2009 (4) TMI 840 - HC - VAT and Sales Tax

Whether the amount received by the assessee, which is termed as demurrage or cylinder holding charges is exigible to tax under Section 3-A of the TNGST Act? Held that - The so called cylinder holding charges collected by the assessee are exigible to tax under Section 3-A of the TNGST Act, which is a charging provision for levy of tax for the transfer of right to use the goods for consideration. Therefore, the revisions are dismissed.

Summary

Issues:
- Taxability of demurrage or cylinder holding charges under Section 3-A of the TNGST Act.

Analysis:
1. The primary issue in this case pertains to the taxability of the amounts received by the assessee, termed as "demurrage or cylinder holding charges," under Section 3-A of the Tamil Nadu General Sales Tax Act (TNGST Act). The Sales Tax Appellate Tribunal had initially brought these charges for taxation, leading to the filing of revisions by the assessee under Section 38 of the TNGST Act.

2. The central question before the court was whether the charges collected by the assessee for the extra period of retention of gas cylinders, beyond the specified period, were liable to tax under the TNGST Act. The assessing officer had considered these charges as an increase in the sale price of gas, thereby bringing the turnover of demurrage charges to tax.

3. The assessee contended that the charges were akin to penalty amounts, citing a judgment by the Orissa High Court in a similar case. However, the Sales Tax Appellate Tribunal viewed the charges as hire charges, which are taxable under Section 3-A of the TNGST Act. The crux of the matter revolved around whether the charges constituted a transfer of the right to use the goods for consideration, falling within the purview of taxable transactions.

4. The court examined the precedent set by the Orissa High Court, which was later overturned by the Supreme Court. The Supreme Court held that the charges collected for the retention of gas cylinders were indeed part of the sale price, particularly towards the transfer of the right to use the goods. This ruling established that such charges were taxable under the relevant sales tax legislation.

5. Drawing from the Supreme Court's interpretation and the provisions of the TNGST Act, the court concluded that the cylinder holding charges collected by the assessee were exigible to tax under Section 3-A of the TNGST Act. The court emphasized that these charges represented consideration for the transfer of the right to use the goods, aligning with the legal framework governing taxable transactions.

This comprehensive analysis highlights the legal intricacies surrounding the taxability of demurrage or cylinder holding charges under the TNGST Act, as interpreted and decided by the Madras High Court in this judgment.