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CBEC ON HIRING


CBEC Clarifies the issue of Service Tax Liability on Hiring of Goods without Transfer of 'Right to Use'of Goods

CBEC issues clarification on service tax liability in case of hiring, leasing, licensing of goods without the transfer of right to use them, as provided u/s 66E(f) of Finance Act; States that in such cases, it is essential to determine whether in terms of the contract, there is transfer of right to use goods and the criteria laid down by SC in BSNL should invariably be followed and applied; SC had inter alia laid down that (i) there must be goods available for delivery, (ii) there must be consensus ad idem as to their identity, (iii) transferee should have legal right to use the goods, (iv) such right should be to the exclusion of the transferor i.e. it should not be merely license to use the goods, and (v) during the period of transfer, owner cannot again transfer the same right to others; Further states that cases decided under Sales Tax / VAT legislations cannot be applied mechanically, they have to be considered against the background of those particular legislative provisions and terms of contract in that case; Some of these cases include Rashtriya Ispat Nigam Ltd, International Travel House Ltd, State Bank of India and G. S. Lamba & Sons; CBEC also cites examples of 'financial lease' & 'operating lease', as well as 'dry leases' & 'wet leases' for aircraft industry, to emphasize the diverse nature of transactions and clarifies that in all these cases, no a priori generalizations or assumptions about service tax liability should be made; Reiterates, "..the terms of the contract should be examined carefully, against the backdrop of the criteria laid down by the Supreme Court in the Bharat Sanchar Nigam Limited case as well as other judicial pronouncements." : CBEC Circular 


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