TAX ON
SERVICE PROVIDED BY WAY OF ERECTION OF PANDAL OR SHAMIANA
Circular No.: 168/3 /2013 – ST
Date:
15/04/2013
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 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.
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.
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.
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 there
for 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.
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.
Accordingly
services provided by way of erection of pandal or shamiana would attract the levy of service tax.
Regards
CA. Mona Singhal
Partner
Arpit Gupta & Associates
Chartered Accountants
701, Nirmal Tower,
26, Barakhamba Road,
Connaught Place, Delhi-110001
Mobile:- +91-9873082769
Website: www.caaga.co.in
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