9911796707
TMI Blog2024 (10) TMI 1653X X X X Extracts X X X X X X X X Extracts X X X X ..... along with interest and penalty. Being aggrieved by the said order the appellant filed the present appeals. 2. Shri S J Vyas, Learned Counsel appearing on behalf of the appellant, at the outset, submits that the case is squarely covered by this Tribunal's decision in the appellant's own case vide Final Order No. 12197-12199/2024 dated 26.09.2024. 3. Shri Rajesh Nathan, Learned Assistant Commissioner (Authorised Representative) appearing on behalf of the Revenue, reiterates findings of the impugned order. 4. We have carefully considered the submissions made by both the sides and perused the records. We find that identical issue in the same set of facts in the appellant's own case has been decided by this Tribunal vide order No. A/12197-12199/2024 dated 26.09.2024, wherein this Tribunal has passed the following order: "4. We have carefully considered the submission made by both sides and perused the records. We find that the Assessee have rented out the textile machineries to M/s. Arvind Ltd for manufacture of textile products. The department's case is that leasing of machineries to M/s. Arvind Ltd is classifiable under supply of tangible goods for use service. For the ease of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inery". 2. The Lessor has agreed at the request of the Lessee to lease and demise unto the Lessee the "Said Machinery" described in the First Schedule hereunder written for a period of 8 (Eight ) years on the terms and conditions hereinafter contained, yielding and paying therefore the monthly rents and as reserved herein. NOW THIS INDENTUR WITNESSTH AND IT IS HEREBY AGREED IT IS HEREBY AHREED AND DECLARED BY AND BETWEEN TE PATYIES HERETO AS UNDER:- 1. ................ 2. ................ 3. The lessee in the intent that the obligations may continue throughout the term hereby granted do hereby covenant with the Lessor as follows: i) During the said terms of 8 years, to pay without any deduction to the lessor the rent, herein reserved by the date and in the manner aforesaid. Provided, however, the TDS as per the provision contained under, the Income Act Tax, 1961 and/or Service Tax Act, Lessee Tax or any other Tax levy, cess, if applicable, in respect this present, same shall be the responsibility of the lessee. ii) To use the "Said Machinery" for yarn processing and weaving of fabrics from the yarns of the Lessee and for any other industrial purposes permitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip right or title in the Equipment, or even a right to Lessee to demand such transfer. (b) At the completion of the Term, or in the event of earlier termination of this Agreement (as the case may be), the possession of the Equipment shall revert to Lessor. (c) Lessor retains the right to re-possess and remove the Equipment from the Location forthwith in the event of any default of any obligations by Lessee. During the Term, the Lessee shall hold the Equipment in trust, under its supervision and care, without prejudice to any of the ownership rights of the Lessor. (d) All along, the Lessee shall have the beneficial possession of the Equipment pursuant to this Agreement subject to the over-riding principle set out in Clause 2.2(a) and (c) above. 3.3 Lessor grants the Lessee the non-transferable exclusive right to use the Equipment as a part of its Captive Plant." 4.1 From the above relevant clauses, it is clear that during the lease period the right to possession and effective control is completely with the lessee and not with the lessor (appellant). It is also not disputed that the said transaction is the deemed sale in terms of Article 366 29 (A) of Constitution of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded by any authority, officer or person subordinate to it, under the provisions of this Act, including sub-section (2) of this section and if such order or proceeding recorded is prejudicial to the interests of revenue, may make such enquiry, or cause such enquiry to be made and subject to the provisions of this Act, may initiate proceedings to revise, modify or set aside such order in reference thereto as it thinks fit. (2) Powers of the nature referred to in sub-section (1) may also be exercised by the Additional Commissioner, Joint Commissioner, Deputy Commissioner, Assistant Commissioner and the Commercial Tax Officer in the case of orders passed or proceedings recorded by authorities, officers or persons subordinate to them. (Sub-sections 2-A, 3, 5 and 6 are omitted.) 263. Revision of orders prejudicial to revenue (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Ram & Co. v. Kasi Naicker - (2003) 11 SC 699 : AIR 2003 SC 4156). If the plea of the petitioners is accepted, we have to read Section 20(1) of the APGST Act as empowering revision, only when an order of assessing officer/appellate authority is erroneous in so far as it is prejudicial to the interest of revenue. This is plainly not permissible. 10. The impugned order of the Tribunal is also attacked on the ground that the Tribunal erred in not recording a finding on the issue raised. This cannot be a ground for us to exercise revisional jurisdiction under Section 22(1) of the Act. As rightly pointed out by the Special Counsel for Commercial Taxes, the submissions were noted in the order. The learned Tribunal considered the core issue and, having found that the agreement is a contract for the transfer of the right to use Transit Mixers, dismissed the appeals. We fail to understand as to how the impugned order can be put to challenge only on the ground that a finding is not recorded on one of the issues raised by the assessee before the Tribunal. Transportation service or Transfer of the right to use Transit Mixers? 