A Division Bench of the Bombay High Court has recently quashed an order by the Assistant Commissioner of Central Goods and Services Tax & Central Excise demanding Service Tax from the assessee company in liquidation, Swire Oilfield Services India Private Limited.
The company (in liquidation) had, vide a lease agreement dated 1st April 2011, given on lease various containers on hire for consideration to one CU Inspection India Private Limited. On the lease rental/hire earned, the company discharged VAT at the rate of 12.5%.
It was contended by the respondent-revenue that the petitioner did not pay service tax or obtain service tax registration even after crossing the threshold limit of Rs.10 lakhs and the fact of providing taxable services were submitted to have come to the notice of the revenue during enquiry. Consequently, respondent 3 came to a conclusion that the company (in liquidation) has failed to pay service tax and also failed to obtain service tax registration with the sole intent to evade due service tax and issued a show cause notice.
The petitioner-assessee submitted that the transfer of right to use goods was subject to levy of VAT as the the definition of sale under the MVAT Act also includes such transfer of right to use goods for any purpose as a deemed sale transaction and accordingly is subject to VAT. Such a transaction was contended to have been made in this matter, according to the submissions made on behalf of the assessee.
The case of Bharat Sanchar Nigam Limited vs Union of India (2006) was referred to by the High Court Bench comprising Justice A S Doctor and Justice K R Shriram in addition to the decision in Commissioner of Service Tax-V, Mumbai vs. M/s. UFO Moviez India Ltd (2002) to reach the inference in the light of the facts at hand that, the transfer of goods is a deemed sale and that, where VAT liability has been discharged during the relevant period, the question of claiming service tax thereof does not arise.
The impugned order was therefore quashed by the Division Bench in favour of the assessee company in liquidation.
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