The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal(CESTAT) held that no service tax is leviable on transfer of transit mixer. It was observed that the hiring of Transit Mixer is covered under “right to use” and not under the service of “Supply of Tangible Goods” and the sale of RMC is not liable to service tax as it is a simple sale of transaction and there is no element of service in it.
The order passed by the Commissioner confirming the demand for service tax and also the penalty as proposed in the show cause notice was challenged by the appellant M/s R. V. Infrastructural Pvt. Ltd.
The appellant has been issued demand-cum-show cause notice dated 23.10.2012, inter-alia stating that it was noticed that M/s R. V. Infrastructural Pvt. Ltd., (“Service Provider/ Party/ Assessee‟)working as sub-contractor has provided taxable services in respect of construction activities undertaken on behalf of M/s Larsen & Toubro Limited which may be classified as “Commercial or Industrial Construction” Services as per Section 65(105)(zzq) defined as per Section 65(25b) and “Works Contract Services” as per Section 65(105)(zzzza) of the Finance Act, 1994 ibid depending upon subcontract awarded by M/s Larsen & Toubro Limited and are getting amount instead of providing the taxable services but not paying service tax on the amount received from M/s Larsen & Toubro Limited.
The assessee was requested to furnish the details of the gross amount received and service tax paid for the period 2007-08 to 2010-12. The assessee replied vide their letter dated 04.09.2012 which was incomplete and therefore the reply of the assessee was found inadmissible.
The Commissioner analysed the clauses of the agreement between the appellant and M/s L&T Limited and on that basis concluded that the final effective control and right of possession of the transit mixer remained with the appellant and hence they were liable for service tax under the category of “Supply of Tangible Goods Service‟, relying on the decision of the Tribunal in the case of Greatship (India) Ltd., vs. Commissioner of Service Tax, which considered all the earlier case law on the subject.
On the sale of RMC, the Commissioner distinguished the decision of the Tribunal as upheld by the Supreme Court relied upon by the appellant in the case of GMK Concrete Mixing Pvt. Ltd., vs. Commissioner of Service Tax observed that the appellant has not submitted sufficient documents for the sale of RMC and hence they were liable to pay service tax on this activity.
The appellant submitted that hiring of Transit Mixer is covered under “right to use” and not under the service of “Supply of Tangible Goods” and the sale of RMC is not liable to service tax as it is a simple sale of transaction and there is no element of service in it and therefore they have been paying VAT thereon.
The appellant submitted Form ST-2 dated 15.7.2010, whereby they were registered under the taxable services, i.e., “supply of tangible goods for use service” and also placed on record the turnover details of L&T during the period 2007–08 to 2011–12 separately for each of the activities.
A two-member bench comprising M S Binu Tamta, Member (Judicial) and P V Subba Rao, Member (Technical) observed that there is not even a whisper in the show cause notice about the provisions of section 65(105)(zzzzj) defining “Supply of Tangible Goods for use Service” and its applicability to the services rendered by the appellant yet the Commissioner in the impugned order has levied service tax holding that services provided by the appellant falls in the category of “Supply of Tangible Goods for use Service”.
The CESTAT set aside the order and held that the demand of service tax proposed in the show cause notice under commercial or industrial construction services as per section 65 (105) (zzq) defined as per section 65 (25b) and Works Contract Services as per section 65 (105) (zzzza) of the Act nor are they chargeable to service tax under “Supply of Tangible Goods Use of Goods”.
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