#Deemed Sale

CESTAT quashed a Rs 22.84 crore service tax demand against HCL Infosystems, holding that the services do not fall within the negative-list taxable categories and are not deemed sales or advertising agency services. The ruling narrows the tax base under the negative-list regime, benefitting IT service providers offering consulting, maintenance and related services.

When equipment is rented with full possession, control, and risk transferred to the customer, the transaction qualifies as a deemed sale under VAT/CST, not a service, thereby excluding service tax liability. This clarifies the boundary between taxable services and taxable sales in equipment leasing, impacting manufacturers and rental firms nationwide.

The Tribunal holds that payment of VAT on hire of machinery constitutes deemed sale under Article 366(29A)(d), excluding such transactions from service tax under STGU category.