1. Service tax liability dispute regarding classification of machinery hiring as supply of tangible goods or transportation service under the Finance Act, 1994. (Para 2 )
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2026 Supreme(Online)(CESTAT) 3891
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL NEW DELHI PRINCIPAL BENCH
Ajay Sharma, J, Hemambika R. Priya, Technical Member
Shri Sai RMC – Appellant
Versus
Commissioner of Central Excise & CGST – Respondent
SERVICE TAX APPEAL NO.51146 OF 2022
Important Points
Hiring of vehicles where the contractor retains substantial control (providing driver, maintenance, and fuel) constitutes a taxable service under Section 65(105)(zzzzj) of the Finance Act, as there is no transfer of the right of possession and effective control to the user.
Subject
Tax - Service Tax
Act Referred
Finance Act, 1994: S.65(105)(zzzzj)
Income Tax Act: S.194C, S.194I
Assam VAT Act: S.2(43)(iv)
Constitution of India: Art.366(29A)(d)
Income Tax Act: S.194C, S.194I
Assam VAT Act: S.2(43)(iv)
Constitution of India: Art.366(29A)(d)
Headnote
(A) Service Tax - Supply of Tangible Goods - Transfer of Right to Use - Where the supplier retains substantial operational control, including the provision of drivers, maintenance, and fuel, the transaction is classified as a taxable service under Section 65(105)(zzzzj) of the Finance Act, rather than a transfer of the right to use goods. (Para 6.1, 7, 8)
(B) Goods Transport Agency (GTA) - Evidence of Service - In the absence of consignment notes or evidence demonstrating the nature of transportation services, the claim for classification as GTA service is unsustainable. (Para 4, 8)
Issues: Whether the hiring of Transit Mixture machines, where the supplier retains control over drivers and maintenance, constitutes a "supply of tangible goods" service or a "transportation of goods by road" service.
(B) Goods Transport Agency (GTA) - Evidence of Service - In the absence of consignment notes or evidence demonstrating the nature of transportation services, the claim for classification as GTA service is unsustainable. (Para 4, 8)
Issues: Whether the hiring of Transit Mixture machines, where the supplier retains control over drivers and maintenance, constitutes a "supply of tangible goods" service or a "transportation of goods by road" service.
Legal Category Hierarchy
Advocates:
For the Appellants/Petitioners: None
For the Respondents: M.M. Rahman
For the Appellants/Petitioners: None
For the Respondents: M.M. Rahman
Table of Contents
2. Appellant claimed hiring charges were for freight services, while the Department contended the contract constituted a transfer of right to use tangible goods. (Para 3 , 4 )
3. The contract terms regarding exclusive control of the equipment determined the classification, and the absence of evidence for transportation services supported the supply of tangible goods classification. (Para 6 , 7 , 8 )
4. Where substantial control over equipment remains with the supplier, the transaction is a taxable service under the supply of tangible goods category rather than a transfer of property. (Para 7 , 8 )
5. Appeal dismissed, upholding the demand for service tax on hiring charges as a supply of tangible goods. (Para 9 )
6. What is the test to determine if a contract involves the supply of tangible goods under Section 65(105)(zzzzj) of the Finance Act, 1994?
The test is whether the contract involves the transfer of right of possession and effective control. If substantial control remains with the supplier, the transaction constitutes a service rather than a deemed sale, regardless of physical handover. (Para 7 , 8 )
7. Does hiring of Transit Mixture machines by a supplier providing personnel and maintenance constitute a taxable supply of tangible goods?
Yes, if the supplier retains control, responsibility for maintenance, and operations, the arrangement qualifies as a supply of tangible goods service, as the user lacks effective control to the exclusion of the supplier. (Para 6 , 7 , 8 )
HEMAMBIKA R. PRIYA
The present appeal has been filed by M/s. Shri Sai RMC1, against the Order-in-Appeal No.349(SM)/ST/JPR/2021 dated 18.11.2021 passed by the Commissioner (Appeals), Central Excise & CGST, Jaipur confirming the demand of service tax amounting to Rs.2,89,224/-along with interest and penalty.
1. The Appellant
2. The brief facts are that the appellant was engaged in providing taxable service i.e. Goods Transport Agency Service and was registered with service tax department. During verification of third party information, the department observed that the tax deducted at source (TDS) for the year 2012-13 was Rs.27,31,350/-. In order to ascertain the facts, documents were sought from the Appellant for the Financial Year 2012-13 to 2015-16. The Appellant provided the 26AS. On scrutiny of ST-3 returns filed by the Appellant, it was noticed that the Appellant had paid service tax only on GTA Service and on Manpower recruitment/supply service’ under RCM. As per 26AS, TDS had been deducted under Section 194 C and 194 I of the Income Tax Act i.e. under the head of ’payment to contractors and ’renting of immovable property. Therefore, it appeared that the appellant had not paid Service Tax amounting to Rs.11,84,194/-. A Show Cause Notice dated 28.03.2018 was issued to the Appellant, proposing therein recovery of Service Tax amount of Rs.11,84,194/- alongwith interest under proviso to Section 73(1) and Section 75 of the Act respectively, Imposition of penalty under Section 77(1)(c) and 78 of the Act, was also proposed. The adjudicating authority vide Order-in-Original dated 07.08.2020 confirmed the demand of Rs.19,047/- against job work done by the Appellant, Rs.2,89,224/- against hiring charges for TM Machine and Rs.26,100/- against renting of immovable property (total Rs.3,34,371/-) alongwith interest, penalty of Rs.3,34,371/- under Section 78 and of Rs.10,000/- under Section 77(1)(c) was imposed. Being aggrieved with the said Order-in-Original dated 07.08.2020, the Appellant filed an appeal before the Commissioner (Appeals). The Commissioner (Appeals) vide Order-in-Appeal dated 18.11.2021 dropped the demand of Rs.19,047/- confirmed on the amount received from sale of ready mix concrete, holding that the Appellant was not required to pay Service Tax on the RMC cleared on job work basis. As regards the Service Tax of Rs.2,89,224/, the Commissioner (Appeals) noted that the Appellant had already paid amount of Rs.72,306/- alongwith interest of Rs.4,140/- on receipt of Rs.23,40,000/- towards "Transportation of Goods by Road Service”. The impugned order has held the Appellant was liable to pay Service Tax on full amount received against hiring of Transit Mixture Machine, and upheld the demand of Service Tax amounting to Rs.2,89,224/-.
3. No one appeared on behalf of the appellant despite several opportunities. In the hearing on 14.07.2026, the appellant was warned of the last opportunity. However, when the case was called out, no one appeared nor any request for adjournment had been received. Hence, we have taken up the case for final hearing by taking into consideration the grounds mentioned in the Appeal memo.
3.1. The appellant has submitted that the order of the Appellate Authority is not based on the facts of the case hence illegal and bad in the eye of the law. It has been further submitted that the Appellate Authority had ignored the fact that the vehicles were provided for freight on payment, and the control of the vehicles was not handed over. It has been also stated that the adjudicating authority had wrongly interpreted the service and confirmed the tax amount of Rs.2,89,224/- and penalty. The Appellant had correctly charged the tax and deposited the same by claiming the benefit of the notification issued for Goods Transport Agency. The Appellate Authority had also erred in imposing the penalty amount of Rs.10000/- under section 77(1)(c) of the Act.
4. Learned authorized representative for the Department reiterated t
