Circular
No. 168/3
/2013 – ST, F. No. 356/2/2013-TRU, dated 15th April, 2013
Tax on Service provided by way of erection of Pandal or Shamiana
- regarding.
Several representations have been
received seeking clarification on the levy of service tax on the activity of
preparation of place for organizing event or function by way of erection/laying
of pandal and shamiana. The doubt that has been raised is that
this may be a transaction involving “transfer of right to use goods” and hence
deemed sale.
2. The issue has been examined.
“Service” defined in section 65B (44) of the Finance Act, 1994, includes a
‘declared service’. Activity by way of
erection of pandal or shamiana is a declared service, under
section 66E 8(f). The process of erection of Pandal or shamiana
is a reasonably specialized job and is carried out by the supplier with the
help of his own labour. In addition to the erection of pandal or shamiana
the service is generally coupled with other services like supply of crockery,
furniture, sound system, lighting arrangements, etc.
3. For a transaction to be regarded
as “transfer of right to use goods”, the transfer has to be coupled with
possession. Andhra Pradesh High Court in the case of Rashtriya Ispat Nigam Ltd.
Vs. CTO [1990 77 STC 182] held that since the effective control and possession
was with the supplier, there is no transfer of right to use. This decision of
the Andhra Pradesh High Court was upheld by the Supreme Court subsequently
[2002] 126 STC 0114. In the matter of Harbans Lal vs. State of Haryana – [1993]
088 STC 0357 [Punjab and Haryana High Court], a view was taken that if pandal,
is given to the customers for use only after having been erected, then it is not transfer of right to use
goods.
4. In the case of BSNL Vs. UOI
[2006] 3 STT 245 Hon’ble Supreme Court held that to constitute the transaction for the
transfer of the right to use the goods, the transaction must have the following
attributes:-
a. There must be goods available for
delivery;
b. There must be a consensus ad idem
as to the identity of the goods;
c. The transferee should have a legal
right to use the goods and, consequently, all legal consequences of such use
including any permissions or licenses required therefor should be available to
the transferee;
d. For the period during which the
transferee has such legal right, it has to be the exclusion of the transferor: this
is the necessary concomitant or the plain language of the statute, viz., a
“transfer of the right to use” and not merely a license to use the goods:
e. Having transferred the right to use
the goods during the period for which it is to be transferred, the owner cannot
again transfer the same right to others.
5. Applying the ratio of above
judgments and the test formulated by Hon’ble Supreme Court, the activity of
providing pandal and shamiana along with erection thereof and
other incidental activities do not amount to transfer of right to use goods. It
is a service of preparation of a place to hold a function or event. Effective
possession and control over the pandal or shamiana remains with
the service provider, even after the erection is complete and the specially
made–up space for temporary use handed over to the customer.
6. Accordingly services provided by
way of erection of pandal or shamiana would attract the levy of service tax.
7. Trade Notice/Public Notice may be
issued to the field formations and tax payers. Please acknowledge receipt of
this Circular. Hindi version follows.
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