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2015 (3) TMI 259 - HC - VAT and Sales TaxExemption u/s 3F of CST - Authority took the view that the contract for transfer of right to use machines was executed at Kanpur, which is a separate transaction, and import of machine from outside of the State is a separate transaction. The dealer transferred the machine with right to use the same at Kanpur on a lease rent of ₹ 5457837/- per quarter, which being independent transaction is taxable under Section 3F of Act, 1956 - whether transaction in question of dealer is taxable under Section 3F or the dealer is entitled to exemption under Section 3F(2)(B)(1) of Act, 1956. Held that - A simple reading of the Section 3F clearly show that it is transfer of right to use any goods in the State which is the taxable incident under the aforesaid provisions. However, this aspect has been considered by a Constitution Bench of Apex Court with respect to similar statutes of various States including the State of U.P., Therefore, it would be useful to look into the aforesaid decision, namely, 20th Century Finance Corporation Ltd. and another Vs. State of Maharashtra, AIR 2000 SC 2436. After addressing entire history of certain amendments in the constitution, as also State Legislation in respect of sale or purchase of goods, the Court observed that, by virtue of entry 92-A, List 1, Seventh Schedule of the Constitution, the Parliament has power to legislate in regard to taxes on sales or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce. Article 269 provides for levy and collection of such taxes. Vide Article 286 (1) of the Constitution, the State legislature is precluded to make law imposing tax on the transactions of transfer of right to use any goods where such deemed sales takes place (a) outside the State and (b) in the course of import of goods into the territory of India. There are some other limitations on the taxing power of the State legislature by Article 286(3) of the Constitution. In respect to inter-State trade or commerce the situs of sale or purchase is wholly immaterial. The State legislature cannot by law, treat sales outside the State and sales in the course of import as sales within the State by fixing the situs of sales within its State in the definition of sale as it is within the exclusive domain of Parliament to fix the location of sale by creating legal fiction or otherwise. The situs of sale can only be fixed by the appropriate legislature. Tribunal has considered the question whether there was any inside sale or not, in the light of relevant facts and applying the dictum laid down and discussed above, has found that no transfer of right to use the goods had taken place inside the State of U.P. and on the contrary, it has taken place outside U.P., which view, I find myself in entire agreement. Learned Standing Counsel could not point out any manifest, legal or otherwise error in the view taken by the Tribunal, so as to persuade the Court to take a different view. I, therefore, find no justification to interfere with the view taken by the Tribunal in the impugned order. - Decided against Revenue.
Issues involved:
1. Taxability of transaction under Section 3F of the Central Sales Tax Act, 1956. 2. Interpretation of legal provisions regarding transfer of right to use goods. 3. Determination of situs of sale for levy of tax. Detailed Analysis: Issue 1: The judgment deals with the taxability of a transaction under Section 3F of the Central Sales Tax Act, 1956. The case involved a dealer who entered into an agreement for the transfer of right to use certain machines and received lease rent. The assessing authority determined tax liability under Section 3F for the transaction. The dealer claimed exemption under Section 3F(2)(B)(1) of the Act. The Tribunal allowed the dealer's appeal, leading to the Revenue filing a revision. Issue 2: The judgment extensively analyzes the legal provisions related to the transfer of right to use goods. Definitions of key terms such as 'goods,' 'dealer,' 'sale,' 'lease,' 'lessee,' and 'lessor' are provided from the Act. Section 3-F of the Act, dealing with tax on the right to use goods, is examined. The judgment also references the 20th Century Finance Corporation Ltd. case, highlighting the limitations on State legislative authority to impose tax on transactions of transfer of right to use goods in inter-State trade or commerce. Issue 3: The judgment delves into the determination of the situs of sale for the levy of tax. Various principles to ascertain the situs of sale are discussed, including where goods are delivered, where the contract is concluded, where goods are sold or delivered, and where essential ingredients of a sale are found. The judgment cites precedents to establish that the location of sale is where the property in goods passes, emphasizing that the State cannot levy tax based solely on the delivery of goods within the State if the transfer of right to use occurred outside the State. Conclusion: The Court upheld the Tribunal's decision, ruling that no transfer of right to use goods took place inside the State, and the transaction occurred outside the State. The judgment dismisses the revision, answering the question of law against the Revenue and in favor of the dealer based on the analysis of legal provisions and precedents regarding the taxability of transactions involving the transfer of right to use goods under the Central Sales Tax Act, 1956.
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