Custom, Excise & Service Tax Tribunal
Til Ltd vs Kolkata South on 22 July, 2025
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO. 1
Service Tax Appeal No. 76877 of 2016
(Arising out of Order-in-Original No.47/COMMR/ST-II/KOL/2016-17 dated
28.07.2016 passed by Commissioner of Service Tax, Kolkata)
M/s. Gainwell Commosales : Appellant
(Formerly known as Tractors India Pvt. Ltd.)
Godrej Waterside, Unit No. 705, 7th Floor, Tower II, Block DP,
Sector-V, Salt Lake City, Kolkata-700091.
VERSUS
Commissioner of Service Tax, Kolkata : Respondent
180, Shantipally, Rajdanga Main Road, Kolkata-700107,
West Bengal.
With
Service Tax Appeal No. 76128 of 2017
(Arising out of Order-in-Original No.176-177/PR.COMMR/ST-I/KOL/2016-17 dated
31.03.2017 passed by Commissioner of Service Tax, Kolkata)
M/s. Gainwell Commosales :
(Formerly known as Tractors India Pvt. Ltd.) Appellant
Godrej Waterside, Unit No. 705, 7th Floor, Tower II, Block DP, Sector-V, Salt Lake City,
Kolkata-700091.
VERSUS
Commissioner of Service Tax, Kolkata :
180, Shantipally, Rajdanga Main Road, Kolkata-700107, West Bengal. Respondent
With
Service Tax Appeal No. 75411 of 2019
(Arising out of Order-in-Appeal No.573/S.Tax-II/Kol/2018 dated 26.10.2018 passed
by Commissioner of CGST & CX, Kolkata)
M/s. Gainwell Commosales : Appellant
(Formerly known as TIL Ltd.)
1, Taratala Road, Garden Reach, Kolkata-700 024.
VERSUS
Commissioner of CGST & CX, Kolkata : Respondent
180, Shantipally, Rajdanga Main Road, Kolkata-700107,
West Bengal.
APPEARANCE:
Shri B.L.Narasimhan, Rahul Tangri, Vasudev A, Advocates for the Appellant
Shri D.Sue, Authorized Representative for the Respondent
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Appeal No.: ST/76877/2016, 76128/2017, 75411/2019/-DB
CORAM:
HON'BLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL)
HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NO. 77225-77227/ 2025
DATE OF HEARING :22.07.2025
DATE OF DECISION:22.07.2025
Order : [Per Shri Ashok Jindal]
All the appeals are having common issue
therefore, all the appeals are disposed of by a
common order.
2. The facts of the case are as under:
1. M/s. Gainwell Commosales Private Limited is
primarily engaged in the trading of various
equipments such as cranes, diesel generator
sets, earthmoving equipment, and parts
thereof.
2. The Appellant was registered under the Service
Tax law, various State Value Added Tax Acts,
and also the Central Sales Tax Act, for trading
in the equipment and parts thereof.
3. In addition to the manufacturing and trading of
equipment, the Appellant also enters into
agreements with various customers for renting
out such equipment for specific period on
rental basis. As per the agreements, entered
into with the customers, the Appellant shall
deploy the equipments at the site of the
customers, for specified period, during which
the responsibility of the equipment entirely and
exclusively rests with the customer. In short,
the customer takes the possession and control
of the equipment, whereas the ownership
would remain with the Appellant.
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4. Few of the important terms of the Agreements
entered into by the Appellant with various
customers are summarized below -
(i) An operator for operating the equipment
may either be deputed by the customer
itself or by the Appellant, at the request
of the customer. However, in both the
scenarios, the responsibility for any claim
arising in connection with the operation
of the equipments vests with the
customer.
(ii) The equipment delivered on rent by the
Appellant, shall be at the sole risk of the
Customer.
(iii) The equipment shall be under the
possession, control and custody of the
Customer during the tenure of the
agreement
(iv) The equipment will be returned to the
Appellant on expiry of the contract
period.
(v) The customer shall indemnify the
Appellant against any losses, damages,
or destruction to the equipment or any
component thereof.
