Service Tax not Leviable on Supply of Mobile Gensets: CESTAT

The Delhi bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has ruled that service tax cannot be assessed on the supply of generators since it is a sale of goods under Article 266(29A) of the Indian Constitution.

The appellants are in the business of providing generator sets to their customers on a rental basis. According to the agency, the appellants must pay service tax on such receipts.

The appellant had argued that their supply of gensets, in both forms, was governed by the requirements of VAT or Sales Tax, and that he had paid VAT/Sales Tax on the consideration charged because the effective control and possession of the gensets was with clients. According to Article 366(29A) of the Indian Constitution read with Sales Tax Laws, such genset delivery was “deemed sales,” and thus VAT/Sales Tax was paid on the consideration received by the appellant.

The Tribunal bench, consisting of Judicial Member Mr. Anil Chaudhary and Technical Member Mr. C J Mathew, found that the appellant’s activity, namely the supply of generators, as well as the transfer of right to use, effective control, and possession, could not be covered under the Act’s Section 66E(f) for the period 01.07.2012 to 31.01.2016. Furthermore, the aforementioned conduct has been excluded from the Act’s definition of “service” as described in Section 65B(44). As a result, service tax demand for the period in question is unsustainable and will be set aside.

“That the appellant is paying VAT on the money received from customers for the supply of D.G. sets.” As a result, levying service tax on the same transaction is illegal, as it is well-established that VAT and service tax are mutually exclusive. As a result, either VAT or service tax can be imposed on a specific transaction, according to the Tribunal.

“The CBEC has said in Circular No. 198/08/2016-SERVICE TAX, dated August 17, 2016, that in order to distinguish such transactions as the sale of goods or the delivery of services, it is necessary to evaluate whether there is a transfer of the right to use the items under the conditions of the contract.” Because the delivery of gensets fits the Apex Court’s criteria, we deem the supply of gensets to be a sale of goods under Article 266(29A) of the Indian Constitution,” the Tribunal noted.

CA The petitioner was represented by Abhinav Kalra.

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