Supplier-retained control over hired machinery makes its provision a taxable supply of tangible goods service.

The appellant, a registered service provider, supplied Transit Mixture (TM) machines to M/s. Sai Nath RMC.

The department treated the receipts from this arrangement as taxable under “supply of tangible goods” service.

The adjudicating authority confirmed, among other amounts, service tax of Rs. 2,89,224 on hiring charges for the machines; the Commissioner (Appeals) upheld that demand after noting that the appellant had paid Rs. 72,306 as tax on part of the receipts by classifying them as transportation service.

The appellant appealed to the Tribunal, but did not appear at the hearing.

Section 65(105)(zzzzj) of the Finance Act, 1994 defines taxable service to include the supply of tangible goods for use without transferring the right of possession and effective control of those goods.

The Tribunal relied on the Supreme Court’s decision in K.P. Mozika v. ONGC, C.A. No. 3458/2017, dated 9 January 2024, for the principle that where substantial control over the goods remains with the contractor, the arrangement is a service and not a transfer of the right to use the goods.

The order also refers to Birla Ready Mix v. Commissioner of Central Excise, Noida, 2013 (30) S.T.R. 99 (Tri.-Del.), as authority concerning vehicle-hiring arrangements.

The Tribunal considered the requisition letter, which stated that the appellant would provide the drivers and bear maintenance and diesel costs, and noted that the appellant had produced no evidence of issuing consignment notes to establish that it provided GTA service.

It therefore treated the arrangement as one in which the appellant retained substantial operational responsibility and applied K.P. Mozika to uphold service-tax liability on the hiring charges.

The order’s reasoning is internally inconsistent: paragraph 6.1 says the appellant had transferred the right to use the vehicle, while paragraphs 7–8 apply the rule that retained control means no such transfer.

The Tribunal nevertheless upheld the demand on the latter basis.