The Central Board of Excise and Customs (the CBEC) vide Circular No. 168/3/2013, dated April 15, 2013 has issued clarification on following issue:
Issue:
Whether service tax is leviable on the activity of preparation of place for organizing event or function by way of erection of pandal and shamiana?
Facts:
The process of erection/laying of Pandal or shamiana for organizing event or function is a reasonably specialized job and is carried out by the supplier with the help of his own labour. In addition to the erection of pandal or shamiana the service is generally coupled with other services like supply of crockery, furniture, sound system, lighting arrangements, etc.
Thus the confusion in the trade was whether above process would amounts to service exigible to service tax or transfer of right to use goods i.e. deemed sale exigible to sales tax/ Value Added Tax.
Clarification:
1. Above service falls within the definition of service
In terms of Section 65B (44) of the Finance Act 1994 (“the Finance Act”), service includes declared services. Further Section 66E of the Finance Act provides list of declared services. Clause (f) of Section 66E provides as under:
“Transfer of goods by way of hiring, leasing, licensing or any such manner without transfer of right to use such goods”
Accordingly, transfer of goods by way of hire, lease without transfer of right to use such goods falls within the parameters of Service.
2. Above activity does not amounts to transfer of right to use
A transaction will be regarded as transfer of right to use goods in case effective possession and control over such goods is also transferred. This position has been substantiated by the Hon’ble Supreme Court in the case of Rashtriya Ispat Nigam Ltd. Vs. CTO [2002] 126 STC 0114] wherein it has been held that there would not be any transfer of right to use goods where the effective control and possession remains with the supplier of such goods.
Further, the Hon’ble Supreme Court in case of BSNL Vs. UOI [2006] 3 STT 245] has held that for a transaction to be covered in ambit of transfer of the right to use the goods the following attributes should be there in a transaction:
a. There must be goods available for delivery;
b. There must be a consensus ad idem as to the identity of the goods;
c. The transferee should have a legal right to use the goods and, consequently, all legal consequences of such use including any permissions or licenses required therefor should be available to the transferee;
d. For the period during which the transferee has such legal right, it has to be the exclusion of the transferor: this is the necessary concomitant or the plain language of the statute, viz., a “transfer of the right to use” and not merely a license to use the goods:
e. Having transferred the right to use the goods during the period for which it is to be transferred, the owner cannot again transfer the same right to others.
In view of above, in the activity of pandal and shamiana along with erection thereof and other incidental activities, effective possession and control over the pandal or shamiana remains with the service provider, even after the erection is complete and especially made-up space for temporary use handed over to the customer.
Thus there is no transfer of right to use goods in the process of erection/ laying of Pandal or shamiana.
Thus the activity of erection of pandal and shamiana falls under Section 66E(f) of the Finance Act as the process of erection of Pandal or shamiana is a specialized job to be carried out by the supplier with the help of his own labour and is generally coupled with other services like supply of crockery, furniture, sound system, lighting arrangements, etc. without transfer of right to use such pandal or shamiana.
Hence, such service of preparation of place for organizing event or function by way of erection/lying of pandal and shamiana will be exigible to service tax.
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Bimal Jain
FCA, ACS, LLB, B.Com (Hons)
Mobile: +91 9810604563
E-mail: [email protected]
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