2009 (11) TMI 834 - HC - VAT and Sales Tax

Whether there was no transfer of the right to use the vehicles, covered by the contracts, in favour of the hirer so as to make the payments received under the transactions in question exigible to tax under either of the statutes on the basis of the fiction of a deemed sale within the meaning of the relevant provisions of the two Acts read with article 366(29A)(d) of the Constitution? Held that - The above features of the contract, in our considered view, makes it abundantly clear that it is the ONGC and not the contractor who has exclusive control and dominion over the crane during the subsistence of the contract, though, during the aforesaid period, at times, physical possession of the crane may come back to the contractor. Such temporary physical possession of the contractor, according to us, would hardly be relevant as under the contract the ONGC is vested with the authority to requisition the crane for operational purposes at any time. Besides, such temporary possession of the crane by the contractor does not mitigate against the transfer of the right to use the crane which event, as already indicated on the authority of the decision of the apex court in 20th Century Finance Corpn. Ltd. 2000 (5) TMI 980 - SUPREME COURT OF INDIA 11constitutes the taxable event under article 366(29A)(d) of the Constitution. The terms of the contract also do not visualize any operation of the tankers/trailers by the owners thereof at any point of time during the period of the contract. The above core terms of the contract being vital for determination of the question of control of the vehicles after the same are hired, the conclusion that can reasonably be reached with regard to the transfer of right to use, necessarily, has to be the same, i.e., that by virtue of the contract agreement in question a transfer of the right to use the goods covered by the contract has been contemplated and in the absence of any contrary material had that been affected by and between the parties. Appeal dismissed.

Issues Involved:
1. Transfer of the right to use vehicles under the contract agreements.
2. Applicability of tax under the Assam General Sales Tax Act, 1993 and the Assam Value Added Tax Act, 2003.
3. Interpretation of relevant contract terms and statutory provisions.
4. Previous judgments and their applicability.

Issue-wise Detailed Analysis:

1. Transfer of the Right to Use Vehicles under the Contract Agreements:
The primary contention by the contractors was that the contract agreements did not involve a transfer of the right to use the vehicles, thus not making the payments received taxable under the Assam General Sales Tax Act, 1993, or the Assam Value Added Tax Act, 2003. The court examined the contract terms and found that the ONGC had clear dominion and control over the vehicles during the contract period. The vehicles were required to be placed at the disposal of ONGC, operated as per ONGC's instructions, and could be called for duty at any time. The court concluded that there was indeed a transfer of the right to use the vehicles, making the transactions taxable.

2. Applicability of Tax under the Assam General Sales Tax Act, 1993, and the Assam Value Added Tax Act, 2003:
The court referred to the definitions of "lease," "operating lease," and "sale" under the Assam General Sales Tax Act, 1993, and the definition of "sale" under the Assam Value Added Tax Act, 2003. It also considered Article 366(29A)(d) of the Constitution, which includes the transfer of the right to use any goods for cash, deferred payment, or other valuable consideration as a deemed sale. The court concluded that the transactions under the contracts fell within the ambit of these statutory provisions, making them exigible to tax.

3. Interpretation of Relevant Contract Terms and Statutory Provisions:
The court analyzed various clauses of the contract, including those defining operational time, operational charges, empty run, commencement of contract period, and the scope of work. It found that ONGC had exclusive control over the vehicles, which were to be used as per ONGC's discretion, including during hazardous situations. The court noted that the vehicles were to be operational for 26 days a month, with ONGC having the authority to demand their operation even on maintenance off days. This indicated a transfer of the right to use the vehicles, making the transactions taxable under the relevant statutes.

4. Previous Judgments and Their Applicability:
The court considered previous judgments, including those by a learned single judge of the Gauhati High Court, which had interpreted similar contract terms to hold that there was no transfer of the right to use the goods. However, the court disagreed with these interpretations, providing a detailed analysis of the contract terms to support its conclusion. The court also addressed an order by the apex court, which had set aside a similar judgment on the grounds that several questions of fact required adjudication by the taxing authority. The court noted that no such factual questions were present in the current cases, thus affirming its conclusion.

Conclusion:
The court dismissed all the writ appeals and writ petitions, concluding that the contract agreements did involve a transfer of the right to use the vehicles, making the transactions taxable under the Assam General Sales Tax Act, 1993, and the Assam Value Added Tax Act, 2003. The parties were left to bear their own costs.

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