The Kolkata bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) has held that Crane Hiring Service Falls Under the Supply of Tangible Goods Service and Taxable.
M/s C. P. Construction Co, the Appellant is a Proprietorship concern, registered with the Service Tax department under Commercial or Industrial Building and Civil Structures’ and ‘Maintenance or Repair Services’.
The examination of audited financial accounts of the Appellant for the periods 2005-06, 2006-07, 2007-08 and 2008-09, copies of work order for the relevant period, payment receipts and ST-3 returns for the material period, revealed that the Appellant has received a certain sum from various clients on which no Service Tax was paid for the respective years.
Based on the said verification, a demand of Service Tax of Rs.52,27,911/-, including Cess was raised on the Appellant vide Show Cause Notice dated 13.10.2010. The Notice was adjudicated by the Commissioner, Bolpur vide impugned order dated 17.02.2011, wherein he has confirmed the service tax of Rs. 42,24,192/- demanded along with interest and imposed an equal amount of tax as penalty under Section 78 of the Finance Act, 1994. The balance demand in the Notice was dropped. Penalties were also imposed under Sections 76 and 77((2) of the Finance Act, 1994.
The Appellant contended that a perusal of the work orders reveals that the Appellant was not in possession and effective control of the entire crane and allied machinery, which were handed over to the transferee and the Appellant had no control over the machinery after handing it over to them. They further asserted that they are registered under the West Bengal Value Added Tax, 2003 under transfer of right to use to be treated as ‘deemed sale’ and exempted from Service Tax. Section 2(39) of the WBVAT Act deals with “sale” which means any transfer of property in goods for cash, deferred payment or other valuable consideration
The Appellant also contested the issue of limitation. They stated that the department itself had doubts about the classification of the service and demanded service tax under the category of ‘Financial Leasing Service’ for the period before 16.05.2008. Accordingly, they contended that the extended period was not invocable in the case.
The adjudicating authority dropped the demand under ‘Financial Leasing service’ for the period up to 15.05.2008 on the ground that the option to own the cranes at the end of the lease period is an essential ingredient to demand service tax under ‘Financial Leasing’ which is not available in this case.
After examining the work orders for the supply of the cranes he concluded that the ‘Crane Hire charges’ collected by the Appellant are rightly chargeable to service tax under the category of ‘supply of tangible goods’ service w.e.f.16.05.2008 and confirmed the demand only for the period after 16.05.2008.
The Appellant contended that the transaction involved is of ‘deemed sale’ and hence not liable to service tax. The Appellant contended that they have handed over possession and effective control of the cranes to transferee and they have no control over the cranes after handing over the same to the contractor.
The CESTAT observed that the adjudicating authority has categorically examined the terms and conditions of the contracts for ‘Crane Hiring ‘and confirmed the demand under ‘Supply of tangible Goods service’ in the impugned order.
It was evident that the appellant had not transferred possession and effective control of the cranes to the transferee. They have only transferred the ‘right to use’ the cranes to the transferee. As per Section 65(105)(zzzzj), service provided in relation to machinery and equipment for use, without transferring the right of possession and effective control of the machinery is liable to service tax under the category of ‘Supply of Tangible Goods service’ w.e.f.16.05.2008.
A division bench comprising Mr R Muralidhar, Member (Judicial) And Mr K Anpazhakan Member (Technical) observed that the service of ‘Crane hiring’ rendered by the Appellant falls within the ambit of ‘Supply of tangible Goods service’ as defined under Section 65(105)(zzzzj) of the Finance Act, 1994.
The CESTAT held that the adjudicating authority has rightly confirmed the demand for service tax on ‘Crane hiring Charges’ under the category of ‘Supply of Tangible Goods service’ w.e.f 16.05.2008.
Further viewed that extended period is not invocable and the demand is to be restricted to the normal period of limitation. Accordingly, we confirm the demand on ‘Crane Hiring Charges’ for the normal period of limitation under ‘Supply of tangible Goods Service’ along with interest. Since suppression of fact to evade payment of tax has not been established, no penalty is imposable under section 78 of the Finance Act, 1994.
The Tribunal Upheld the demand for service tax on ‘Crane Hiring’ Charges for the normal period of limitation along with interest under ‘Supply of tangible Goods service and the demand confirmed on the count for the extended period of limitation is set aside.
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