Lindstorm Services India Pvt Ltd Vs C.C.E. & S.T. (CESTAT Ahmedabad)
CESTAT Ahmedabad held that activity of leasing workwear (uniform) to their clients on the conditions mentioned in the agreements with their clients is not taxable under supply of tangible goods.
Facts- The appellant is a subsidiary of Lindstrom OY Finland and is engaged in leasing workwear (uniform) to their clients on the conditions mentioned in the agreements with their clients.
Based on the agreement, it appears that the appellant is engaged in supply of Work-wear on rent/ lease basis as per the requirement of each customer. The activity rendered by the appellant includes renting/ leasing of Workwear, washing, maintenance, repairing, alteration, designing of Workwear, providing lockers and transportation of Work-wear. The revenue after discussing the definition of ‘Supply of Tangible Goods Service’ as incorporated in Section 65(105)(zzzzg) before the introduction of negative list and definition of ‘Service’ under Section 65(B)(44) read with declared service under Section 66 of Finance Act, 1994, it appears that the nature of services involved supply of Work-wear for use while transferring possession only without transferring rights of effective control and thus appeared to be falling under the scope of declared service.
Accordingly, the adjudicating authority was of the opinion that since the effective control of the goods has not been transferred, the activity of leasing of Work-wear falls under the category of taxable service i.e. supply of tangible goods service prior to introduction of negative list and declared service post negative list regime, therefore, the demand of service tax was dropped.
Conclusion- CESTAT Chandigarh in order no. 60716 of 2019 dated 02.08.2019 held that in terms of agreement work-wear rented out always remains with the exclusive possession of their clients and nobody else can use those work wear at the same time and hence effective control to lie with the user / clients. The appellant, therefore, does not have control over the use of the work-wear. Thus the activity is not in the nature of ‘service’ under the Finance Act in both during the period prior to negative list regime and thereafter as held in the impugned order.
Held that the CESTAT’s two benches have taken a consistent view that the service in question is not taxable under supply of tangible goods for use or under the declared service.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The brief facts of the case are that the appellant is a subsidiary of Lindstrom OY Finland and is engaged in leasing workwear (uniform) to their clients on the conditions mentioned in the agreements with their clients. The salient features of the agreement are as under:
(i) That the Assessee undertook to deliver, wash and service individually customised workwear to the clients. Each worker will be provided with the workwear of his size which will be measured by the Assessee along with logo and labels as specified.
(ii) The Assessee would own the workwear and will have exclusive right to wash and service the same.
(iii) If the delivery is delayed or defective, the same shall be compensated by Lindstrom.
(iv) The workwear shall be collected by the customer once a week for being sent to Lindstrom for servicing.
(v) If the workwear cannot be leased because of wear and tear, it will be returned to Lindstrom but the customer shall pay the price as per the price list (depreciated price). If the workwear is to be replaced by the customer, the same is to be redeemed at agreed upon price.
(vi) Retail Price will increase every year by 8%.
(vii) VAT is being charged on the rental charges (see invoice reproduced at Para 4.3 Page 4 of the SCN).
(viii) There are separate provisions for pricing of replacement and valuation of redemption price.
On the basis of the above activities under the agreement and conditions therein, it appears that the appellant is engaged in supply of Work-wear on rent/ lease basis as per the requirement of each customer. The activity rendered by the appellant includes renting/ leasing of Work-wear, washing, maintenance, repairing, alteration, designing of Work-wear, providing lockers and transportation of Work-wear. The revenue after discussing the definition of ‘Supply of Tangible Goods Service’ as incorporated in Section 65(105)(zzzzg) before the introduction of negative list and definition of ‘Service’ under Section 65(B)(44) read with declared service under Section 66 of Finance Act, 1994, it appears that the nature of services involved supply of Work-wear for use while transferring possession only without transferring rights of effective control and thus appeared to be falling under the scope of declared service. Accordingly, the adjudicating authority was of the opinion that since the effective control of the goods has not been transferred, the activity of leasing of Work-wear falls under the category of taxable service i.e. supply of tangible goods service prior to introduction of negative list and declared service post negative list regime, therefore, the demand of service tax was dropped in relation to appeal No. ST/107182021. Being aggrieved by order in original No. DIV-V/ADJAC/RV/02/LINDSTORM/19-20 dated 08.05.2019, the Revenue filed appeal before the Commissioner (Appeals) who vide order-in-appeal No. VAD-EXCUS-001-APP-443-2019-20 dated 07.11.2019 allowed the appeal of the department setting aside the order-in-original, against this order-in-appeal, the assessee filed appeal bearing No. ST/10718/2021. As regard the appeal No.ST/11134/2019 filed by the Revenue, the adjudicating authority has dropped the demand vide Order-in-Original No. VAD-EXCUS-001-COM-2918-19 dated 18.03.2019 against which the Revenue has filed appeal bearing No. ST/11134/2019. Since both the appeals involving a common issue, they are taken up for disposal together.
2. Ms. Vandana Singh, learned Counsel appearing on behalf of the assessee, at the outset submits that the similar issue arose out of the identical service agreement with various service recipient at Chandigarh and Chennai Bench, which was decided in favour of the assessee at the following order:
