period during which the transferee has such legal right, it has to be to the exclusion to the transferor this is the necessary concomitant of the plain language of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer of the risks and rewards associated with that asset to the lessee. It is for a short term period and at the end of the lease period the lessee does not have an option to purchase the asset. The cost of repairs, maintenance and obsolescence rests with the lessor. Issue involved in the matter is squarely covered by the decision of tribunal in the case of Carzonrent India Pvt Ltd. [2017 (50) STR 172 (T-Del)]. This decision was subsequently followed in the case of Sun National Transport Co. [2020 (34) GSTL 445 (TAll)]. 4.1 We have considered the impugned order along with the submissions made in appeal and during the course of argument. 4.2 The issues that need determination in these appeals can be stated as follows: (i) Whether the operating lease entered by the appellant with their client in respect of the motor vehicles provided by them in terms of MLA, are cases of deemed sale , as per Article 366 (29A) (d) of the Constitution of India and will be subjected to sales tax/ VAT, or they are covered by the definition of rent a cab scheme operator service as defined by Section 65(91) of the Finance Act, 1994 and taxable service under section 65(105)(o) of the said Act. (ii) Wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease of the Vehicle(s) as specified in Article 3 hereof. (3) Manufacturer Manual means and includes the manual(s) issued by the manufacturer of the Vehicle(s) (4) Payment Schedule means the schedule as referred in Article 4, which specify the due dates on which lease rentals have to be paid by the Lessee. (5) Supplementary Schedule(s) means the schedule or schedules referred to in Article 15, which specify the details with respect to the Vehicle(s) and other terms and conditions of Lease. (6) The Vehicle(s) means the Vehicle(s) and each of the Vehicle(s), specified in the relevant Supplementary Schedule(s) and provided on lease to the Lessee by the Lessor. ARTICLE 2 LEASE OF VEHICLE(S) 2.1 At the request of the Lessee (hereinafter referred to as the Order'), from time to time, the Lessor may acquire and grant on ST/88843,88844,88845,88846,88848,88851,89088/26 2018 lease, the Vehicle(s), on the terms and conditions herein contained, 2.2 Each Order shall be considered and evaluated by the Lessor and the acquisition and leasing of the Vehicle(s) shall be at the sole discretion of the Lessor. 2.3 Upon the Lessor accepting an Order, the Parties hereto shali execute a Supplementary S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistration transferred in the name of the Lessor or its nominee on the termination and/or expiry of the Lease and/or requiring possession thereof. 2.7 In the event that the Lessee causes cancellation of, or instructs the Lessor to cancel a Purchase Order/Contract with the supplier of the Vehicle(s) or the Lessee shall refuse or be unable for any reason to accept delivery, the Lessor shall be entitled to terminate the Lease of the aforesaid Vehicle(s) and the Lessee shall pay to the Lessor on demand all costs, charges, expenses, damages incurred by the Lessor arising out of such an action of the Lessee, but for any consequential damages, 2.8 Appropriation of payments (a) Any payments due and payable under or pursuant to this Agreement and made by the Lessee shall be appropriated towards such dues in the following order viz: (i) Interest (Late Payment Charges as specified in Article 4.3 on arrears of Lease Rentals that has became due and not paid; (ii) Costs, charges and other expenses; (iii) Lease Rentals. (b) Notwithstanding anything contained in Sub Article (a) hereinabove, the Lessor may, at its discretion, appropriate such payments towards the dues, if any, payable by the Lessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ories of the Vehicle(s) installed by the Lessor, (iv) The Lessor shall issue a receipt to the Lessee or to any person nominated by the Lessee for the delivery of items in sub-clause 3.3 (i), (ii) and (iii) herein above. 3.4 Upon occurrence of event specified in Article 3.2(b) or in Article 3.2(c) above, as the case may be, the Lessee shall in addition to surrender of vehicle(s) as specified in Clause 3.3 above, pay the Early Termination Amount as mentioned in Note 6 of the Supplementary Schedule(s) to the Lessor immediately upon such cessation of Lease Period and termination of Lease Agreement. 3.5 Upon occurrence of event specified in Article 3.2 (d), the Lessee shall pay the Total Loss Penalty Amount as mentioned in Note 7 of the Supplementary Schedule(s) to the Lessor within seven (7) days of such cessation of Lease Period and termination of Lease Agreement. 3.6 In the event the Lessee fails to comply with the provisions of Article 3.3 or 3.4, or 3.5 above, then the Lessee shall be liable to pay all losses and/or damages that the Lessor may incur as a consequence of non compliance by the Lessee with provisions of Article 3.3 or 3.4. or 3.5 as mentioned above. 3.7 All rights and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m and also by any increase / decrease in levy and taxes, duties and charges by State / Central Government, as the case may be or any other related and consequential charges and taxes levied on this transaction now or hereafter. 