11. The petitioners allege that the contract with Grasim i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Limited - (1972) 29 STC 474 : (1972) 1 SCC 472 and Northern India Caterers (India) Limited v. Lt. Governor of Delhi - (1978) 4 SCC 36, it was held that service of meals in a hotel or restaurant does not constitute sale of food for the purpose of levy of sales tax and must be regarded as rendering service in the satisfaction of human need. So as to tackle these issues, which effected the State's revenue (by depriving tax on such type of sales), the matter was referred to the Law Commission of India. 13. In their Sixty First Report, the Law Commission of India dealt with specific transactions like transfer of control commodities, supply of food in hotels, transfer of goods on hire purchase and the works contracts. In Chapter 1-E the Law Commission made pertinent observations, which compel excerption. CHAPTER 1-E SOME GENERAL OBSERVATIONS AS TO TAXATION ON SALE I-E General observations as to "sale" (1) So far, we have dealt with specific transactions. A few general observations may now be made. A sale of goods requires an agreement to transfer title in goods for money, followed by the actual passing of such title as a result of the agreement. The broad concept, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riety of economic activities, which were hitherto not considered as sale of goods, came within the fold of State laws. Indeed, as observed by the Law Commission of India, the underlying theme was to devise a tax, which will embrace all transactions which are regarded as adding value or which is entered into with that object. This is reflected in the new definition in Article 366 (29A), which reads as under. 366. Definitions (29A) "tax on the sale or purchase of goods" includes - (a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (b) a tax on the transfer of property in goods whether as goods or in some other form involved in the execution of a works contract; (c) a tax on the delivery of goods on hire purchase or any system of payment by instalments; (d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty in goods (whether as goods or in some other form). The latter part of clause (29A) of Article 366 of the Constitution makes the position very clear. While referring to the transfer, delivery or supply of any goods that takes place as per sub-clauses (a) to (f) of clause (29A), the latter part of clause (29A) says that "such transfer, delivery or supply of any goods" shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made ....... The object of the new definition introduced in clause (29A) of Article 366 of the Constitution is, therefore, to enlarge the scope of 'tax on sale or purchase of goods' wherever it occurs in the Constitution so that it may include within its scope the transfer, delivery or supply of goods that may take place under any of the transactions referred to in sub-clauses (a) to (f) thereof wherever such transfer, delivery or supply becomes subject to levy of sales tax. (emphasis supplied) 17. Inspired by the Forty-sixth Amendment, like many States, Andhra Pradesh also enacted a provision on similar lines being Section 5-E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement of lease of the equipment for a period of sixty months or more. As these goods were moved out of the State during the course of interstate trade, in their sales tax return for the year 1988-89, the assessee claimed exemption on the ground that the transaction was not excisable to tax under Section 5-E of the Act. The original authority rejected the contention. The assessee was successful before the Appellate Deputy Commissioner. However, the Commissioner following the judgment of the Bombay High Court in 20th Century Finance Corporation Limited v. State of Maharashtra - (1989) 75 STC 217 (Bom.) in suo motu revision, set aside the appellate order restoring the original assessment order. The assessee then filed special appeal before this Court inter alia contending that deemed sales cannot be distinguished from ordinary sales for the purpose of taxation under the Act, and that, the taxable event of delivering the goods having occurred in the State of Tamil Nadu, the same is not excisable under Section 5-E of the Act. Relying on Builders Association and Gannon Dunkerly and Co. v. State of Rajasthan - (1993) 1 SCC 364 : (1993) 88 STC 204 the contention was accepted observing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d along with other similar appeals (20th Century Finance Corporation Limited v. State of Maharashtra - (2000) 6 SCC 12 : (2000) 119 STC 182 (SC)) by a Constitution Bench of the Supreme Court which inter alia considered the import of subclause (d) of clause (29A) of Article 366 of Constitution, and the constitutional validity of Section 5-E of the APGST Act and similar provisions in Haryana, Maharashtra, Rajasthan, Uttar Pradesh and Tamil Nadu Acts. By majority of 3:2, Section 5-E(b) was held to be in excess of the legislative power of the State under Entry 54 of List II of the Seventh Schedule to the Constitution. But to save it from being unconstitutional, the Court read down holding that it would not be applicable to the transaction of the transfer of the right to use goods if such deemed sale is (i) an outside sale; (ii) sale in the course of import or export of the goods; and (iii) an inter-State sale. The decision of this Court in ITC Classic Finance was affirmed, and the Bombay decision in 20th Century Finance was overruled. It is apt to quote the following relevant portion from the Judgment. The various sub-clauses of clause (29A) of Article 366 permit the imposition of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods. (emphasis supplied) 23. While holding that, in a contract for the transfer of the right to use goods, the taxable event would be the execution of the contract for delivery of the goods, it was observed. Article 366(29A)(d) further