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2015 (4) TMI 527 - HC - VAT and Sales TaxClassification of transaction - inter State Sale transaction or inter-State Lease Transaction - sale of Empty Gas Cylinders against the assessee to Reliance Industrial Infrastructure Limited on the basis of a tripartite agreement by which on one hand the RIIL was purchaser (buyer) of the EGC. On the basis of the tripartite agreement, the cylinders were to be sent to Reliance Petroleum Limited - Held that - Admittedly, the assessee is only a supplier/seller of EGC to one RIIL/purchaser (buyer/lessor) who had an agreement of lease with one RPL (consignee/lessee) and agreement has been entered by the two Reliance Companies where certain lease money was required to be paid by the lessee RPL to lessor RIIL on the terms and conditions entered into by and between those two Reliance Companies. However, merely because the assessee has been shown to be a party who supplied the EGC in the lease agreement, in my view, cannot claim any benefit out of the two lease agreements which were basically in between RIIL and RPL Ltd.. It would be appropriate and fruitful to quote Section 3 of the CST Act, which is the bone of contention between the parties. Admittedly, the entire sale consideration on the basis of the so called lease agreement having supplied EGC to RPL on behalf of RIIL was received by the assessee as per the terms and conditions and no amount, over and above, was received or receivable in terms of the lease agreement in between the parties. The Tax Board, in the impugned order, has gone into the terms and conditions in between the two Reliance Companies vis-a-vis the assessee and it would be appropriate to observe that the terms and conditions specifically provided that the purchase order for the procurement of the EGC, to be provided on lease by the RIIL to RPL, would be given by RIIL (lessor) only to those suppliers of the EGC which would be selected by both i.e. the lessor and lessee on the basis of their mutual consultation and on such terms as were agreed to by and between them. It was not that entire purchases were required to be made from the assessee and there could be several suppliers but the supplier was also to be selected by lessor (RIIL) in consultation with RPL (lessee). Both the contracts despite being mutually inter-dependent were exclusive in seeking the fulfillment of different objectives for which these were entered. The RIIL, in pursuance of the contract of sale, placed the order with the assessee for the supply of goods on behalf of the RPL (lessee) in compliance of which the assessee sent goods to RPL (lessor) after raising invoices in favour of RIIL (lessor). Therefore, in my view, the justification of the Tax Board and the Revenue Authorities appears to be just and proper that the inter-State movement of the goods was the result of the purchase order placed by the RIIL and in pursuance thereof, the assessee supplied goods which occasioned the movement of the goods and not the lease agreement. Subsequent leasing after having goods purchased from the assessee by the two Reliance Companies does not take the entire transaction as contended by counsel for the assessee that it is a lease agreement in between the assessee RIIL and RPL, as the case may be. The goods were delivered and title passed. If under the agreement, the movement of goods was because of a clause in the contract of sale (purchase order placed by RIIL to the assessee) or as an incident of contract of sale (leasing of goods under the agreement between RIIL and RPL) , the same shall be deemed to have taken place in the course of inter-State trade and commerce. On perusal of clauses of the agreement, it is crystal clear that the movement of goods took place in fulfillment of the purchase order which was in the nature of the contract of sale between the assessee and RIIL. Therefore, I have no hesitation in holding that the transaction in between the assessee and the RIIL was certainly in the nature of inter-State sale within the meaning of Section 3(a) of the CST Act, no matter whether the purchase order was incidental to the lease agreement between the RIIL and RPL. - there is no hesitation in holding that the aforesaid transaction is sale of Empty Gas Cylinders (EGC) is inter State Sale transaction and not at all in the nature of inter-State Lease Transaction. - Decided against assessee.
Issues Involved:
1. Whether the transaction of the sale of Empty Gas Cylinders (EGC) was an Inter-State Sale or an Inter-State Lease transaction under Section 3(a) of the Central Sales Tax Act (CST Act). Issue-wise Detailed Analysis: 1. Determination of the Nature of Transaction: The petitioner-assessee contended that the sale of EGC to Reliance Industrial Infrastructure Limited (RIIL) and subsequent delivery to Reliance Petroleum Limited (RPL) under a tripartite agreement constituted an Inter-State Lease transaction. The petitioner argued that the movement of goods was in pursuance of the lease agreement, making it a lease transaction under Section 3(a) of the CST Act. The Assessing Officer (AO), however, held that the transaction was a simple sale, independent of the lease agreement between RIIL and RPL. Both the Deputy Commissioner (Appeals) and the Rajasthan Tax Board upheld the AO's decision, concluding that the transaction was an Inter-State Sale. 2. Legal Arguments and Interpretation: The petitioner's counsel argued that the tripartite agreement between the petitioner, RIIL, and RPL was integrally connected and that the petitioner was an essential party to the lease transaction. He cited several judgments to support the claim that the transaction should be considered an Inter-State Lease. Conversely, the Revenue's counsel argued that the petitioner was merely a supplier and not a party to the lease agreement, and thus, the transaction could not be considered a lease. The entire sale consideration was received by the petitioner, with no additional lease payments involved, indicating a sale transaction. 3. Analysis of Section 3 of the CST Act: The court examined Section 3 of the CST Act, which defines when a sale or purchase of goods takes place in the course of inter-State trade or commerce. The court noted that the movement of goods from one state to another must be occasioned by a contract of sale. The court found that the purchase order from RIIL to the petitioner occasioned the movement of goods, not the lease agreement between RIIL and RPL. 4. Examination of Contractual Relationships: The court observed that the petitioner was only a supplier of EGC to RIIL, which had a separate lease agreement with RPL. The lease agreement between RIIL and RPL did not involve the petitioner beyond the supply of goods. The court concluded that the purchase order and the lease agreement, though interconnected, served different objectives. The purchase order aimed at procuring goods, while the lease agreement provided for leasing the goods after procurement. 5. Judicial Precedents: The court reviewed various judgments cited by both parties. It found that the facts of the present case were distinguishable from those in the cited judgments. For instance, in the case of I.T.C. Classic Finance and Services, the lease transaction was considered an Inter-State Sale because the movement of goods was an incident of the contract of sale. Similarly, in the case of Tata Iron and Steel Co. Ltd., the movement of goods was occasioned by the contract of sale, making it an Inter-State Sale. 6. Conclusion: The court concluded that the transaction between the petitioner and RIIL was an Inter-State Sale under Section 3(a) of the CST Act. The movement of goods was occasioned by the purchase order from RIIL, not the lease agreement between RIIL and RPL. The petitioner was not a party to the lease agreement and did not receive any lease payments, further supporting the conclusion that the transaction was a sale. The court dismissed the revision petitions, answering the question of law in favor of the Revenue. Final Judgment: The revision petitions are dismissed. The question of law is answered against the assessee and in favor of the Revenue, with no order as to costs.
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