Asian Paints Limited Vs Commissioner of CGST & Central Excise (CESTAT Mumbai)
The appeal was filed by Asian Paints Limited against the Order-in-Appeal dated 13.07.2022 whereby the Commissioner (Appeals) upheld the demand of service tax, interest and penalty for the post-negative list period (01.07.2012 to 31.03.2015) in relation to lease rental charges collected from dealers and distributors for tinting machines supplied under lease agreements. The Commissioner (Appeals) had, however, set aside the service tax demand for the period prior to 01.07.2012.
The appellant manufactures paints and varnishes and supplies computerized tinting machines to dealers for mixing base paints with colour shades. During an EA-2000 audit, the department noticed that the appellant collected lease rentals from dealers but had not discharged service tax. The department treated the leasing activity as taxable under the Finance Act, 1994 and issued multiple show cause notices covering the period from April 2005 to March 2015. The original adjudicating authority confirmed all the demands along with interest and penalties under Sections 77 and 78 of the Finance Act, 1994. The Commissioner (Appeals) subsequently restricted the surviving demand to the post-negative list period, resulting in the present appeal.
The appellant submitted that the lease agreements fulfilled all five conditions laid down by the Supreme Court in Bharat Sanchar Nigam Limited v. Union of India for transfer of the right to use goods. It argued that the leased tinting machines were identifiable goods, delivered to the dealers, placed under their exclusive possession and control for the lease period, and could not simultaneously be transferred to others. The appellant also pointed out that VAT had been discharged on the lease rentals, demonstrating that the transaction was treated as a deemed sale. It further contended that there was no suppression of facts since all relevant information had been disclosed in statutory records and returns. Reliance was placed on several judicial decisions in support of these submissions.