4.7 The Lessee agrees that the lease amount / rentals will undergo change due to change(s) in the fiscal or monetary policy, which may affect the Lease Rentals. Consequent to such change, the Lessor shall be entitled at any time and from time to time to give notice to the Lessee of its intention to change the Lease Rentals payable by the Lessee and the Lessee shall be bound to pay Lease Rentals as notified, from time to time. ARTICLE 5 TECHNICAL CONTROL AND INSPECTION 5.1 The Lessee shall present the Vehicle(s) for pollution checks and other statutorily mandated technical / fitness tests, at the dates and places determined by the relevant authorities. Further, the Lessee shall present the Vehicle(s) as and when required by any competent authority for any inspection that may be required by any law, regulation and / or rule. The costs of all such tests/inspections, shall be borne by the Lessor. 5.2 The Lessee shall as and when requested by the Lessor, make ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent the Lessee hereby agrees to bear the cost of insuring the vehicle(s) and accordingly shall reimburse the cost towards insurance premium of these vehicles to the Lessor forthwith upon receipt of notice of demand by the Lessee from the Lessor. The Lessor shall comprehensively insure the Vehicle(s), in the joint names of the Lessor and the Lessee with the Lessor's name as the owner and Loss Payee, against all risks, including third party risks. The Lessee shall not do or omit to do or be done or permit or suffer any act which might or could prejudicially vitiate or affect any such insurance, 9.2 The Lessee assumes all and any liability for loss or damage to the Vehicle(s) or parts thereof, arising out of the negligence or misconduct or by any act or omission of the Lessee, and hereby agrees, confirms and undertakes to indemnify and keep indemnified and saved harmless the Lessor from any losses, claims, damages, expenses and third party claims that the Lessor might be put to/ may suffer/ incur in this regard, not covered by Insurance Policy. 9.3 Upon the happening of any event that causes any damage or loss to the Vehicle(s) and/or its accessories whilst thereon, including acci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is subject and/or the Lessee's Memorandum and Articles of Association. (b) Result in any breach of any agreement or arrangement to which the Lessee is a party. 10.2 The Lessee warrants that it has obtained all consents, licenses, approvals as are necessary for or in connection with the execution, validity and enforceability of this Agreement and for the use and operation of the Vehicle(s) and undertakes to keep them effective and in force at all times during the period of this Agreement and till the Vehicle(s) is delivered back to the Lessor in good order and condition, reasonable wear and tear excepted. ARTICLE 11 LESSEE'S COVENANTS During the subsistence of this Agreement and till the Vehicle(s) is / are delivered back to the Lessor in good order and condition in terms hereof, the Lessee shall : 11.1 Not claim any right, title or interest in the Vehicle(s) and/or parts, components thereof other than that of the Lessee or contest the Lessor's sole and exclusive ownership thereof. 11.2 Only claim the right of usage through its employees and / or nominees over the Vehicle(s) 11.3 Use and operate the Vehicle(s) in conformity with the Manufacturer Manual and comply wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the use of the Vehicle(s). 11.10 The Lessee agrees, confirms and undertakes to indemnify and keep indemnified and saved harmless the Lessor from and against all costs, expenses, damages, claims and losses that the Lessor may incur/ suffer on account of any Governmental statutory action which may affect the contents and structure of this Agreement. ARTICLE 12 EVENTS OF DEFAULT 12.1 An event of default shall occur hereunder if the Lessee: (a) Fails to pay any two rentals or part thereof or any other payment required to be made hereunder when due and such failure continues for a period of after written notice is sent to the Lessee: or (b) Fails to perform or observe any other covenant, conditions or agreement to be performed or observed by it hereunder or in any other document furnished to the Lessor in connection herewith and such failure or breach continues unremedied for a period of 14 days after written notice is sent to the Lessee; or (c) Without the Lessor's consent, sells, transfers, parts with possession or sublets or encumbers or creates any charge and/or lien on or endangers the Vehicle(s) any item thereof; or (d) Shall become bankrupt or become insolvent or make a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... force or the levy of any new taxes, of whatever description on the Vehicle(s). 14.2 Notices Unless otherwise provided herein, all notices or other communications under or in connection with this Agreement shall be given in writing and may be sent by personal delivery or post or courier or facsimile. Any such notice or other communication will be deemed to be effective if sent by personal delivery, when received, if sent by post, on receipt of the same and if sent by courier, on receipt of the same, and if sent by facsimile, when sent (on receipt of a confirmation to the correct facsimile number). All correspondence shall be addressed, when sent to the Lessee at the address mentioned above and when sent to the Lessor, at the address of ORIX Auto Infrastructure Services Limited mentioned above. 