OD-2 IN THE HIGH COURT AT CALCUTTA SPECIAL JURISDICTION [CENTRAL EXCISE]

ORIGINAL SIDE CEXA/12/2025 IA NO: GA/1/2025, GA/2/2025 COMMISSIONER OF SERVICE TAX II KOLKATA VS M/S COMPUTER EXCHANGE PRIVATE LIMITED : C O R A M :

THE HON'BLE THE CHIEF JUSTICE T.S SIVAGNANAM -A N D-

HON'BLE JUSTICE CHAITALI CHATTERJEE (DAS)

Heard On : 19.6.2025 Judgment On : 19.6.2025 Appearance :

Mr. Uday Shankar Bhattacharyya, Adv.

Mr. Kaustuv Kanti Maiti, Adv.

…for appellant.

Mr. Ankit Kanodia, Adv.

Ms. Megha Agarwal, Adv.

…for respondent.

T.S SIVAGNANAM, CJ. :

1. This appeal has been filed by the Central Excise Department challenging the order passed by the Customs, Central Excise and Service Tax Appellate Tribunal, East Zonal Bench, Kolkata (the Tribunal) in Excise Appeal No.75602/2017 dated 6.6.2024.

2. The revenue has raised the following substantial questions of law for consideration.

“a. Whether the service provided by the respondent is an act of ‘Supply of Tangible Goods Services’ when the effective control of the supplied equipment was with the respondent as mentioned in the agreement executed between the respondent and their customers ?

b. Whether the service provided by the respondent as supply of ‘Tangible Goods Service’ when there is an activity of supply of tangible goods for use by its customer and the said tangible goods have been supplied by the respondent to its customer without transferring right of possession and effective control of such tangible goods ?

c. Whether the learned Tribunal erred in holding that the effective control of the equipment is with the service recipient though the agreement contains that the effective control of the supplied equipment was with the respondent ?

d. Whether the transfer of right to use of the equipment by the respondent to its customer on rental basis for limited purpose comes within the purview of supply of tangible goods for use as per provision of Section 65(105)(zzzzj) of the Finance Act, 1994 ?

e. Whether the payment of VAT on rentals of the equipment is a deemed sale within the meaning of Article 366(219A) of the Constitution of India ?

f. Whether the learned Tribunal is erred in passing the impugned order dated 06.06.2024 by not considering the principles laid down by the Hon’ble Supreme Court reported in 2006(12) STR 161 (SC) in the case of BSNL vs. Union of India since permission of the respondent would have to be taken by its customers for removal/shifting of the equipment from location to another and no alteration or modification addition, or deletion of the equipment could be made without the permission of the respondent and the customer/hirer could not engage its or outside engineers to attend the equipment without prior permission of the respondent?”

3. We have heard Mr. Uday Shankar Bhattacharyya, learned senior standing counsel for the appellant/department and Mr. Ankit Kanodia, learned counsel for the respondents.

4. The learned Tribunal by the impugned order rightly allowed the assessee’s appeal and set aside the order passed by the Commissioner of Service Tax-II, Kolkata by order-in-original no.112/COMMR/ST-II/KOL/2016- 17 dated 20.1.2017. The appellant issued show cause notice dated 7.10.2016 proposing that an amount of service tax, education cess and SHE cess totaling to Rs.2,69,68,866/- leviable on taxable service namely, ‘supply of tangible goods service’ during the period from 2011-12 to 2014-15 shall not be recovered from the assessee under the provision to section 73(1) of the Finance Act; why appropriate interest on the due amount of service tax and education cess shall not be demanded under section 75 of the Act; why an amount of CENVAT credit to the tune of Rs.62,329/- wrongly taken and utilised by the assessee during the relevant period should not be recovered along with appropriate interest under Rule 14 of the CENVAT Credit Rules, 2004 read with Section 75 and proviso to Section 73(1) of the Finance Act; why penalty under section 77 of the Act should not be imposed for contravention