2008 (4) TMI 680 - HC - VAT and Sales Tax

Whether, under the facts and circumstances of the case, the plant and machineries having suffered Orissa sales tax at the time of purchase inside the State of Orissa the lease rental received on leasing out those plant and machineries can be taxed? Whether, under the facts and circumstances of the case, the transfer of property in goods and the transfer of right to use the goods are two distinctly separate taxable events once as sale and secondly as deemed sale in the face of the legislative intent of single-point taxation as provided under section 8 of the Orissa Sales Tax Act? Whether, under the facts and circumstances of the case, the imposition of penalty by the Sales Tax Officer and confirmed by the Assistant Commissioner and Sales Tax Tribunal is correct law? Held that - This court holds that since no tax can be imposed by way of subsequent lease rent in respect of the same goods on the petitioner, there cannot be any imposition of penalty for non-payment of the same. As such, the penalty imposed on the petitioner is quashed. All the three questions referred to above on which the matter has been argued are answered in the negative, i.e., in favour of the assessee and against the Revenue.

Summary

Issues:
Challenge to sales tax revision order by the assessee based on the order of the Full Bench of the Orissa Sales Tax Tribunal. Questions regarding taxation on lease rental, transfer of property in goods, and imposition of penalty. Interpretation of section 8 of the Orissa Sales Tax Act.

Analysis:
The petitioner, a public limited company, entered into a lease agreement for machinery that had already suffered Orissa sales tax at the time of purchase. The Sales Tax Officer assessed the petitioner under section 12(5) of the Orissa Sales Tax Act for not registering under the correct jurisdiction. The Assistant Commissioner and the Orissa Sales Tax Tribunal upheld the assessment, leading to the petitioner's appeal.

The petitioner argued that goods taxed at the first point in Orissa should not be taxed again upon subsequent sale, citing legislative intent and relevant case law. The petitioner relied on a decision by the Orissa High Court and the Andhra Pradesh High Court, emphasizing single-point taxation under section 8 of the OST Act. The court noted that the lease rental received by the petitioner constituted a deemed sale, which cannot be taxed separately from an ordinary sale.

The court referenced a Division Bench judgment of the Sales Tax Tribunal, which supported the petitioner's position that no further tax could be imposed on lease rent for the same goods. Consequently, the penalty imposed on the petitioner was quashed, and the judgment of the Sales Tax Tribunal was overturned in favor of the assessee. The court ruled in favor of the petitioner on all three questions raised during the proceedings, leading to the disposal of the sales tax revision.

In agreement with the Chief Justice, Justice B.N. Mahapatra concurred with the decision to quash the Sales Tax Tribunal's judgment and ruled in favor of the assessee against the Revenue.