(vi) The Appellant upon delivery of the
equipment at the site of the customer,
shall not use the equipment for any other
purpose or withdraw the same.
5. Since, there was a transfer of right to use the
goods, i.e., transfer of effective control and
right of possession of the goods to the
customers, the Appellant raised invoices
charging applicable VAT treating the same as
"deemed sales".
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6. However, in respect of such transactions,
proceedings were initiated for various periods
by the Ghaziabad and Kolkata
Commissionerate by issuance of various Show
Cause Notices covering different periods. In
the said Show Cause Notices, the Department
alleged that the Appellant is liable to discharge
service tax under the category of "supply of
tangible goods service" under Section
65(105)(zzzzj) of the Finance Act, 1994 and
the Appellant has failed to pay service tax for
the transaction of renting the equipments on
hire to various customers for specified period
of time, as per the agreement.
7. In respect of the proceedings issued by the
Ghaziabad Commissionerate, the same
culminated in issuance of Order-in-Original No.
11-12/ST/Commr./GZB/2013-14 dated
27.09.2013 which is pending before the
Hon‟ble CESTAT, Allahabad.
8. In respect of the proceedings initiated by the
Kolkata Commissionerate, the Appellant duly
replied to the underlying SCNs, stating that the
no service tax is payable since the nature of
the transactions are "deemed sales" for which
applicable VAT/CST stood deposited by the
Appellant.
9. However, without considering the detailed
submissions made by the Appellant, the
impugned Orders-in-Original were passed by
the Ld. Commissioner, Kolkata confirming the
demands, against which the appellant filed
Appeal No. ST/76877/2016 and
ST/76128/2017. In respect of Appeal No.
ST/75411/2019, since the Order-in-Original
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was passed by the Ld. Assistant Commissioner,
the Appellant preferred an appeal before the
Ld. Commissioner (Appeals). The Ld.
Commissioner (Appeals), without appreciating
the submissions made by the Appellant, issued
the impugned Order-in-Appeal, which is
challenged before this Hon‟ble Tribunal.
10. In short, the impugned Orders have upheld the
demand on the grounds that the effective
control of the equipments which are rented
out, are retained by the Appellant, and thus, it
does not qualify to be "deemed sales" and
hence taxable under the category of "supply of
tangible goods service".
11. The impugned Orders are being assailed by the
Appellant vide the instant appeals on the
following grounds which are independent of
and without prejudice to each other.
12. The Ld. Counsel for the appellant submits that
entry 54 of List II of the 7th Schedule of
Constitution of India empowers the State to
levy tax on sale and purchase of goods.
Further, vide the 46th amendment, Article
366(29A) of the Constitution of India, that
defines the term "tax on the sale or purchase
of goods" was widened to include in sub-clause
(d) "a tax on the transfer of the right to use
any goods for any purpose (whether or not for
a specified period) for cash, deferred payment
or other valuable consideration". Therefore,
basis the aforementioned scheme of the
Constitution of India, various States including
West Bengal amended their VAT Act to include
within its ambit the levy of VAT on such
transaction in the nature of transfer of right to
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use goods. The relevant portion of Section
2(39) of the West Bengal Value Added Tax Act,
2003 is extracted below -
"(39) "sale" means any transfer of
property in goods for cash, deferred
payment or other valuable consideration,
and includes, -
......
(c) any transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration,;
...."
13. Similarly, Section 2(g) (iv) of the Central Sales Tax, 1956 also contains provision parimateria to Section 2(39) of the West Bengal Value Added Tax Act, 2003.
14. Therefore, whenever there involves a transfer of right to use any goods, the same would be subject to levy of VAT/CST under the respective State VAT Act or the Central Sales Tax Act, as the case may be. In order to ascertain whether a transaction qualifies as a transfer of right to use the goods, it is pertinent to refer to the landmark decision of the Hon‟ble Supreme Court in the case of Bharat Sanchar Nigam Limited (BSNL) v. Union of India - 2006 (2) S.T.R. 161 (S.C.) wherein the Hon‟ble Supreme Court defined five attributes necessary to constitute to a „transfer of right to use goods‟.