14.3 Waiver Any express or implied waiver by either Party to this Agreement shall not constitute a waiver of any other default by the other Party or a waiver of any of the Party's rights. All rights and powers of the Lessor under this Agreement will remain in full force, notwithstanding any neglect, forbearance or delay in the enforcement thereof by the Lessor, and the Lessor shall not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mination (b) 2% penalty on Book Value amount as aforesaid (c) Taxes (d) Insurance recovery for balance period (e) Extra Kms Charges, if any (f) Other outstanding amount including arrears of lease rentals and out of pocket expenses, if any (g) SUB TOTAL (a)+(b)+(c)+(d)+(e)+(f) (h) Market Price of the vehicle as on date of early termination (i) Total (Early Termination Penalty Amount) [(g)-(h)] (7) Total Loss Penalty Amount Sr No. Particulars Of Early Termination Charges (a) Book Value as on the date of occurrence of event specified in article 3.2(d) (b) 2% penalty on Book Value amount as aforesaid (c) Taxes (d) Extra Kms Charges, if any (e) Other outstanding amount including arrears of lease rentals and out of pocket expenses, if any (f) SUB TOTAL (a)+(b)+(c)+(d)+(e) (h) Insured settled value (i) Total (Total Loss Penalty Amount) [(i)-(h)] (8) Tyre and Battery Limitation Tyre Maximum 5 pieces based on Lessor's inspection Battery Maximum 1 pieces based on Lessor's inspection (9) Permissible kms 80,000 km over a period of 48 months, with an average of 20.000 km per annum. (10) Charges above the permissible Limit: Rs. 6/- per km in excess of 80,000 km for 48 months, No excess k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereby confirm that their intent is that the vehicle(s) shall at all times remain the property of the Lessor. . Thus, all the time during the period of agreement, the ownership of the vehicles undisputedly remains with the Noticee. 43.2 As per Article 5.2 of the agreement, The Lessee shall as and when requested by the Lessor, make available the vehicles, to the Lessor for inspection or technical check up by the Lessor/ competent authorities. . Thus the technical control lies with the Lessor i.e. the Noticee and has not been transferred to the Lessee or the client. 43.3 Article 6.2 of the agreement states that The Lessee shall not make and alterations, additions or changes to the Vehicle(s), without the prior permission of the Lessor in writing . Further, As per Article 12.1(f). An event of default shall occur hereunder if the Lessee, Makes any additions/alterations to the Vehicle(s) without the prior written permission of the Lessor; . As per Article 3.2 of the agreement, the Lease period shall cease with immediate effect and the Lease Agreement shall determine ipso facto upon occurrence of Event of Default as specified in Article 12 of agreement. It is obvious that the Lessor i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rucks, cranes, etc for use in a particular project where the person to whom such equipment is supplied is subject to such terms and conditions in the contract relating to the manner of use of such equipment, return of such equipment after specified time, maintenance and upkeep of such equipment The transaction will not involve transfer of right to use such equipment as in terms of the agreement the possession and effective control over such equipment has not been transferred even though the custody may have been transferred along with permission to use such equipment. The receiver is not free to use such equipment in any manner as he likes and conditions have been imposed on use and control of such equipment. In the instant case too, the terms of agreement as discussed in forgoing para, indicate that the client,/Lessee is not free to use such equipment in any manner as he likes and conditions have been imposed on use and control of such equipment. Therefore, it is evident that only the custody of vehicles is transferred to the clients by the Noticee along with permission to use these vehicles and the absolute right to use the vehicles is not transferred 45. The fact that para 3.3 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd is included the definition of 'service' for the period with effect from 01.07.2012. Since the said activity is a service and not included in the Negative list under Section 66D of the act, the same is chargeable to Service Tax by virtue of provisions of Section 66B of the Act. 4.6 For our analysis we have juxtaposed the relevant clauses above agreement for ease of reference against the five criteria as laid down by the Hon ble Apex Court in the case of BSNL, supra and also reiterated by the Board in the circular of the Board. S No Criteria as laid down by Hon ble Apex Court Clause of Agreement a There must be goods available for delivery; Article 2.3, 2.4 and 2.5 b There must be a consensus ad idem as to the identity of the goods; Supplementary Schedule gives the details of the vehicle along with the registration number, engine number and chassis number c The transferee should have a legal right to use the goods - consequently all legal consequences of such use, including any permissions or licenses required therefor should be available to the transferee; Article 11.2 16.1 d For the period during which the transferee has such legal right, it has to be to the exclusion to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s), however clause 11.2 provides for the unfettered right to use of the vehicle (s) to the lessee through its employee or nominees. In our view clearly the agreement provides for unfettered right of usage to the lessee and is just not transfer of custody or possession. The reliance placed on Article 11.7, do not advance the argument of the revenue as that clause from plain reading is applicable only after termination of the lease agreement. The reliance placed by the Commissioner on the Education Guide para 6.6.2 is totally uncalled for. The said para is in line with the facts of the decision of Hon ble Andhra