2025-VIL-396-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Supply of DG set, Supply of Tangible Goods, Works Contract Service – Demand of service tax under the head "supply of tangible goods service" and "works contract service" based on the appellant's supply of DG sets to customers - Whether the supply of DG sets by the appellant to its customers amounted to "Supply of Tangible goods service" chargeable to service tax under section 65(105)(zzzzj) of the Finance Act, 1994 – HELD - There are two types of lease contracts-where the effective possession and control is given to the transferee and VAT/ sales tax is payable and where there is no effective possession and control to the transferee and service tax is chargeable - the supply of DG sets by the appellant to its customers, where the effective possession and control of the DG sets was transferred to the customers, would amount to deemed sales under Article 366(29A) of the Constitution and would therefore be chargeable to VAT/sales tax and not to service tax under "Supply of Tangible Goods Service" - Tribunal relied on Supreme Court's judgment in BSNL case, which laid down five criteria to determine whether effective possession and control of goods has been transferred. All five criteria were satisfied in the present case and therefore the demand of service tax under ‘supply of tangible goods’ service could not be sustained - the demands of service tax under both the heads of "supply of tangible goods service" and "works contract service" are set aside - The impugned order is set aside and the appeal is allowed - Whether the sale of DG sets by the appellant to its customers, along with installation and commissioning services, amounted to "works contract service" chargeable to service tax - HELD - The predominant nature of the contract was the sale of DG sets, and the installation and commissioning services provided by the appellant were incidental to the sale. Merely because the appellant provided these incidental services, it did not automatically mean that the contract was a "works contract service" chargeable to service tax. It is common for sellers of large equipment to also provide installation and commissioning services to ensure the equipment is in working order and this would not convert the sale into a works contract. Therefore, the demand of service tax under the head "works contract service" was also not sustainable.
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