15. It is also referred to Section 65 (105)(zzzzj) of the Finance Act, which the Ld. Commissioner is 7 Appeal No.: ST/76877/2016, 76128/2017, 75411/2019/-DB observing in the impugned Orders that the present transaction in dispute falls under -
"Section 65. Definition -
....
(105) "Taxable service" means any service provided or to be provided - .....
"(zzzzj) to any person, by any other person in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances;"
16. Therefore, to sum up, a transaction would fall within the ambit of VAT/CST Act if there is a „transfer of right to use‟ and in order to satisfy the same, there should be - (1) transfer of right of possession; and (2) transfer of effective control.
17. In order to examine if the agreement by the Appellant with the customers falls within the ambit of „transfer of right to use‟, it is pertinent to discuss the relevant clauses of the agreement.
A. It is humbly submitted that the goods were very much available for delivery and delivered as evident from the preamble of the agreement and the Income-cum-Delivery Challans. Therefore, this qualifies the first attribute of the BSNL decision of "There must be goods available for delivery".
8Appeal No.: ST/76877/2016, 76128/2017, 75411/2019/-DB B. Further, as regards the second attribute of BSNL decision that "there must be consensus ad idem as to the identity of goods" a part of page 93 of the Appeal Paper Book in ST/76877/2016 and is extracted below -
Equipme Quanti Rental Maximu Minimu Extra
nt & ty Rate m m Base day
Attachme (Units) Type Permissi Rental Per
nt ble Charge Unit
Descripti Operatin s Per (Rs.)
on g Hour Unit
Cap Per (Rs.)
Unit
(Hours)
CAT 42B 1 Month 250 Rs. Prora
ly 95,000 ta
+ 4%
VAT
C. Further, as regards the third attribute of the BSNL decision which states that transferee should have a legal right to use the goods with all the permissions and licenses being made available to the transferee, it is submitted that such attribute does not apply to the present case since the Customers do not require any legal permission or license for its use. Further, as per the agreement, the Appellant has transferred all the rights in the said equipments to the customers, and the same are used at the discretion of the customers. The customers are also provided with option to appoint their own operators for operating the equipment. The relevant clauses of the agreement are extracted below -
9Appeal No.: ST/76877/2016, 76128/2017, 75411/2019/-DB "2. Rental 2.2 ....Although ownership would best with TIPL, TIPL shall part with the possession, control and custody of the equipment. The equipment shall be under the possession, control and custody of the CUSTOMER during the tenure of the Agreement for use by them for the purpose for which the equipment is manufactured."
D. As regards the fourth attribute in the BSNL decision of transferring of right to use and not merely a license to use the goods, shows that the control and custody of the equipment vests with the Customer itself. Further, the agreement gives the option to the customer to request for operator from the Appellant, who shall work totally under the supervision of the Appellant. However, even in such a case, the Customer would only be liable for any claim arising in connection with the operation of the Equipment by operators provided by Appellant. Relevant portion of the agreement is reproduced below -
"4.Operating Assistance 4.1... On Customer‟s request, TIPL shall provide 1 equipment operator for single shift operation of maximum 10 hours per day. Such Operators deputed by TIPL to operate the equipment shall follow the instructions and directions of the CUSTOMER.
4.2 The CUSTOMER shall be responsible for any claim arising in connection with the operation of the Equipment by operators provided by TIPL. ...."10
Appeal No.: ST/76877/2016, 76128/2017, 75411/2019/-DB E. Therefore, from the above extracted clauses of the Agreement, it is quite clear that the customer has the option to operate the equipment, and the entire effective control and right to use vests with the customers of the Appellant.
F. Also, it is pertinent to note that the agreement contains clause for inspection of the equipments by the Appellant. In this regard, it is submitted that the very fact that the Appellant reserve the right to inspect clearly shows that the possession and effective control has been transferred to the customers. Had the Appellant retained the possession and effective control, the Appellant would not require the customer‟s permission to inspect. In this regard, reliance is placed on the decision in Anandcine Services Pvt. Ltd. v.
