2002 (10) TMI 743 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the amount received by the assessee for the detention of cylinders beyond the stipulated period can be deemed as consideration for the transfer of the right to use the cylinders and thus be exigible to tax under the Kerala General Sales Tax Act, 1963.

Issue-wise Detailed Analysis:

1. Nature of the Transaction:
The assessee, a dealer in industrial gases and medical oxygen, supplied these gases in cylinders to customers with a stipulation that the cylinders must be returned within ten days. If not returned within this period, the customers were required to pay rent for the delayed return. The assessing authority included this rent as taxable turnover under Section 5(1)(iii) of the Kerala General Sales Tax Act, 1963. The assessee contended that this rent was not for the transfer of the right to use the cylinders but merely a penalty to ensure the prompt return of the cylinders.

2. Legal Provisions and Definitions:
Section 5(1)(iii) of the Act imposes tax on the transfer of the right to use any goods. For this provision to apply, there must be an agreement for the transfer of the right to use goods. The court noted that the cylinders are "goods" as per Section 2(xii) of the Act. However, the crucial point was whether there was a transfer of the right to use the cylinders.

3. Arguments by the Assessee:
The assessee argued that the transaction involved only the sale of gases and not the transfer of the right to use the cylinders. The provision for rent was solely to ensure the cylinders' return. The assessee cited the Orissa High Court's decision in Asiatic Gases Ltd. v. State of Orissa and the Supreme Court's decision in State of Andhra Pradesh v. Rashtriya Ispat Nigam Ltd., which supported the view that incidental retention of cylinders does not constitute a transfer of the right to use the cylinders.

4. Arguments by the Respondent-State:
The Government Pleader argued that the receipt of rent indicated a transfer of the right to use the cylinders, making it taxable under Section 5(1)(iii). The Pleader cited several cases, including Industrial Oxygen Company Pvt. Ltd. v. State of Andhra Pradesh, where similar transactions were deemed taxable.

5. Court's Analysis and Conclusion:
The court examined the facts and legal precedents. It noted that the sale was only of gases and not of cylinders. The rent provision was to ensure the return of cylinders and not for transferring the right to use them. The court agreed with the Orissa High Court's view that the term "transfer of the right to use" implies an agreement for such transfer, which was absent in this case. The court distinguished the present case from those cited by the respondent, noting that the cited cases involved direct transfers of goods, which was not the situation here.

6. Final Judgment:
The court concluded that the incidental receipt of rent for the delayed return of cylinders did not constitute a transfer of the right to use the cylinders. Consequently, such receipts were not taxable under Section 5(1)(iii) of the Act. The orders of the appellate authorities were set aside, and the assessing authority was directed to revise the assessment by excluding the rent received for the delayed return of cylinders.

Petitions Allowed:
Both revision petitions were allowed, and the assessment orders were revised accordingly.