shows that levy of tax is not on use of goods but on the transfer of the right to use goods. The right to use goods accrues only on account of the transfer of right. In other words, right to use arises only on the transfer of such a right and unless there is transfer of right, the right to use does not arise. Therefore, it is the transfer which is sine qua non for the right to use any goods. If the goods are available, the transfer of the right to use takes place when the contract in respect thereof is executed. As soon as the contract is executed, the right is vested in the lessee. Thus, the situs of taxable event of such a tax would be the transfer which legally transfers the right to use goods. In other words, if the goods are available irrespective of the fact where the goods are located and a written contract is entered into between the parties, the taxable event on such a deemed sale would be the execution of the contract for the transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion of India - 2004 (170) E.L.T. 385 (S.C.) = 2006 (3) S.T.R. 98 (S.C.), a two Judge Bench took the view that transferring the right to use the telephone instrument/apparatus, fell within Section 2(h) of the Uttar Pradesh Trade Tax Act, which defined "sale" to include the transfer of the right to use goods. Doubting the correctness, the matter went before a three Judge Bench. In the lead opinion, as well as in concurring opinion, it was held that though giving a telephone connection would be a transfer of the right to use the goods, there cannot be transfer of the right to use in the case of telephone service. "Providing the use of electro magnetic waves are neither abstracted nor are they consumed in the sense they are not extinguished by their user". In the lead opinion, it was held that whether there is a transfer of the right to use goods, would depend ultimately upon the intention of the parties, to be determined with reference to the contract between the parties. In the concurring opinion, following attributes to constitute the transfer of the right to use goods were pointed out; (a) there must be goods available for delivery; (b) there must be a consensus ad idem as to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the right to use goods which accrues only on account of the transfer of the right. In other words, the right to use goods arises only on the transfer of such right to use goods. (g) The transfer of right is the sine qua non for the right to use any goods, and such transfer takes place when the contract is executed under which the right is vested in the lessee. (h) The agreement or the contract between the parties would determine the nature of the contract. Such agreement has to be read as a whole to determine the nature of the transaction. If the consensus ad idem as to identity of the good is shown the transaction is exigible to tax. (i) The locus of the deemed sale, by transfer of the right to use goods, is the place where the relevant right to use goods is transferred. The place where the goods are situated or where the goods are delivered or used is not relevant. 27. To buttress the argument that the essential requisites of the transaction of the transfer of the right to use goods are absent, the counsel relies on Sandeman v. Scurr - (1866) L.R.2 QB. 86, The Omoa Coal and Iron Company v Huntley - (1877) 2 Company Pleas Division 464, Baumvoll v. Gilchrest - (1892) 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vessel; the master and crew become to all intents his servants, and through them the possession of the ship is in him. A charter by way of demise may be for time or for a particular voyage. In modern times, however, charters by way of demise are invariably expressed to be for a period of time. Under a charter not by demise, on the other hand, the ship owner agrees with the charterer to render services by his master and crew to carry the goods which are put on board his ship by or on behalf of the charterer. In this case, notwithstanding the temporary right of the charterer to have his goods loaded and conveyed in the vessel, the ownership and also the possession of the ship remain in the original owner through the master and crew, who continue to be his servants. Although the master, by agreement between the owner and charterer, may acquire authority to sign bills of lading on behalf of, and may be obliged to accept voyage instructions from, the latter, he nevertheless remains in all other respects the servant of the owner. Whether or not the charter amounts to a demise must turn on the particular terms of the charter. "The question depends, where other things are not in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (NB: Affirmed in RINL-II) 4. (1990) 77 STC 470 (WBTT) (Modern Decorators v. CTO) Constructing pandals, barricades, rostrums on land, road, building roof top. Material belongs to decorators. After providing these and collecting rent, they were removed and taken away. They were not handed over to the customers. The goods are not transferred. The customer has no right to use the materials necessary for the construction of pandals. The erection of pandals by the decorator is not "sale", but tables, chairs etc., let out to customers are "goods" within the meaning of "sale" assessable to tax. 5. (1991) 83 STC 325 (Ori.) (K.C. Behera v. SoOrissa) Buses - Bus hired out to State Transport Corpn. The contract disentitled from using the vehicle covered by the agreement in any route. The bus was to be run for Corpn. as per the agreement and directions of an officer. The transaction is a "sale" within the extended meaning of the word. Providing of the driver by the owner notwithstanding there was a transfer of the right to use bus for consideration, and effective control, general control and possession of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quipment was