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2011 (4) TMI 1238 - HC - VAT and Sales TaxPetition seeking to quash section 2(gg) and 2(j) read with note 4 of the Haryana General Sales Tax Act, 1973 as amended Held that - After consideration of rival submissions, we are of the view that this petition is to be allowed. The deeming provision enacted by the State Legislature is in conflict with section 4(2)(a) of the Central Sales Tax Act, 1956. Note 4 cannot be held to be applicable to transfer of right of use of goods outside the State of Haryana merely because the goods are within the State at the time of use when such goods are not in the State at the time of transaction. Accordingly, the writ petition is allowed and the impugned order dated April 23, 1993, annexure P4, to the extent of including in turnover transaction taking place outside the State of Haryana is quashed.
Issues:
1. Validity of section 2(j)(iv) read with note 4 of the Haryana General Sales Tax Act, 1973. 2. Conflict between State Legislature's deeming provision and Central Sales Tax Act, 1956. 3. Taxation jurisdiction based on location of goods at the time of use. 4. Interpretation of taxable event in the transfer of the right to use goods. 5. Applicability of note 4 to transactions of transfer of the right to use goods outside the State of Haryana. Detailed Analysis: 1. The petitioner sought the quashing of section 2(j)(iv) and note 4 of the Haryana General Sales Tax Act, 1973, contending that the provision subjected transactions occurring outside the State to taxation if the goods were in Haryana at the time of use. The petitioner challenged the validity of this provision, arguing that it exceeded the State's legislative competence under entry 54 of List II of the Seventh Schedule. 2. The State justified the impugned provisions by asserting that goods used within the State could be taxed regardless of where the transaction originated. However, the Court found that the deeming provision in the State's legislation conflicted with section 4(2)(a) of the Central Sales Tax Act, 1956. Citing the Supreme Court's ruling in 20th Century Finance Corpn. Ltd., the Court emphasized that the taxable event occurs where the transaction is entered, not where the goods are delivered or used. 3. The Court considered the jurisdiction for taxation based on the location of goods at the time of their use. The petitioner argued that the State Legislature cannot levy tax on transactions outside the State merely because the goods are within the State during their use. The Court agreed, holding that the State's deeming provision was in conflict with the Central Sales Tax Act, which determines the taxable event based on where the transaction is entered. 4. Regarding the interpretation of the taxable event in the transfer of the right to use goods, the Court referred to the Supreme Court's judgment, emphasizing that the transfer of the right to use goods is the taxable event, irrespective of the location of the goods at the time of use. The Court clarified that the situs of the deemed sale is where the right to use the goods is transferred, not where the goods are delivered for use. 5. The Court specifically addressed the applicability of note 4 to transactions of the transfer of the right to use goods outside the State of Haryana. Relying on the Supreme Court's decision, the Court held that note 4 cannot apply to transactions occurring outside the State if the goods were not in Haryana at the time of the transaction. Consequently, the Court allowed the writ petition and quashed the order including transactions outside Haryana in the turnover for taxation purposes.
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