2026-VIL-1510-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Classification of Leasing of Medical Equipment - Transfer of Right to Use Goods - Deemed Sale under Article 366(29A) of the Constitution - Taxability as Supply of Tangible Goods under Section 66E of the Finance Act, 1994 - Appellant engaged in leasing of dialysis equipment and providing comprehensive maintenance contracts and annual maintenance agreements to hospitals retained ownership of equipment and did not transfer possession and effective control to lessee as per contractual terms which indicated appellant was providing services only and not transfer of right to use equipments - Whether leasing of equipment with retention of ownership and control by lessor constitutes deemed sale not liable to Service Tax or falls within declared service category and liable to Service Tax - HELD - Article 366(29A)(d) of Constitution provides deeming fiction to treat transactions as deemed sale which includes transfer of right to use goods and such transactions are subject to VAT or CST. However transactions involving supply of tangible goods without transfer of right to use goods have been declared to be a service under Section 66E of the Finance Act - In the present case conditions laid down in the principle of BSNL case are not satisfied. Mere permission to enter premises for inspection and maintenance of leased equipment is insufficient to hold the lease as deemed sale. Usage of leased machines throughout lease period was subject to appellant's approval. Maintenance expenses and insurance expenses were borne by appellant - Department has correctly observed that appellant retained ownership of equipment and had not transferred possession and effective control of equipment - Contract is essentially a contract for services and not a deemed sale of goods - Activity in question falls under definition of service and declared service under Section 66E(e) of Finance Act prior to 2012 category was Supply of Tangible Goods under Section 65(105)(zzzzj) of the Act - Payment of VAT by hospital is insufficient to alter the conclusion. Service Tax demand on leasing of equipment is sustainable – The order under challenge is upheld and the appeal is dismissed
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