01.03.2022- No Service Tax On Supply Of Mobile Generators With Operator where Effective Control And Possession Is Transferred

The Hon’ble CESTAT vide order dated 02.02.2022 in the matter of M/s Subash Light House Vs Commissioner, Central Goods and Service Tax, Audit-II in Service Tax Appeal No. – 50176 of 2019 held that the supply of generators with technician and transfer of effective control and possession would be covered under Right to use and is not liable to Service tax under the category of Supply of Tangible Goods.

The Appellant preferred the appeal before the Hon’ble CESTAT assailing order dated 23.10.2018 passed by the Ld. Commissioner, CGST (Audit-II) where in the demand of Service Tax was confirmed against the Appellant under the category of Supply of Tangible Goods Section 65(105) (zzzzj) for supply of mobile generators.

 

Facts:

  • The Appellant is registered under Sales Tax/VAT law and engaged in the supply of fixed and mobile generator sets on rental basis to their clients.
  • The department demanded Service Tax on the aforesaid activity under the category of Supply of Tangible goods.
  • Thereafter the Ld. Commissioner while passing the impugned order and considering the submissions made by the Appellant dropped the demand for the supply of fixed generators relying on the decision of Supreme Court in the matter of Bharat Sanchar Nigam Ltd – 2006 (2) STR 161 – SC and on the decision of Rashtriya Ispat Nigam Ltd. – (RINL) (2002) 126 STC 114 (SC) and held that the supply of fixed generators being ‘deemed sale’ would be covered under ‘transfer of right to use’.
  • However, the demand on the supply of mobile generators provided with operators was confirmed against the Appellant considering it to be falling under the category of Supply of Tangible Goods and not covered under ‘transfer of right to use’.
  • The demand was confirmed on the ground that the Appellant has provided the operator, who operated and carried out repair and maintenance, thus the effective control and possession was with the Appellant.

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