1995 (3) TMI 434 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Taxability of rent collected for electricity meters under the Bengal Finance (Sales Tax) Act, 1941.
2. Definition and interpretation of "sale" and "transfer of the right to use any goods" under section 2(g)(ii) of the 1941 Act.
3. Applicability of statutory duties under the Indian Electricity Act, 1910.
4. Whether the monthly rent for meters constitutes maintenance charges or rental for the right to use.

Detailed Analysis:

1. Taxability of Rent Collected for Electricity Meters:
The primary issue was whether the rent collected by the applicant-company from its consumers for the electricity meters installed at their premises is taxable under the Bengal Finance (Sales Tax) Act, 1941. The respondents argued that the transaction constitutes a "sale" under section 2(g)(ii) of the 1941 Act, which includes "any transfer of the right to use any goods for any purpose" for valuable consideration. The applicant contended that the meters were installed and maintained as part of statutory duties and were not let out for hire in a commercial sense.

2. Definition and Interpretation of "Sale" and "Transfer of the Right to Use Any Goods":
The court examined the definition of "sale" under section 2(g)(ii) of the 1941 Act, which includes "any transfer of the right to use any goods for any purpose." The applicant's counsel argued that there was no transfer of the right to use the meters, as the company retained control over their use, installation, and maintenance. However, the respondents contended that the meters were installed for the consumer's benefit, and the consumer paid rent for their use, thus constituting a transfer of the right to use.

3. Applicability of Statutory Duties under the Indian Electricity Act, 1910:
The applicant-company argued that the installation and maintenance of meters were mandatory under section 26 of the Indian Electricity Act, 1910, and related rules. The meters remained sealed, and consumers had no right to handle or operate them, which was exclusively the company's domain. The court noted that the statutory provisions required the licensee to supply and maintain meters if the consumer did not purchase one, and the licensee had certain rights to inspect and test the meters.

4. Whether the Monthly Rent Constitutes Maintenance Charges or Rental for the Right to Use:
The applicant's counsel argued that the monthly rent paid by consumers was essentially a maintenance charge for keeping the meters in order, as required by statutory duty. The respondents, however, argued that the rent was paid for the right to use the meters, as the licensee could not use the same meter for any other consumer once installed. The court concluded that the monthly rent was not merely a maintenance charge but was paid for the right to use the meter, thus constituting a transfer of the right to use.

Conclusion:
The court held that the transactions of installing meters at consumers' premises against rental/hire charges amounted to a "sale" under section 2(g)(ii) of the 1941 Act. The right to use the meters was transferred to the consumers, and the monthly rent paid was for this right, not merely for maintenance. Consequently, the application was dismissed, and the interim orders were vacated.