The Customs , Excise & Service Tax Appellate Tribunal (CESTAT) Ahmedabad Bench observed that as the Renting of Earth Moving Equipment to various clients is not a taxable services as it does not falls under supply of tangible goods and secondly, the service prior to 01.07.2012 and subsequent thereto it does not fall under the definition of input service.
The issue involved is whether rent charges collected towards hiring of Earth Moving Equipment would be covered and chargeable to service tax under ‘Supply of Tangible Goods Service’, in a case where, transferring of right of possession and use of earth moving machinery, is deemed as sale under Article 366 (29A)(d) of Constitution of India, and is excluded from service under Section 65(105)(zzzzj) upto 30.06.2012 and under 65B(44)(a)(ii) with effect from 01.07.2012 and Sales Tax/VAT/CST has been paid.
Shri Sachin Chitnis with Shri Viraj Reshamwala appearing for the appellant, Gmmco Limited submits that, in the present case the period involved is post negative list regime i.e. 01.07.2012 and according to amended statutory provisions, the deemed sale in terms of Article 366 (29A)(d) of Constitution of India is not covered under service as defined under Section 65B(44)(a)(ii) of the Finance Act, 1994.
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He submits that the appellant has paid VAT considering the transaction as deemed sale as right to possession and effective control has been transferred to the service recipient. He further submits that both the lower authorities have decided the matter considering the definition of Supply of Tangible Goods for use in terms of Section 65(105)(zzzzj) of Finance Act, 1994 whereas the individual service definitions were done away with effect from 01.07.2012 therefore the entire basis of the impugned order is without authority of law and on that ground itself the demand is not sustainable. He further submits that this issue is no longer res-integra as in the appellant’s own case, it has been decided in their favor via final orders dated 12.01.2024 and 31.10.2016.
Shri Sanjay Kumar, learned Superintendent (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order.
The ITAT Bench comprising Ramesh Nair, Judicial Member and C.L Mahar, Technical Member observed that the appellant has given earth moving equipment on monthly rent basis to their lessee and the right to possession and use of earth moving equipment has been transferred to the lessee.
Accordingly, the same is the deemed sale under Article 366 (29A)(d) of Constitution of India. The transaction is whether deemed sale or service is established on the basis of invoice raised by the appellant whereby the appellant has paid State VAT therefore, the transaction is clearly a deemed sale. The relevant definition of service in terms of Section 65B(44) of the Finance Act, 1994 is also provided.
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As per the definition of service, it is clear that activity which constitutes transfer, delivery or supply of any goods which is deemed sale within the meaning of Article 366 (29A)(d) of the Constitution of India, is excluded from the definition of service.
In the facts of the present case, since the transaction is deemed sale and the appellant has paid VAT, the same is clearly covered under sub-clause (ii) of clause (a) of Section 65B(44) which is excluded from the definition of service itself. The activity of the appellant does not fall under any taxable service.
So according to the above order it is clear that transaction of renting of Earth Moving Equipment to various clients firstly, does not fall under supply of tangible goods and secondly, the service prior to 01.07.2012 and subsequent thereto it does not fall under the definition of input service as mentioned above.
Therefore, the activity of renting of Earth Moving Equipment to various clients is not a taxable service. Hence the impugned order is not sustainable, the same is set-aside and the appeal is allowed.
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