Whether supply of pipes to be treated as supply of tangible goods service even if VAT paid?

PJ/Case Law /2016-17/3390

Case:-SUJALA PIPES PVT. LTD. VERSUS COMMISSIONER OF CUS., C. EX. & S. T., GUNTUR

Citation:-2015 (40) S.T.R. 606 (Tri. - Bang.)

Brief Facts:-The appellant is engaged in manufacture of RPVC pipes & fittings falling under CETH 3917. They are also registered for payment of service tax for GTA services received. During the Year 2008-2009 and 2009-2010 appellants received certain amounts for hiring out pipes manufactured by them for use by the farmers in agricultural operations as well as vehicle hire and rentals and building rentals. Total service tax of Rs. 8,51,552/- has been demanded from the appellants on the ground that pipes rented out by the appellants to the farmers amounts to provision of service of supply of tangible goods. Appellants have rendered services of Renting of Immovable Property as well as Equipment Hire.
Appellant’s Contention:- As regards demand on the ground that SOTG service has been rendered, the learned counsel submits that in the order-in-appeal the Commissioner has denied the claim of the appellant that the service did not amount to SOTG service only on the ground that appellant did not provide evidences of payment of VAT and the VAT assessment on the transactions. He submits that the pipes were handed over to farmers and appellant had paid VAT on the transaction. As regards Renting of Immovable Property, the learned counsel submits that the demand relates to the period prior to the amendment of definition of service carried out in 2010 and therefore show cause notice is time-barred. In view of the fact that there was a dispute about the liability and there were different opinions and retrospective amendment was brought in, appellant was entitled to bona fide belief and therefore the extended period could not have been invoked. As regards the service relating to Equipment Hire, learned counsel submits that he does not have any evidence in respect of this demand and therefore instead of remanding the matter prolonging the litigation he would prefer to pay the amount with interest and does not want to contest the demand. This is only on the ground that appellant does not want to undertake the search for documents etc.

Respondent’s Contention:- Commissioner has denied the claim of the appellant that the service did not amount to SOTG service only on the ground that appellant did not provide evidences of payment of VAT and the VAT assessment on the transactions.
Reasoning of Judgment:–After hearing both sides, Tribunal found that the appellants had produced the VAT assessment order and the letter written by the appellant that they have paid VAT for the period 1-8-2007 to 31-3-2010. This evidence was produced before the original authority and after going through the same, Tribunal opined that this can be considered as sufficient evidence. As regards the other observation, the Tribunal held that when pipes are handed over to farmers for use, it is natural that the assessee will not have control over its use that transfer of goods involve transfer of possession and effective control. Moreover it is the responsibility of the department to show that appellants have rendered a service which obligation has also not been fulfilled in this case.
As regards Renting of Immovable Property, the contention of the learned counsel that as there was retrospective amendment, the demand is time barred was accepted. In view of the fact that there was a dispute about the liability and there were different opinions and retrospective amendment was brought in, it was held that appellant was entitled to bona fide belief and therefore the extended period could not have been invoked.
As regards the service relating to equipment hire, appellant’s suggestion not to contest the demand for service tax in respect of Equipment Hire amounting to Rs. 49,148/- plus interest and request for waiver of penalty by invoking provisions of Section 80 of Finance Act 1994 is reasonable. In this case the demand is being accepted only because the appellant does not want to prolong litigation and amount involved is also small. In view of the above observations, the demand for service tax of Rs. 49,148/- with interest is confirmed as not contested. Demand for service tax on renting of immovable property is set aside on the ground of limitation. Demand relating to SOTG service in respect of pipes is set aside on merits. Penalties are waived in total by invoking the provisions of Section 80 of Finance Act 1994. The appeal is decided in the above terms.

Decision:-Appeal disposed of.
Comment:–The gist of the case is that to levy service tax under the category of ‘Supply of tangible goods service’, it is essential to ensure that the transaction is not of sale wherein effective control and possession has been transferred to the recipeint. Since in the present case VAT has been paid on supply of pipes to the farmers, it indicated that the transaction was that of sale and not of supply of tangible goods service. Therefore, the service tax demand was set aside on merits. As regards the service tax demand pertaining to renting of immovable property service, it was held that since there was ambiguity about its levy and there was retrospective exemption, extended period of limitation cannot be invoked and penalties cannot be imposed.
Prepared by:- Alakh Bhandari

Comments

PJ/Case Law /2016-17/3390

Post a Comment

Query