Case Law Details

Case Name : Transpek Industry Ltd. Vs C.C.E. & S.T. (CESTAT Ahmadabad)
Appeal Number : Service Appeal No. 10379 of 2017
Date of Judgement/Order : 20/03/2020
Related Assessment Year :
Courts : All CESTAT (949) CESTAT Ahmedabad (129)

Transpek Industry Ltd. Vs C.C.E. & S.T. (CESTAT Ahmadabad)

We find that the appellant have referred to a contract under which ISO tank was hired by them on lease from foreign supplier. We find that the Adjudicating Authority as well as the appellate authority has held that the renting of ISO tank falls under the category of “supply of tangible goods service” only on the reasoning that there is no transfer of right of possession and effective control in respect of the leased ISO tank. However, no proper reasoning was given as how there is no transfer of right to possession and effective control. From the facts narrated by the learned counsel, we find that after supply of ISO tank the same was under their control, was operated by them with their own employees, and repair and maintenance if any was also carried out by the appellant themselves. With these facts, it prima facie appears that the right to use and effective control was with appellant. However, both the lower authorities have not carefully gone through the contract and not given reasoning under the given facts on why there is no transfer of right and effective control by the foreign supplier to the appellant. Therefore, in our considered view, the matter needs to be reconsidered carefully by the Adjudicating Authority. We also find that the Adjudicating Authority has contended that since there is no payment of VAT, the transaction is not a deemed sale. However, we are of the view that there may be cases where even though there is a deemed sale, but the particular transaction may not attract sales tax/VAT. Therefore, even if the VAT payment is not there, only on that basis it cannot be said that it is not a deemed sale. This aspect also needs to be considered. The appellant also relied upon various judgments on the issue in hand. The Adjudicating Authority must carefully consider these judgments taking into account the fact of that case whether the same is applicable or not. Having discussed above, we set aside the impugned order and remand the matter to the Adjudicating Authority for passing a fresh order after providing sufficient opportunities to the appellant. Since the matter is of very old period, i.e. 2008- 2009 to 2017, the Adjudicating Authority shall pass the denovo order within a period of 3 months from the date of this order.

FULL TEXT OF THE CESTAT JUDGEMENT

The brief facts of the case are that during the course of audit of appellant‟s excise records, it was noticed, that the appellant has made payment towards tanker hire charge to various foreign suppliers in foreign currency for hiring ISO tanker which was mostly used for export purpose. The department was of the view that ISO tank owned in such a case does not transfer the right of possession and no VAT/Sales Tax has been paid, it is liable to classify under “supply of tangible goods service” and the appellant is liable for payment of Service Tax under reverse charge mechanism/shift mechanism on the rent paid for the ISO tank obtained on lease from the foreign owners. Accordingly, show cause notice proposing recovery of Service Tax not paid along with interest and imposition of penalties was issued. The Adjudicating Authority vide Order in Original confirmed the demand with interest and imposed penalty under section 76 and 77 of the Finance Act 1994. Being aggrieved with the Order in Original, the appellant filed appeal before the Commissioner (Appeal) on the ground that ISO tank was handed over to the appellant with full right of possession and effective control during the renting period with their own labour force to operate including repair and maintenance. The Learned Commissioner dismissed the appeal and upheld the Order in Original. Therefore, the present appeal filed by the appellant before us.

2. Shri Saurabh Dixit, learned counsel appearing on behalf of the appellant submits that during the entire period of renting, the right to use of ISO tank and effective control was with the appellant. ISO tank is operated by the appellant’s own labour. The repair and maintenance as and when required is also carried out by the appellant themselves. Therefore, during the renting period, there is no interference or involvement of the lessor of the ISO tank who are located outside the country. Therefore, the renting of ISO tank does not fall under the category of “supply of tangible goods service”. In support, he placed reliance on the following judgments:

(1) M/s G.S. Lamba & Sons 2015 (324) ELT 316 (AP)

(2) GIMMCO Ltd. 2017 (48) STR 476 (Tri- Mum)

(3) Aims Pharma Ltd. 2019 (5) TMI 2400-Cestat (Ahm.)

3. Shri Ghanshyam Soni, Learned Joint Commissioner (Authorised Representative) appearing on behalf of the Revenue reiterates the finding on the impugned order.

4. We have heard both sides and perused the records. We find that the appellant have referred to a contract under which ISO tank was hired by them on lease from foreign supplier. We find that the Adjudicating Authority as well as the appellate authority has held that the renting of ISO tank falls under the category of “supply of tangible goods service” only on the reasoning that there is no transfer of right of possession and effective control in respect of the leased ISO tank. However, no proper reasoning was given as how there is no transfer of right to possession and effective control. From the facts narrated by the learned counsel, we find that after supply of ISO tank the same was under their control, was operated by them with their own employees, and repair and maintenance if any was also carried out by the appellant themselves. With these facts, it prima facie appears that the right to use and effective control was with appellant. However, both the lower authorities have not carefully gone through the contract and not given reasoning under the given facts on why there is no transfer of right and effective control by the foreign supplier to the appellant. Therefore, in our considered view, the matter needs to be reconsidered carefully by the Adjudicating Authority. We also find that the Adjudicating Authority has contended that since there is no payment of VAT, the transaction is not a deemed sale. However, we are of the view that there may be cases where even though there is a deemed sale, but the particular transaction may not attract sales tax/VAT. Therefore, even if the VAT payment is not there, only on that basis it cannot be said that it is not a deemed sale. This aspect also needs to be considered. The appellant also relied upon various judgments on the issue in hand. The Adjudicating Authority must carefully consider these judgments taking into account the fact of that case whether the same is applicable or not. Having discussed above, we set aside the impugned order and remand the matter to the Adjudicating Authority for passing a fresh order after providing sufficient opportunities to the appellant. Since the matter is of very old period, i.e. 2008- 2009 to 2017, the Adjudicating Authority shall pass the denovo order within a period of 3 months from the date of this order.

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