The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), held that Supply of ISO Tankers on lease by foreign suppliers is deemed sale, hence sales tax would not be leviable.
M/s SRF Ltd. (Chemical Business), the appellantis before the Tribunal to assail the order passed by the confirming the demand of service tax with interest and penalty for the reason that the appellant had received supply of tangible goods for use, service from foreign suppliers, for which service tax was to be paid by the appellant under reverse charge mechanism.
The appellant claims that during the lease period, it had effective control and possession over the ISO tankers and so the entire transaction would qualify as a deemed sale under article 366(29A) of the Indian Constitution, as a result of which no service tax liability would arise.
The show cause notice alleged that the appellant had received services in the nature of STGU from the foreign suppliers, which would be taxable under section 65(105)(zzzzj) of the Finance Act, 1994 and leviable to service tax at the hand of the appellant in terms of section 66A of the Finance Act read with rule 2(1)(d)(iv) of the Service Tax Rules, 19945 and rule 3(iii)(c) of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006.
The Constitution empowers the State to levy Sales Tax/VAT on transactions in the nature of transfer of right to use goods, which were earlier not eligible to sales tax as such transactions were not covered by the definition of “sale” as given in the Sales of Goods Act, 1930.
A Bench consisting of Justice Dilip Gupta, President and PV Subba Rao, Technical Member ruled that “The supply of ISO Tankers on lease/rental basis by foreign suppliers to the appellant would amount to a deemed sale under article 366 (29A) of Constitution as the appellant throughout had effective control and possession over the ISO Tankers.”
“The Commissioner failed to appreciate that since the translation involved sale or purchase of goods in the course of import of goods into India, no sales tax/VAT was required to be paid even if the transaction qualified as a deemed sale” the Tribunal added.
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