Commissioner of Service Tax - II, Chennai
- 2025-VIL-188-MAD-ST wherein it was held that if the owner reserves the right to inspect, it very well shows that possession and effective control has been transferred from the owner.
G. The final attribute in the BSNL‟s decision is that after transferring the right to use, the same rights cannot again be transferred to others. In this case, it is submitted that the above said attribute is clearly present in the present transaction as a necessary implication. Once the equipments are delivered and installed in the customers premises, there is no question of the same being used by some other party. Thus, such condition also stands fulfilled.
11Appeal No.: ST/76877/2016, 76128/2017, 75411/2019/-DB I. Hence, from the above extracted clauses it is proved beyond doubt that the effective control and possession of the goods have been transferred to the customers of the Appellant, therefore, the same being a transaction of „transfer of right to use the goods‟, thereby the same being a deemed sales and falling within the ambit of West Bengal VAT Act.
J. Reliance is placed on the decision of the Hon‟ble CESTAT Kolkata in the case of M/s.
Computer Exchange Pvt. Ltd. v.
Commissioner of Service Tax, Service Tax
- II Commissionerate, Kolkata - 2024- VIL-1904-CESTAT-KOL-ST wherein it was held that when the effective control of the equipment is with the service recipient and if the assessee is paying appropriate VAT on the transaction, the assessee is not liable to pay Service Tax under the category of „supply of tangible goods‟ service. Such decision of the Hon‟ble CESTAT Kolkata was affirmed by the Hon‟ble Calcutta High Court in 2025-VIL-675- CAL-ST wherein it was held that the Hon‟ble Tribunal has correctly held that equipment rental constituted deemed sale attracting VAT, not service tax.
Specific rebuttal to the findings in the impugned Order K. The Ld. Commissioner (Appeals) has observed that the Appellant undertakes the periodical routine and scheduled maintenance of the equipments.
L. In this regard, the Ld.Counsel for the appellant submits that providing maintenance by the 12 Appeal No.: ST/76877/2016, 76128/2017, 75411/2019/-DB Appellant would not in any way affect the right to possession and effective control of the customers of the Appellant. Reliance is placed on the decision of the Hon‟ble CESTAT, Allahabad in the case of M/s. Express Engineers & Spares v. Commissioner, CGST, Ghaziabad - 2022 (1) TMI 564 - CESTAT Allahabad wherein it was held that "The finding in the impugned order that since the Appellant was responsible for the maintenance and repair of the diesel generator sets, the Appellant has retained effective control, cannot also be sustained because once the control and possession of the diesel generator sets was transferred to the customers, mere maintenance or repair work will not change the nature of the transaction."
M. He relied on the following decisions wherein similar proposition of law was upheld -
M/s. Inox Air Products Pvt. Ltd.
(Unit-I) v. CCE & CGST, Noida -
2025-VIL-535-CESTAT-ALH-ST M/s. Gimmco Ltd. v. CCE & S.T. Nagpur (vice-versa) - 2017 (48) S.T.R. 476 (Tri. - Mumbai) N. Further, the Ld. Commissioner (Appeals) has also observed that the operators of the equipment would generally be provided by the Appellant, and even though it gives the option to the customers for appointing operators, prior concurrence of the Appellant is to be obtained. It is humbly submitted that it is a settled position merely because crew are provided by the Appellant, it would not take 13 Appeal No.: ST/76877/2016, 76128/2017, 75411/2019/-DB away from effective control and possession of the equipment from the customers. Reliance is placed on the decision of the Hon‟ble CESTAT, New Delhi in the case of Petronet LNG Ltd. v. Commissioner of Service Tax, New Delhi - 2016 (46) S.T.R. 513 (Tri. - Del.) wherein it was held that mere fact that crew are employed by contractor does not in any manner derogate from the fact that the transaction constitutes transfer of the right to use the tangible goods, including possession and effective control of the tankers since there were several other clauses in agreements which stipulated that personnel on board the vessels operated strictly in terms of detailed instructions, guidelines and directives issued by the contractee, and they could be replaced by contractor based on requirement of contractee.
