2014 (1) TMI 1617 - HC - VAT and Sales Tax

Whether this contract by which the petitioners had agreed to transport the goods amounts to sale within the meaning of the TVAT Act or not - Held that - Transfer of goods is totally different from transportation of goods. It appears that the revenue in the State of Tripura is under the mistaken belief that the word transfer in the Act includes transportation of goods. There is no transfer in the property of goods when a person transports those goods on behalf of the consigner or the consignee - phrase transfer of property in goods has been expanded in the context of works contract to include those goods which are used in the execution of the works contract. This expansion of the definition can however not bring within its ambit the mere transportation of goods. When a person transports goods on behalf of the consigner or the consignee there is no transfer in the property of goods either directly or by inference. A contract to transport goods from one place to another is not a works contract. The amount which a transporter receives may be included in the sale value for calculating the taxable turnover but by no stretch of imagination can the transporter be held liable to pay tax. We are, therefore, clearly of the view that the deduction of tax on the amount paid to the transporters/petitioners is illegal and is liable to be quashed and the same is accordingly quashed. The tax which has been deducted shall be refunded to the petitioners along with statutory interest within 3 (three) months from today failing which the State shall be liable to pay interest at 12 per cent. per annum. In case there are any taxes due from any of the petitioners the State shall be at liberty to adjust the refundable amount against the taxes due from the petitioners to the State. - Petition disposed of.

Summary

Issues:
Levy of value-added tax on transportation of goods under the TVAT Act in the State of Tripura.

Analysis:
The judgment by the Tripura High Court addressed the issue of whether the transportation of goods constitutes a sale under the Tripura Value Added Tax (TVAT) Act. The petitioners, either owners of vehicles used for transportation or agents arranging transportation, challenged the imposition of VAT on the transportation of foodgrains for the public distribution system. The core question was whether the transportation contract amounted to a sale under the TVAT Act.

The court examined the definition of "sale" under section 2(25) of the TVAT Act, emphasizing that transportation of goods is distinct from the transfer of goods. The court clarified that the Act's provisions on works contracts did not apply to mere transportation services. The judges highlighted that the Act's charging section, Section 3, makes dealers in taxable goods liable for tax, while Section 3A pertains to the transfer of goods in works contracts, not general transportation services.

The court, led by Chief Justice Deepak Gupta, interpreted Section 3A, explaining that it relates to works contracts where property in goods is transferred during execution. The judges emphasized that transportation services do not involve the transfer of goods' property. They ruled that while transportation charges may impact taxable turnover calculations, transporters are not liable to pay tax. The court deemed the deduction of tax on transportation services as illegal, ordering refunds to the petitioners with interest if not processed within three months.

Furthermore, the court allowed assessing officers to request details of vehicles used for transportation to trace transactions. The judgment concluded by disposing of the writ petitions with these observations, affirming that transportation contracts do not fall under the purview of sales taxable under the TVAT Act in Tripura.