2014 (3) TMI 305 - HC - VAT and Sales Tax

Levy of tax u/s 3A - Transfer of the right to use the equipments - Whether the Tribunal is right in concluding that in order to attract the levy of tax under Section 3A of the Tamil Nadu General Sales Tax Act, whether the possession of the goods has to be given to the user of the goods - Held that - it had been found that the O.N.G.C. had imported the equipments viz., the R.P. Chain and the radio paging system, from Dubai, and they had been used by the respondent company, by deployment of the equipments, with their specialised personnel, and that no other person had any access to the equipments, except the staff of the respondent company. As such, the Tribunal held that there was no transfer of the right to use the equipments. Even the O.N.G.C. had no right to use the equipments on their own. However, the physical possession and the effective control of the equipments had been given to O.N.G.C. Even though the possession of the equipments was with O.N.G.C., they had been operated only by the personnel from the respondent company. Section 3-A of the Tamil Nadu General Sales Tax Act, 1959, does not get attracted. The Sales Tax Appellate Tribunal had found that the transactions cannot be treated as one falling under Section 3-A of the Act, warranting levy of tax, as the transactions were in the nature of services and there was no transfer of the right to use the goods in question. Thus, the Tribunal had confirmed the view of the Appellate Assistant Commissioner - In view of the findings of fact relating to the question, with regard to the applicability of Section 3-A of the Tamil Nadu General Sales Tax Act, 1959,we find that it is not necessary for this Court to go into the aspect of limitation, at this stage - Decided against Revenue.

Summary

Issues:
1. Interpretation of Section 3-A of the Tamil Nadu General Sales Tax Act, 1959 regarding the transfer of right to use goods.
2. Determining the applicability of tax under Section 3A of the Act based on possession of goods by the user.
3. Assessment of taxable turnover for assessment years 1991-92 and 1993-94.

Analysis:
1. The Tax Case Revisions were filed against the order of the Sales Tax Appellate Tribunal confirming the order of the Appellate Assistant Commissioner. The substantial questions of law framed in the revisions revolved around the interpretation of Section 3-A of the T.N.G.S.T Act, 1959, specifically focusing on whether delivery and possession of goods by the lessor to the lessee are essential for attracting the provisions of the Act. The Tribunal held that the impugned transactions did not fall under the purview of Section 3-A since the delivery of the leased equipment was not handed over to the lessee, ONGC. The Tribunal's decision was based on the nature of the transactions being more service-oriented rather than involving a transfer of the right to use goods.

2. The order under challenge related to the assessment years 1991-92 and 1993-94, where the respondent company was engaged in off-shore oil exploration activities for government contractors. The Assessing Officer determined the taxable turnover for these years under the Tamil Nadu General Sales Tax Act, 1959, and levied surcharge, additional surcharge, and penalties. The Appellate Assistant Commissioner and the Sales Tax Appellate Tribunal decided in favor of the assessee, emphasizing that there was no transfer of the right to use the equipment in question to ONGC, despite ONGC having possession and effective control over the equipment. The Tribunal concluded that the transactions were service-oriented and did not warrant tax under Section 3-A of the Act.

3. The Tribunal's findings highlighted that even though ONGC had physical possession of the equipment, they were operated solely by the respondent company's personnel. As a result, the Tribunal dismissed the appeal filed by the Revenue, confirming the view of the Appellate Assistant Commissioner. The Court, based on the factual findings regarding the applicability of Section 3-A of the Act, dismissed the tax case appeals without delving into the aspect of limitation. Ultimately, the Court upheld the Tribunal's decision, emphasizing that the transactions in question did not fall under the purview of Section 3-A, leading to the dismissal of the appeals filed by the Revenue.