O. Therefore, placing reliance on the aforementioned decisions, it is humbly submitted that in the instant case, as clearly evident from the contract, there is transfer of right to use the goods, i.e., transfer of effective control and right of possession of the goods to the customers, and hence, the same is a deemed sale within the West Bengal VAT Act / Central Sales Tax and falls outside the scope of levy of service tax.
18. Service Tax and VAT are mutually exclusive, and in the instant case demand of service tax is not sustainable since VAT has undisputedly been paid on the transaction.
14Appeal No.: ST/76877/2016, 76128/2017, 75411/2019/-DB
19. He also submitted that it is a settled position of law that service tax and VAT are mutually exclusive, and in the instant case, VAT has been undisputedly discharged in the transactions.
20. In this regard, he further submitted supra, the transaction entered into between the Appellant and the customers has been categorized as a deemed sales and VAT has been discharged on the transaction. The Appellant has also enclosed a CA certificate certifying that VAT or CST wherever applicable has been deposited, on the transactions.
21. It is a trite law that VAT and service tax are mutually exclusive. In this regard, reliance is placed on the decision of the Hon‟ble Supreme Court in the case of Imagic Creative Private Limited v. Commissioner of Central Taxes
- 2008 (9) S.T.R. 337 (S.C.)wherein the Hon‟ble Supreme Court held that payments of service tax as well as VAT are mutually exclusive.
22. Further reliance is placed on the decision of the Hon‟ble CESTAT Kolkata in the case of M/s. Oil India Ltd. v. Commissioner of Customs & Central Excise (Appeals), Guwahati - Final Order No. 77166 of 2024 dated 11.09.2024 in ST/75060/2015 wherein on an identical issue, it was held that since VAT has been discharged by the assessee, the same cannot be treated as exigible to service tax.
23. Further reliance is placed on the following decisions wherein it was held that when the 15 Appeal No.: ST/76877/2016, 76128/2017, 75411/2019/-DB assessee has duly discharged VAT liability, liability of service tax cannot be fastened -
(i) M/S. TEL EXPORTS V. COMMISSIONER, CE & ST, CHENNAI - 2025-TIOL-784- CESTAT-MAD
(ii) Commissioner of Service Tax -
V, Mumbai v. UFO Moviez India Limited - 2022 (61) G.S.T.L. 4 (S.C.).
(iii) Nayana Premji Savala v. Union of India - 2022 (66) G.S.T.L. 417 (Bom.).
24. It is also pertinent to refer to Circular No. 334/1/2008-TRU dated 29.02.2008 wherein in paragraph 4.4.3 it has been stated that "...Supply of tangible goods for use and leviable to VAT/sales tax as deemed sale of goods, is not covered under the scope of the proposed service. Whether a transaction involves transfer of possession and control is a question of facts and is to be decided based on the terms of the contract and other material facts. This could be ascertainable from the fact whether or not VAT is payable or paid."
25. It is humbly submitted that Circulars are binding on the department. Reliance is placed on the decision in UOI v. Arviva Industries (I) Ltd 2008 (10) STR 534 (SC).
26. Therefore, basis the aforementioned decisions and circular, it is clear that VAT and Service Tax are mutually exclusive, and when it is an undisputed fact that VAT has been duly paid on the transaction, the same cannot be subject to service tax again. Hence, on this ground alone, the impugned Orders are liable to be set aside.
16Appeal No.: ST/76877/2016, 76128/2017, 75411/2019/-DB
27. Demand confirmed for the period post 01.07.2012 is not sustainable since the provisions of the negative list regime have not been invoked.
28. It is humbly submitted that for the period from July 2012 to March 2015, the impugned Order has confirmed the demand of Service Tax demand on the ground that the same falls within the ambit of "supply of tangible goods service" under Section 65 (105) (zzzzj) of the Finance Act.
29. In this regard, it is humbly submitted that post 01.07.2012, such a provision cited by the Ld. Commissioner in the impugned Order is inapplicable on account of advent of the negative list.
