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2009 (8) TMI 1109 - HC - VAT and Sales TaxLiablity to pay sales tax on the transfer of the right to use any goods for any purpose - Held that - This court need not determine the question as to whether in the facts and attending circumstances of the present case there is any transfer of the right by the GAIL to use any goods for any purpose in favour of NEEPCO or the State Government inasmuch as the statute, in the light of the decision in Smt. Namita Paul 2007 (8) TMI 694 - GAUHATI HIGH COURT has not imposed any liability to pay sales tax on a transferor of the right to use goods for any purpose. The impugned letter, dated January 1, 1999, issued by respondent No. 2 and also the letter, dated January 2, 1999, issued by respondent No. 3, are, thus, clearly without any authority of law and cannot, therefore, be sustained. In the result and for the reasons discussed above, this writ petition succeeds. The directions and/or information, contained in the impugned letters, dated January 1, 1999 and January 2, 1999, are hereby set aside and quashed.
Issues Involved:
1. Legality of imposing sales tax on transportation charges. 2. Validity of Rule 3A(2) under the Tripura Sales Tax Act, 1976. 3. Authority to deduct sales tax at source from transportation charges. Issue-wise Detailed Analysis: 1. Legality of Imposing Sales Tax on Transportation Charges: The Gas Authority of India Limited (GAIL) contended that the directions given by the Superintendent of Taxes to North Eastern Electric Power Corporation Limited (NEEPCO) to deduct sales tax at source from transportation charges were illegal and without any authority of law. The respondents argued that the transportation charges amounted to a "transfer of the right to use" and were thus taxable under the Tripura Sales Tax Act, 1976 (TST Act, 1976). They relied on the definition of "sale" in section 2(g) of the TST Act, 1976, which includes "transfer of the right to use any goods for any purpose." However, the court noted that the liability to pay sales tax is of a "dealer," defined under section 2(b) of the TST Act, 1976, as a person who sells taxable goods manufactured, made, or processed by him in Tripura or brought by him into Tripura for the purpose of sale in Tripura. Since GAIL did not fall within this definition, it could not be made liable to pay sales tax on transportation charges. 2. Validity of Rule 3A(2) under the Tripura Sales Tax Act, 1976: The court examined whether Rule 3A(2) of the TST Act, 1976, which mandated deduction of sales tax at source for the transfer of the right to use goods, was ultra vires. The court observed that the statute itself had not imposed any liability to pay tax on a person who transfers the right to use any goods for any purpose. Thus, the rule-making authorities could not have made such a rule. The court referred to a Division Bench decision in Smt. Namita Paul v. Food Corporation of India, which held Rule 3A(2) ultra vires the TST Act, 1976, as the definition of "dealer" did not include a person who transfers the right to use any goods for any purpose. Therefore, Rule 3A(2) was invalid. 3. Authority to Deduct Sales Tax at Source from Transportation Charges: The respondents argued that section 3AA of the TST Act, 1976, permitted deductions at source. However, the court clarified that section 3AA only applied to the transfer of property in goods involved in the execution of works contracts and not to the transfer of the right to use any goods for any purpose. Since the TST Act, 1976, did not create a charge on any person who transfers the right to use any goods for any purpose, section 3AA could not be invoked for deducting sales tax at source from GAIL's transportation charges. Conclusion: The court concluded that the directions given by the Superintendent of Taxes to NEEPCO to deduct sales tax at source from GAIL's transportation charges were without any authority of law. The impugned letters dated January 1, 1999, and January 2, 1999, were set aside and quashed. The writ petition succeeded, and no order as to costs was made.
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