2011 (1) TMI 1196 - HC - VAT and Sales Tax

Tax revision - right to use - Andhra Pradesh General Sales Tax Act, 1956 - assessees treated the hiring of transit mixers as contract of transport service, and not the transfer of the right to use the goods - vehicles are maintained by the petitioners. They appoint the drivers and fix their roster. The licences, permits and insurances are taken in their names by the petitioners, which they themselves renew. The transit mixers go to Grasim s batching plants in Miyapur and Nacharam, where they are loaded with RMC and then proceed to the construction sites of customers. The product carried is manufactured by Grasim, which is delivered to the customers and the customers pay the cost of the RMC to Grasim and the petitioners nowhere figure in the process of putting the property in transit mixers to economic use Held that - entire use in the property in goods is to be exclusively utilised for a period of 42 months by Grasim. The existence of goods is identified and the transit mixers operate and are used for the business of Grasim. Therefore, conclusively it leads to the only conclusion that the petitioners had transferred the right to use goods to Grasim, revision cases fail and dismissed

Summary

Issues Involved:
1. Whether the petitioners' contract is for transfer of the right to use transit mixers to M/s. Grasim Industries Limited for transporting the RMC?
2. Whether the State Sales Tax Appellate Tribunal has committed any error warranting interference under section 22(1) of the Andhra Pradesh General Sales Tax Act, 1957?

Issue-wise Detailed Analysis:

1. Whether the petitioners' contract is for transfer of the right to use transit mixers to M/s. Grasim Industries Limited for transporting the RMC?

The petitioners argued that their contract with Grasim was for providing transportation services and not for transferring the right to use transit mixers. They maintained control over the transit mixers, including the drivers, permits, and maintenance, and the vehicles were painted with Grasim's branding to ensure product quality and customer satisfaction. The petitioners contended that since the effective control and possession of the vehicles remained with them, there was no transfer of the right to use the goods, and thus, section 5E of the Act was inapplicable.

The court examined the contract, noting that the petitioners provided a dedicated fleet of vehicles to Grasim, available 24/7, painted with Grasim's branding, and operated under Grasim's instructions. The court found that the agreement effectively transferred the right to use the transit mixers to Grasim for a period of 42 months, during which Grasim had exclusive control over the vehicles' use for transporting RMC. The petitioners' responsibilities for maintenance, permits, and drivers did not negate the transfer of the right to use the vehicles. The court concluded that the transaction met all the essential requirements of a transfer of the right to use goods under section 5E of the Act.

2. Whether the State Sales Tax Appellate Tribunal has committed any error warranting interference under section 22(1) of the Andhra Pradesh General Sales Tax Act, 1957?

The petitioners argued that the Tribunal erred by not recording findings on all issues raised and that the exercise of revisional jurisdiction under section 20(2) of the Act is barred when two views are equally possible. They relied on precedents under section 263(1) of the Income-tax Act, which the court found inapplicable due to differences in the scope of revisional jurisdiction between the APGST Act and the Income-tax Act.

The court noted that the Tribunal had considered the core issue and found that the agreement was a contract for the transfer of the right to use transit mixers. The Tribunal dismissed the appeals, and the court saw no grounds for interference under section 22(1) of the APGST Act merely because a specific finding on one of the issues was not recorded. The court emphasized that the machinery provisions of a taxing statute must be interpreted to be workable and that the petitioners' plea would require reading section 20(1) of the APGST Act in a way not intended by the Legislature.

Conclusion:

The court dismissed the revision cases, concluding that the petitioners' contract with Grasim involved the transfer of the right to use transit mixers, making the transaction taxable under section 5E of the APGST Act. The Tribunal had not committed any error warranting interference under section 22(1) of the Act. The court upheld the Tribunal's decision and dismissed the petitions with costs.