30. The Appellant humbly submits that it is a settled law that demand confirmed based on non-applicable provisions is unsustainable. In this regard, reliance is placed on the recent decision of the Hon‟ble CESTAT, New Delhi in the case of Commissioner of Central Tax Goods and Service Tax, Delhi East v. M/s. Sanjay Electricals (vice-versa) - 2024- VIL-1865-CESTAT-DEL-STwherein for the demand of Service Tax confirmed for the period post, the repealed provisions of Section 65(105) of the Finance Act was cited by the Ld. Commissioner. In this case, the Hon‟ble CESTAT held that demand confirmed by citing the non-existent legal provisions cannot be sustained. The relevant paragraph of the said decision is extracted below -
17Appeal No.: ST/76877/2016, 76128/2017, 75411/2019/-DB "10.....Therefore, this is not a case of mere wrong mention of a provision in the SCN but a confirmation of demand on charging sections which did not exist during the relevant period at all. It is also a case of ascertaining the demand considering exemption notification which also did not exist during the relevant period. Not only were the wrong provisions invoked in the SCN, but the demands were confirmed under them in the impugned order which shows complete non-application of mind. The provisions were not only wrong but were non-existent during the relevant period. We, therefore, answer this question in favour of the assessee and against the Revenue and hold that the demand confirmed in the non-existent legal provisions cannot be sustained."
31. In view of the aforesaid, it is submitted that the demand for the period 01.07.2012 to March 2015 is liable to be set aside as the same has been confirmed under inapplicable provisions.
32. It is humbly submitted that extended period of limitation cannot be invoked in the instant case since the basis the aforementioned submissions, the Appellant was under the bonafide belief that no service tax is payable since the instant transaction in dispute constitutes a deemed sales for which VAT was already paid.
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33. In respect of Appeal No. ST/76877/2016, the period in dispute is from April 2010 to March 2013, however the SCN has been issued only on 24.10.2013. Accordingly, the period from 01.04.2010 to 24.04.2012 is barred by limitation. In respect of Appeal No. ST/76128/2017, the SCN dated 19.10.2015 is for the period October 2013 to May 2014, thus the demand proposed upto March 2014 is time barred.
34. He relied on the decision of the Hon‟ble CESTAT in the case of Carzonrent (India) Pvt. Ltd. v. Commissioner of Service Tax, Delhi - I - 2017 (50) S.T.R. 172 (Tri. - Del.) wherein it was held that when there is an element of dispute and ambiguity whether a transaction is covered by VAT law or Service Tax, and the same needs to be decided based on the facts and applicable law, then extended period of limitation cannot be invoked.
35. He also relied on the decision of the Hon‟ble CESTAT Chandigarh in the case of Sant Roadlines v. Commr. of C.Ex. & S.T., Panchkula - 2020 (43) G.S.T.L. 206 (Tri. - Chan.)wherein it was held that extended period of limitation is not invokable when the assessee was under the bona fide belief that no service tax is payable under the category "supply of tangible goods" when the agreements clearly show such bonafide belief on the part the assessee.
36. Therefore, it is a trite law that when the issue involved is of bonafide interpretation of law, extended period of limitation cannot be 19 Appeal No.: ST/76877/2016, 76128/2017, 75411/2019/-DB invoked. He relied on the decision of the Hon‟ble CESTAT, Kolkata in the case of M/s. Amit Metaliks Limited v. Commr. of Central Excise, Bolpur - 2023-VIL-1683- CESTAT-KOL-CE.
37. Thus, extended period has been wrongly invoked in the instant case.
38. Where the principal demand itself is not payable, the demand for interest and penalty ought to be set aside.
39. He relied on the decision of the Hon‟ble Supreme Court in the matter of Pratibha Processors v. UOI - 1986 (88) E.L.T. 12 (S.C.) wherein it was held that interest is compensatory for lost revenue. In the instant case, since demand is not sustainable, there is no lost revenue, and hence, interest cannot be charged.
40. In the matter of Collector of Central Excise v. H.M.M. Limited - 1995 (76) E.L.T. 497 (S.C.), it was held that the question of penalty would arise only if the Department is able to sustain the demand. Hence, no penalty is imposable since the demand cannot be sustained.
