2003 (9) TMI 740 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of the provisions of the U.P. Trade Tax Act, 1948 regarding the liability of an association of members involved in providing articles for specific purposes.
2. Determination of whether the activities of the members of the petitioner-association constitute a taxable event under section 3-F of the U.P. Trade Tax Act.
3. Analysis of legal precedents regarding the transfer of the right to use goods for consideration and its implications on the tax liability of the petitioner-association members.

Issue 1:
The writ petition sought a mandamus against the trade tax authorities to refrain from taking action under the U.P. Trade Tax Act, asserting that the petitioner and its members are not covered as dealers by the Act. The petitioner, an association providing articles like chairs, tents, pillows, etc., contended that the control over the articles always remains with the owner, and users are restricted to specific purposes like marriages or parties. The challenge was against the imposition of trade tax on the members by the authorities.

Issue 2:
The respondents issued notices to the members for carrying out business activities without registration, prompting the petitioner to challenge the tax imposition. The petitioner argued that there was no transfer of the right to use goods, hence no taxable event occurred. The legal fiction introduced by section 3-F of the U.P. Trade Tax Act, as per article 366 of the Constitution, was invoked to justify the tax imposition. However, the petitioner relied on a Supreme Court decision to argue against the transfer of the right to use goods by its members.

Issue 3:
The Court analyzed conflicting Supreme Court decisions regarding the transfer of the right to use goods for consideration. While one decision emphasized possession as crucial for such transfer, another highlighted that ultimate control by the owner does not negate the transfer of use. Citing the latter decision, the Court held that the control remaining with the owner is irrelevant in determining the transfer of use. Consequently, the Court dismissed the petition based on the binding precedent and upheld the tax liability of the petitioner-association members.

In conclusion, the Court dismissed the petition, emphasizing the legal precedent established by the Supreme Court regarding the transfer of the right to use goods for consideration, which rendered the activities of the petitioner-association members taxable under the U.P. Trade Tax Act.