Service Tax on Lease Rent of Machinery

YES

Yes. Under the head "Use of Tangible Goods" if the possession  and control is not transferred.

The terms of agreement are important. Where the control and posession of the same is given to the cusotmer then not under supply of tangible goods. In this case only VAT would be applicable.

You may have to also examine under banking and financial services ( a 90% abatement is allowed on the lease renatals I think)