41. On the other hand Ld. Authorized Representative supported the impugned order.
42. Heard the parties. Considered the submissions.
43. On going through the arguments advanced by both the sides we find that the following issue emerges whether in case where VAT has been 20 Appeal No.: ST/76877/2016, 76128/2017, 75411/2019/-DB paid by the appellant in that circumstances whether Service Tax is leviable or not?
44. The said issue has been examined by this Tribunal in the case of Computer Exchange Private Ltd. (Supra) wherein the issue before this Tribunal was whether the supply of computer, monitors, laptops and other IT equipments by the appellant to his customers on rental basis would tantamount to „supply of tangible goods‟ service or a „deemed sale‟ as per Article 366 (29A) of the Constitution of India read with the definition of „sale‟ as per the WBVAT Act, 2003.
45. Admittedly in this case, the appellant has paid VAT which is evident from the invoice raised by the appellant on the service recipient.
46. The sample invoice is excerpted herein below for consideration :
21Appeal No.: ST/76877/2016, 76128/2017, 75411/2019/-DB
47. Admittedly, as per the invoice herein above, the appellant has paid VAT for monthly rental of the equipments. The said issue has been decided by this Tribunal holding as under:
22Appeal No.: ST/76877/2016, 76128/2017, 75411/2019/-DB " As the issue has already been settled that if the appellant is paying VAT on the rentals, which is deemed sale, in terms of Article 366 (29A) of the Constitution of India, the appellant is not liable to pay Service Tax under the category of „supply of tangible goods‟ service, therefore, relying upon the decision of the Tribunal cited supra, we hold that the appellant is not liable to pay Service Tax."
48. The said order of this Tribunal has been affirmed by the Hon‟ble High Court vide order dated 19.06.2025. In that view the appellant is not liable to pay Service Tax. The same view was taken by the Hon‟ble Apex Court in the case of Bharat Sanchar Nigam Ltd. (Supra), wherein the Hon‟ ble Apex Court observed as under:
"To constitute a transaction for the transfer of the right to use the goods the transaction must have the following attributes:
a. There must be a 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 consequently all legal consequences of such use including any permissions or licenses required therefore should be available to all the transferee.
d. For the period during which the transferee has such legal right, it has to be the exclusion to the transferor this is 23 Appeal No.: ST/76877/2016, 76128/2017, 75411/2019/-DB the necessary concomitant of the plain language of the status -viz. a "transfer of the right to use" and not merely a licence 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 against transfer the same rights to others. "
49. Admittedly, the transaction in this case would fall within the ambit of VAT/CST if there is a transfer of right to use there should be transfer of right to possession and transfer of effective control. Admittedly, the appellant have transfer the right of possession and transfer the effective control of the equipments to their clients. In that circumstances, no Service Tax is payable by the appellant.
50. Admittedly, in this case the appellant has paid VAT. Therefore, the Service Tax cannot be demanded from the appellant. The said issue has been settled by the Hon‟ble Tribunal in the case of Oil India Limited (Supra) wherein it has been held that since VAT has been discharged by the CC same may be treated as exaggerate to Service Tax. And in the case of Imagic Creative Private Ltd (Supra) the Hon‟ble Apex Court held that payment of Service Tax as well as VAT are mutually exclusive. In view of the above we hold that as appellant has paid VAT on the transaction in question no Service Tax is payable by the appellant. Further we find that post the period 01.07.2012 the provision o negative regime has not been invoked in this case. Therefore, no demand of Service Tax is sustainable against the appellant.
51. In view of the above discussion we hold that demand of Service Tax is not sustainable against the 24 Appeal No.: ST/76877/2016, 76128/2017, 75411/2019/-DB appellant. Consequently, the demand of interest and penalties are not imposable.
52. Therefore, we set aside the impugned orders and allow the appeals with consequential relief, if any.
(Operative part of the order was pronounced in open court) (ASHOK JINDAL) MEMBER (JUDICIAL) (K. ANPAZHAKAN) MEMBER (TECHNICAL) RG