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Judgment
Raju, Member (T)
This appeal has been filed by Cello Household Appliances Private Limited.
Learned Counsel for the appellant pointed out that the appellant had entered into leasing agreement with M/s. Rohit Polly Products Private Limited. The appellant had discharged Service Tax under the category of banking and financial services of availing exemption under Notification No. 4/2006- dated 01.03.2006. After the completion of the lease agreement the machine continued with M/s. Rohit Polly Products Private Limited for 15 days for which they received an addition amount of Rs. 55,000/- . The appellant discharged Service Tax liability on the said amount also. In respect of the said demand penalty of Rs. 7,315/- was imposed under Section 78 of the Finance Act with the option of paying 25% of amount within 30 days of the order. The appellant complied and paid-up this amount.
2.1. In the instant case the liability to Service Tax was interpreted differently by different officers. One show cause notice was issued by the division office proposing to classification the said service as supply of tangible goods service and another show cause notice was issued seeking classify it as banking and financial service. He argued that in respect of lease agreement M/s. Rohit Polly Products Private Limited the revenue as sought to classify under two different services. The impugned order uphold penalty both under 76 and 78. He argued that there was no fraud or suppression and even revenue was not sure where the said service should be classified. He argued that this is prefect case for invocation of Section 80 for waiving penalty.
2.2. He argued that in any other lease rent agreement between the appellant and M/s. Wimplast Limited demand has been raised under supply of tangible goods service. Penalty under Section 78 and Section 76 has been imposed. He argued that the agreement for M/s. Wimplast Limited was purely of renting of plant and machinery. In the said agreement the entire premises was given on rent. On the component of rent of immovable premises appellant have paid service tax under renting of immovable property services. However, in respect of rent of plant and machinery no service tax was paid as the same dose not amount to provision of supply of tangible goods services. He argued in this case entire possession and effective control was transferred to the lessee. He submits that entire reason for confirmation of demand is that the appellant had not paid VAT on the said service. He argued that merely because no VAT was paid on the component of rent on plant and machinery does not imply that possession and effective control was not transferred to the lessee.
Learned AR relies on the impugned order.
We have considered the rival submission. We find that as far as demand in respect of agreement with M/s. Rohit Polly Products Private Limited is concerned, it is notice that even Department was not sure where the said service would be classifiable. The perusal of the impugned order shows that the demand on the plant and machinery component of the agreement of the M/s. Wimplast Limited has been confirmed primary for the reason that appellant has not paid the VAT.
4.1. From the impugned order it is seen that no evidence in support of the claim that the right of possession and effective control has not been transferred is presented. The only reason cited in the order is that the appellant has not paid VAT on the said transaction and therefore it implies that the right of position in effective control has not been transferred. We are not in agreement with this proposition. Department has to produce positive evidence to show that right of possession and effective control has not been transferred. Thus we do not find any merit in the impugned order seeking to clarify the activity of renting of plant and machinery as provision of supply of tangible goods service.
Moreover, the appellant has discharged the tax along with interest. From this circumstances it appears it is fit case for invoking under Section 80.The penalties imposed in respect of this transactions are therefore also liable to be set aside under Section 80 of the Finance Act, 1994.
In the above view impugned order is set aside and appeal is allowed.