Pradesh High Court in the case of Rashtriya Ispat Nigam, supra. However we do not find any application of the said decision to the facts of case in hand because the conclusion which was arrived in that decision was based on the fact of that case and Hon ble High court specifically records as follows: 14. In our view, whether the transaction amounts to transfer of right or not cannot be determined with reference to a particular word or clause in the agreement. The agreement has to be read as a whole, to determine the nature of the transaction. From a close reading of all the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le High Court to the present case. Moreover in all these cases it is essential to look at the agreement between the parties and conclusion has to emerge on that basis. We have elaborately discussed the agreement, the relevant portions of the agreement which form the basis for differentiating our conclusions when we discussed the issues on the basis of the definition and the agreement without considering the decision of the Hon ble High Court. 4.8 Since as per the terms of the agreement as stated in the above table, we find that the conditions as laid down by the Hon ble Apex Court in case of BSNL are satisfied, we have no hesitation in holding that the transaction is of deemed sale as per Article 366 (29A) (d) of the Constitution of India. We also find that co-ordinate bench has in case of Arval India Pvt Ltd [2020 (41) G.S.T.L. 528 (Tri. Mumbai)] concluded in respect of similar operating lease agreement, that the said agreement was that of deemed sale. The said decision also distinguishes the decision of Carzonrent India Pvt Ltd. [2017 (50) STR 172 (TDel)] stating as follows: 7. On the other hand, Learned Authorized Representative canvassed the proposition that different aspects o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g mark in correctness of findings does not have to be at the cost of propriety in levying the tax. 4.9 The decision of Carzonrent was subsequently followed in the case of Sun National Transport Co. [2020 (34) GSTL 445 (TAll)], without giving much reasoning so once we find ourselves in agreement with the distinction made from the decision in that case by Arval case we do not discuss the said decision again. 4.10 In view of our discussions as above we would answer the question at (i) in para 4.2, in favour of the appellant holding that operating lease agreement is squarely a case of deemed sale as per Article 366 (29A) (d) of the Constitution of India. 4.11 The next question that needs to be considered is in respect of leviability of the service tax on the Fleet Management Services Insurance, Maintenance etc. Undisputedly appellant before was not paying service tax in respect of these services, whereas in case of Arval India Pvt Ltd., bench had specifically noted that Arval was discharging service tax on these services provided by them. Counsel for the appellant has in his submissions admitted to liability to service tax on the said services. Taking note of the submissions made by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in Dharamendra Textile and we see no reason to understand or read that decision in that manner. In Dharamendra Textile the court framed the issues before it, in paragraph 2 of the decision, as follows : 2. A Division Bench of this Court has referred the controversy involved in these appeals to a larger Bench doubting the correctness of the view expressed in Dilip N. Shroff v. Joint Commissioner of Income Tax, Mumbai Anr. [2007 (8) SCALE 304]. The question which arises for determination in all these appeals is whether Section 11AC of the Central Excise Act, 1944 (in short the Act ) inserted by Finance Act, 1996 with the intention of imposing mandatory penalty on persons who evaded payment of tax should be read to contain mens rea as an essential ingredient and whether there is a scope for levying penalty below the prescribed minimum. Before the Division Bench, stand of the revenue was that said section should be read as penalty for statutory offence and the authority imposing penalty has no discretion in the matter of imposition of penalty and the adjudicating authority in such cases was duty bound to impose penalty equal to the duties so determined. The assessee on the other ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed statutorily. This is clear from the extended period of limitation permissible under Section 11A of the Act. It is in essence submitted that the penalty is for statutory offence. It is pointed out that the proviso to Section 11A deals with the time for initiation of action. Section 11AC is only a mechanism for computation and the quantum of penalty. It is stated that the consequences of fraud etc. relate to the extended period of limitation and the onus is on the revenue to establish that the extended period of limitation is applicable. Once that hurdle is crossed by the revenue, the assessee is exposed to penalty and the quantum of penalty is fixed. It is pointed out that even if in some statues mens rea is specifically provided for, so is the limit or imposition of penalty, that is the maximum fixed or the quantum has to be between two limits fixed. In the cases at hand, there is no variable and, therefore, no discretion. It is pointed out that prior to insertion of Section 11AC, Rule 173Q was in vogue in which no mens rea was provided for. It only stated which he knows or has reason to believe . The said clause referred to wilful action. According to learned counsel wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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