Service Tax leviable on Tangible goods supplied without transferring Right of possession covered under ‘Supply of tangible goods services’ w.e.f. 16.05.2008: CESTAT [Read Order]

The Chandigarh bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that service tax can be levied on tangible goods supplied along with operators on a monthly hire basis without transferring the right of possession and effective control then the same was covered under supply of tangible goods services as introduced with effect from the date of 16.05.2008 and not under business auxiliary service. 

Shemco India Transport, the appellant assessee was providing services under Cargo handling Services, Business Auxiliary Services, Manpower Recruitment and Supply Agency Services, Erection Commissioning and Installation Services to Nestle India Ltd, Moga, and the assessee had provided services concerning material handling, loading, unloading, providing trailers, low bed trollies, tractor trollies, tractor cranes, erection commissioning and installation of plant and machinery with requisite manpower to Nestle. 

The assessee appealed against the order passed by the Commissioner (Appeals) for confirming the demand of service tax under Rent-a-cab service of Rs. 3,09,800/- interest and equal penalty under Section 78 & Rs.1000/- under Section 77 of the Finance Act,1994. 

Alok Arora, the counsel for the assessee contended that the low bed trollies with tractors provided with drivers to run within the factory, and tractor crane with driver runs within the factory of Nestle do not fall under the category of ‘Business Auxiliary Service’ but rather it falls undersupply of tangible goods service which was made taxable with effect from 16.05.2008. 

Shivam Syal, the counsel for the department contended that the assessee was liable to pay the demand raised by the revenue and contended that the service of the assessee falls under the category of rent-a-can service and the demand was legally sustainable. 

The Bench observed that in the case of Haldia Vs. Industrial Handling, the court held that when the tangible goods are supplied along with operators on a monthly hire basis without transferring the right of possession and effective control and were covered under supply of tangible goods services as introduced as introduced vide amendment to Finance Act with effect from the date of 16.05.2008. 

The two-member bench comprising S S Garg (Judicial) and Anjani Kumar (Technical) held that the service rendered by the assessee does not fall under the category of rent-a-cab service and is not liable to pay the demand raised by the revenue. 

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