Service tax can not be invoked if VAT liability paid towards same transaction – SC

Regime of service tax can not be invoked if assessee had regularly paid amount of VAT liability towards the same transaction 

ABCAUS Case Law Citation
ABCAUS 3568 (2022) (01) SC

The assessee was engaged in conversion of analog cinema content into digital format. The movies were exhibited in theaters using Digital Cinema equipment leased by the assessee to theater owners for which he charged and paid VAT on lease rent.

Based on audit observation the assessee was issued show cause notice demanding service tax on the ground that from as per the agreement with the clients, the legal right of possession and effective control of the Digital Cinema Equipments had not been transferred to the lessee and total control over the equipment remained with Appellant and as such the activity undertaken by the Appellant falls under the category of “supply of tangible goods for use” as defined under Section 65(105)(zzzz) of the Finance Act, 1994. Following the SCN, the demand was confirmed.

The matter travelled to CESTAT which set aside the demand.

The Commissioner of Service Tax filed an appeal before the Hon’ble Supreme Court challenging the order of the Tribunal.

The assessee contended that the Appeal   was devoid of merits as he had already paid VAT on the same transaction and for which reason, it was not open to invoke regime of service tax in respect of the same transaction.

The Hon’ble Supreme Court opined that since the assessee had regularly paid the amount towards VAT liability in respect of the subject goods during the relevant period, the question of claiming service tax thereon did not arise.

Accordingly, the civil appeal was dismissed.

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