2018 (5) TMI 887 – CESTAT CHENNAI – TMI – Nature of activity – deemed sale or service? – Supply of Tangible Goods – appellants are engaged in supply, installation and operation of digital camera equipment having Qube digital technology to various theatre owners on ‘right to use’ basis through an agreement entered with the parties – Department was of the view that the supply of digital camera equipment on higher basis to theatre owners would fall within the definition of service as under Section 65 B (44) of the Act, and the nature of the said service as defined under Section 66 E (f) of the Finance Act, 1994 is liable to levy of service tax.
–
Held that: – The sub-clause (f) of Section 66 E (declared services) refers to transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods – in the present case the supply of goods involves transfer of right of possession and effective control on such goods and therefore would fall
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
basis through an agreement entered with the parties. In terms of the said agreement/LOU, the theatre owners pay a non-refundable deposit and also pay per show fee and in addition to this the appellant will have exclusive right of 20 mts. advertising time for every show. Further, the appellant has to install, commission and maintain all the appliances at their cost and these shall always remain the property of the appellants. The department was of the view that the supply of digital camera equipment on higher basis to theatre owners would fall within the definition of service as under Section 65 B (44) of the Act, and the nature of the said service as defined under Section 66 E (f) of the Finance Act, 1994 is liable to levy of service tax. Three separate SCNs were issued for various periods from July 2012 to March, 2015 and after due process of law, the original authority vide separate Order-in-Original confirmed the demands, interests and imposed penalties. In appeal, the Commissioner
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ion 66 E – declared services. He pointed out that Section 65 B (44) sub-clause (ii) specifically excludes activity which involves transfer, delivery or supply of goods, which is deemed to be a sale within the meaning of clause 29 A of article 366 of the Constitution. That the activity rendered by the appellants was analysed by the Tribunal in the above stated Final Order wherein the Tribunal held that the activity is a deemed sale and does not fall under the category of Supply of Tangible Goods service. That, therefore the issue stands covered by the appellant s own case for the period after July, 2012 also. He prayed that the demand may be set aside. 4. The Ld. AR, Shri B. Balamurugan, AC, reiterated the findings in the impugned orders. 5. Heard both sides. 6.1 Undoubtedly, the activity on which the demand of service tax has been made in these appeals are analogous/identical to the activity which has been under scrutiny in the final order stated supra. The Tribunal after appreciating
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
the category of supply of tangible goods service. The department contends that the theatre owners do not have any right of possession of the equipment and that the appellants have not transferred the right of possession. That since the appellant has retained certain rights and also put down conditions that the theatre owners shall ensure that the appliances connected to the VSAT remains switched on all times that is 24 hours a day in order to enable the appellant to have access to the QCP would amount to retaining the effective control over the equipment. In the decision of G.S. Lamba & Sons Vs. State of Andhra Pradesh (supra), the Hon‟ble High Court has summarized the meaning and transfer of possession as well as retaining effective control over machinery. The relevant portion of the decision is as under:- 30. From the judicial 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
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
r of goods, even if such licences or permits are in the name of owner (transferor) of the goods, and (vi) during the period of contract exclusive right to use goods along with permits, licences etc., vests in the lessee..‟ 8.3 Following the said decision, we are of the view that the activity carried out by the appellant, involving supply of tangible goods for use, since such supply also involves transfer of right of possession and effective control of such goods, the said activity would not fall under supply of tangible goods service. Moreover, the appellant has furnished documents which show that the said user fee collected is assessed under the VAT Act. The levy of VAT and service tax being mutually exclusive, the demand is not sustainable on this ground also. The demand raised and related penalties will therefore require to be set aside which we hereby do. 6.2. The appellant has been discharging VAT on the said activity holding that the transfer of right to use the equipment b
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
on; or (22) declared service means any activity carried out by a person for another person for consideration and declared as such under section 66E; 65 B (51) taxable service means any service on which service tax is leviable under section 66B; 66 E Declared Services – The following shall constitute declared services, namely:- (f) transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods; The Tribunal having already analysed the nature of the activities in the appellant s own case for a previous period, we are of the considered opinion that the activity does not fall within the definition of service under the Finance Act, 1994 as amended in 2012. 8. In the result, impugned orders are set aside and the appeals are allowed with consequential reliefs, if any. ( Operative part of the Order pronounced in the open Court ) – Case laws – Decisions – Judgements – Orders – Tax Management India – taxmanagementindia – taxmanagement –
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =