The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that when complete possession and control of de-humidifier machine given to customer during entire renting period, then it does not amount to supply of tangible goods.
The appellants are engaged in providing the equipment namely de-humidifier on hire basis. The case of the department is that the hiring of the equipment by the appellants to their client is classifiable under the category of supply of tangible goods for use services which has been introduced with effect from 16.05.2008 under Section 65 (105) (zzzj) of Finance Act, 1994. Accordingly, the same is taxable. Therefore, the show cause notices for the different periods have been issued proposing the demand of service tax on hiring of equipment under the category of supply of tangible goods service.
The counsel for the appellants submitted that the demand of service tax was raised in the transaction of module one, it is his submission that since there is transfer of right to possession and control of the equipment to the recipient of the service and VAT was applicable and paid for the same, this transaction does not fall under the category of supply of tangible goods for use service.
It was further contended that as per the renting transaction covered by module two since virtually appellant operated the machine at customer premises with their own technician throughout the renting period, the appellants were paying service tax under the category of supply of tangible goods without transfer of possession and control covered by Section 65 (105) (zzzj) of the Finance Act, 1994.
A Two-Member Bench comprising Ramesh Nair, Judicial Member and Raju, Technical Member observed that “In the present case as per arrangement between the appellant and the service recipient, since after giving the equipment on hire to the service recipient, the right to possession and effective control is with the service recipient who possessed the equipment and operated the same with their own employee.”
“It is also undisputed fact that the appellants have discharged the VAT considering the same as deemed sale under Article 366 (29A) of Constitution of India. Therefore, the hiring of equipment under this fact cannot be classified as supply of tangible goods for use service in terms of Section 65 (105) (zzzj) of Finance Act, 1994” the Tribunal noted.
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