The Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) in Kolkata, comprising Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member), has set aside an order, ruling that the company leasing workwear to clients is not liable for service tax.
The assessee M/s. Lindstrom Services India Private Limited, is a subsidiary of M/s. Lindstrom OY, Finland and is engaged in leasing workwear to their clients on the conditions mentioned in the agreement with their clients. The appellant-company has 11 locations in India.
During the financial year 2013-14, Service Tax Audit was conducted at their Chennai Branch and thereafter, audits were conducted all over India at all the other locations and during such visits, the statement of Syed Asif Raja, Accountant of the appellant (Haryana Branch) was recorded; various documents including agreements for providing workwear to clients on rental basis were recovered. Two such agreements namely, with M/s. Mother Dairy Fruits and Vegetables Private Limited and M/s. Ecocat (India) Private Limited were also provided by the appellant. Further, the statement of Shri Manas Kumar, Business Unit Manager of the appellant, Haryana Branch, was recorded.
The Revenue came to the conclusion that the service provided by the appellant is covered under the category of “supply of tangible goods service” classifiable under Section 65(105) of the Finance Act, 1994 prior to 01.07.2012 and thereafter, under Section 65B(44) read with Section 69(f) of the Finance Act.
Therefore the assessee was actually involved in the supply of tangible goods without transferring the right of effective control, which amounts to providing a taxable service to their clients i.e., prior to 01.07.2012 under the definition of ‘supply of tangible goods service’ as per Section 65(105) of the finance Act and after 01.07.2012, under the definition of ‘service’ as per Section 65B(44) of the Finance Act, 1994.
The Show Cause Notice was issued to the appellant herein to demand Service Tax for the period from 01.08.2014 to 31.03.2017, on 08.01.2018. The demand of Service Tax was confirmed by way of the impugned order.
The bench observed that “we find that in the instant case, in terms of agreement work-wear rented out always remains within the exclusive possession of their clients and nobody else can use those work-wear at the same time and hence effective control to lie with the user/ clients. The appellant, therefore, does not have control over the use of the work-wear”.
Thus the activity was not in the nature of “service” under the Finance Act in both during the period prior to negative list regime and thereafter as held in the impugned order. The order under challenge is, therefore, not sustainable.
As the issue has been settled in favor of the assessee therefore, CESTAT held that the assessee was not liable to pay Service Tax. Accordingly, the impugned order was set aside and the appeal was allowed with consequential relief.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