located. State cannot impose tax on interState trade/commerce transactions of the right to use any goods. State is precluded from making law to impose tax on transactions that take place outside the State, in the course of import/export. The delivery of goods is not a condition precedent, but is one of the elements of the transfer of the right to use. 9. (2001) 124 STC 426 (Kar.) Lakshmi AV Inc v. Asst. Commr. of CT) Audi visual and multi media equipments - As per the requirement of customer AV services are provided by transporting equipment at the venue. The operation is supervised by the owner. After completion of the programme, AV system is dismantled and carried back to owner's stores department. The lease of the hire or letting with possession and effective and general control is given to the customer with choice of selecting the manner, time and nature of use and enjoyment, it is transfer of the right to use goods. But if the work is entrusted to the contractor for achieving desired results and such work also involves use of the goods, it will not be deemed sale within the meaning of the transfer of the rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 permits ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fienda est [In the absence of ambiguity, no exposition shall be made which is opposed to the express words of the instrument] and Verba generalia restringunter ad habilitatem rei vel personae [General words may be aptly restrained according to the matter or person to which they relate]. In addition to these, the legal maxims Ex antecedentibus et consequentibus fit optima interpretation [A passage is best interpreted by reference to what precedes and what follows it], Noscitur a sociis [The meaning of a doubtful word may be ascertained by reference to the meaning of words associated with it], Certum est quod certum redid potest [That is sufficiently certain which can be made certain], Utile per inutile non vitiatui [Surplusage does not vitiate that which in other respects is good and valid], Expressio unius est exclusio alterius expressum facit cessare lacitumi [The express mention of one thing implies the exclusion of another], Verba relata hoc maxime operantur per referentiam ut in eis inesse videntur [Words to which reference is made in an instrument have the same operation as if they were inserted in the clause referring to them] and Ad proximum antecedens fiat relatio, nisi im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. "1.03 For the purpose of the construction of contracts, the intention of the parties is the meaning of the words they have used. There is no intention independent of that meaning. 6.09 Where the words of a contract are capable of two meanings, one of which is lawful and the other unlawful, the former construction should be preferred. Sir Edward Coke [Co. Litt. 42a] expressed the proposition thus : 'It is a general rule, that whensoever the words of a deed, or of one of the parties without deed, may have a double intendment and the one standeth with law and right, and the other is wrongful and against law, the intendment that standeth with law shall be taken. 'In more modern times that statement was approved by the Privy Council in Rodger v. Comptoir D'Escomple de Paris, (1869) LR 2 PC 393 : 16 ER 618, in which Sir Joseph Napier, delivering the advice of the Board said : 'The rule that words shall be construed most strongly against him who uses them gives place to a higher rule; higher because it has a moral element, that the construction shall not be such as to work a wrong'. Similarly, in Fausset v. Carpenter, (1831) 2 Dow & Cl 232 : 6 ER 715, the House of Lords a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e agreement contains sufficient indication with regard to the grant and creation of rights and obligations with reference to such grant for the specified period therein, it would be sufficient to bind the parties to the agreement. The mere absence of date and place does not militate against the parties nor can they escape regulation by the applicable statute. It is also a well settled rule of interpretation that even in the absence of a formal agreement, a contract can be inferred from the pre and post contract correspondence between the parties. In this case, clause (L) gives sufficient indication when it says that, "the agreement will come into force from 1-10-2002 and remain in effect till 31-3-2006, with liberty to parties to terminate the contract by giving three months notice in writing to the other party". The reading of the agreement does not anywhere indicate that it was entered into between the parties elsewhere than at Secunderabad. The first page of the agreement in its footnote contains the address of the Marketing Department of Grasim sufficient enough to conclude that it was entered into between the parties at Secunderabad. Even otherwise it is fairly well settled th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inference of transfer of the right to use Transit Mixers. 