2026-VIL-1191-CESTAT-CHD-ST
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SERVICE TAX CESTAT Cases

Service Tax - Right to Use Tangible Goods Service - Transfer of Possession and Effective Control - Renting out of machineries - The machinery was physically moved from the appellant's premises to the premises of the lessee with all risks, repairs, insurance and taxes to be borne by the lessee - Whether the transaction of renting out machinery constitutes a taxable service of supply of tangible goods without transfer of right to use such goods, or whether it amounts to a transfer of right to use goods not subject to service tax – HELD - To constitute a transaction for the transfer of the right to use goods the goods must be available for delivery, there must be consensus as to identity of goods, the transferee must have a legal right to use the goods with all legal consequences including permissions or licenses, the transferee must have exclusive right to use during the transfer period to the exclusion of the transferor, and the transferor cannot transfer the same rights to others - In the present case, the appellant has transferred possession and effective control of the machinery to the lessee, the lessee is fully authorized to use the machines freely at his own will and wish without restriction, the lessor cannot use or assign its use to any other person during the lease period. The appellant has paid VAT considering the transaction as a deemed sale. Since the statutory definition of taxable service requires that there must be supply of tangible goods "without transferring right of possession and effective control," and in the present case both conditions of transfer of possession and effective control were satisfied, the transaction does not constitute a taxable service – The issue has been consistently decided in favor of the assessee by various benches of the tribunal and even upheld by the Supreme Court, and therefore, the invocation of extended period of limitation without any mala fide intention is not sustainable - The impugned orders are set aside and the appeal is allowed
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