- Para 5 of Circular/letter D.O.F. No. 334/1/2008-TRU, dated 29-2-2008
- Board’s letter F. No. 137/120/2008-CX 4, dated 23-10-2008, [issued from file C. No.iv/16/6/2009-stu]/trade notice no. 12/2009, dated 13-3-2009, Madurai Commissionerate
- Para 5 of Circular/Letter D.O.F. No. 334/1/2008-TRU, dated 29-2-2008
4.4.1Transfer of the right to use any goods is leviable to sales tax/VAT as deemed sale of goods[Article 366(29A)(d) of the Constitution of India]. Transfer of right to use involves transfer of both possession and control of the goods to the user of the goods.
4.4.2 Excavators, wheel loaders, dump trucks, crawler carriers, compaction equipment, cranes, etc., offshore construction vessels and barges, geo-technical vessels, tug and barge flotillas, rigs and high value machineries are supplied for use, with no legal right of possession and effective control. Transaction of allowing another person to use the goods, without giving legal right of possession and effective control, not being treated as sale of goods, is treated as service.
4.4.3 Proposal is to levy service tax on such services provided in relation to supply of tangible goods, including machinery, equipment and appliances, for use, with no legal right of possession or effective control. Supply of tangible goods for use and leviable to VAT/sales tax as deemed sale of goods, is not covered under the scope of the proposed service. Whether a transaction involves transfer of possession and control is a question of facts and is to be decided based on the terms of the contract and other material facts. This could be ascertainable from the fact whether or not VAT is payable or paid.
- Board’s letter F. No. 137/120/2008-CX 4, dated 23-10-2008, [issued from File C. No. IV/16/6/2009-STU]/Trade Notice No. 12/2009, dated 13-3-2009, Madurai Commissionerate
Supply of tangible goods including machinery, equipments and appliance for use, without transferring right of possession and effective control of such tangible goods is a taxable service in terms of provision of section 65(105)(zzzzj) of the Finance Act, 1994. In some cases, vehicles, aircrafts, vessels etc., are also supplied in the above manner and such activities also fall under the said taxable service. In this regard, a doubt has arisen whether the credit of excise duty/Additional duty of Customs (commonly known as CVD) paid on such items are available to the provider of such taxable service and if so whether such goods should be considered as’ inputs’ or ‘capital goods’, for the purposes of the CENVAT Credit Rules, 2004.
- The matter has been examined. It is possible that some of such goods may either fall within the definition of ‘capital goods’ or may not be covered under the said definition. However, as these goods are primary requirements for providing the above-mentioned ‘output services’ for such service providers, the goods including vehicles, aircrafts, vessels etc., are in the nature of’ inputs’. It is emphasized here that this clarification is valid only when the output service is in the nature of service defined under the provisions of section 65(105)(zzzzj) of the Finance Act, 1994and the goods in question are the tangible goods supplied during the course of providing the taxable service.
3. This may be brought to the notice of all constituent members of your trade associations.