41. As mentioned supra, 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 (RINL-I). We may, for ready reference extract important clauses from the agreement. A. That the Second party will maintain and provide a dedicated fleet of 5 vehicles to transport the produce of the First party from their plant to the various customers in the cities of Hyderabad. The number of vehicles required to be dedicated for the use will be subject to change and the parties will mutually agree to the new fleet size. This number shall not change unless otherwise indicated by the First party and agreed to by the Second party and the remaining terms and conditions of this agreement will remain unaffected by this change. B. That the Second party will ensure that adequate number of vehicles are made available on a 24/7 basis i.e., 24 hours and everyday of the weeks as per the instructions of the officials of the First party. If the Second party fails to provide the ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That the Second party will indemnify the First party against statutory claim being made by any authority on the First party for an act of omission or commission by the Second party. (emphasis supplied) 42. In addition to the above clauses, we have thoroughly perused and analysed the agreement between the petitioners and Grasim. With reference to the intention, the purpose and the rights/obligations created under the said agreement, we may divide the same into three parts. The recitals form the first part, which deals with the intention. Admitting that the petitioners are in possession of a fleet of Transit Mixers used for carrying RMC, and further admitting that Grasim was looking for a transporter of RMC, the recitals reveal that both the parties entered into an agreement for transporting RMC by using the vehicles owned by the petitioners. Though the phrase 'offer services to take care of transporting solution needs' is used the real purpose, as can be seen from the second part, is to enable Grasim to have the right to use the Transit Mixers. The agreement requires the petitioners to provide drivers to be dressed in uniform, and all of them are to obey the lawful instructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay the cost of the RMC to Grasim and the petitioners nowhere figure in the process of putting the property in Transit Mixers to economic use. The entire use in the property in goods is to be exclusively utilised for a period of 42 months by Grasim. The existence of goods is identified and the Transit Mixers operate and are used for the business of Grasim. Therefore, conclusively it leads to the only conclusion that the petitioners had transferred the right to use goods to Grasim. For these reasons, we are not able to countenance any of the submissions made by the petitioners' counsel. 46. In the result, for the above reasons, these revision cases fail and are, accordingly, dismissed with costs. (ii) In the case of Aims Pharma Pvt. Ltd. this Tribunal has passed the following 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 cylinders is a deemed sale in terms of Article 366 (29A) of constitution as 'deemed sale' or it falls under definition of 'supply of tangible goods for use' under the Finance Act, 1994. The definition of the alleged services needs to be gone through which is reproduced below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 treated as sale of goods, is treated as service. 4.4.3 Proposal is to levy service tax on such services provided in relation to supply of tangible goods, including machinery, equipment and appliances, for use, with no legal right of possession or effective control. 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 serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 is offered by GIMMCO Ltd. only on 'rights to use' basis". Cl. 15 relating to damages provides for compensation to be paid by the hirer to the assessee in case of damage to the equipment during the period of use. These responsibilities cast on the hirer clearly show that the right of possession and effective control of the equipment rest with the hirer; otherwise the hirer cannot be held responsible for misuse/abuse, safe custody/security, liability to settle disputes with third parties in relation to use etc. Further Cl. 4.3 of the agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 held that the transaction involved was a transfer of right to use Transit Mixers and not transport service and the petitioners had transferred the 'right to use goods' to Grasim. If we apply the ratio of the above decision to the facts of the present case, the transaction involved herein is "transfer of right to use" which is a deemed sale and not "supply of tangible goods for use" service. 6. In view of the foregoing, we are of the considered view that the assessee's activity of giving various equipments on hire does not fall under the category of "Supply of tangible goods for use", hence the same is not liable to service tax w.e.f. 16-5-2008. Now coming to the Revenue's appeal, we f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r use, without transferring right of possession and effective control of such machinery, equipment and appliances." While the assessee contends that what they have transferred is right to use which is a deemed sale, the Revenue's contention is that the right of possession and effective control remained with the assessee 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 los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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; (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 perm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 (A) of the Constitution of India. Since the same facts and issue involved in the present case, the ratio of above judgments are directly applicable in the present case also. Accordingly, we are of the considered view that the demand of service tax under tangible goods for use service in the present case is not sustainable. 5. Hence, the impugned order is set aside. Appeal is allowed." 4.4 Similar view was taken by CESTAT Mumbai in the case of UFO Moviez India Ltd. 2018 (11) G.S.T.L. 391 (Tri.-Mumbai) wherein on the basis of the fact that the transaction was of deemed sale in terms of Article 336 (29) A it was held that the activity same is not classifiable as service of supply of tangible goods for use. This decision was upheld by the Hon'ble Supreme Court by dismissing the Revenue's Civil appeal reported at 2022 (61) G.S.T.L. 4 (S.C.) wherein the following observation was made by the Apex Court:- "[Order]. - Delay condoned. 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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