2016 (4) TMI 405 - HC - VAT and Sales Tax

Denial of C Forms for the years 2002-03 and 2003-04 - Whether the transfer of right to use equipment under the impugned transaction was not an interstate sale even though the goods moved from Maharashtra to Delhi and whether the only pre-condition for issuance of C-Form is that the buyer is a registered dealer and the goods are mentioned in his registration certificate as required for use in electricity generation and distribution - AT concluded that since the situs of the sale was Delhi and the agreement transferring the right to use the equipment was executed at New Delhi between RASL and DVB, the said transaction could not be said to be an inter-state sale - Held that - the lease agreement entered into between RASL and DVB has occasioned the movement of goods from Maharashtra to Delhi. The said transaction is deemed to be an inter-state sale within the meaning of that expression in Section 3 (a) of the CST Act. As the appellant is a registered dealer and the goods in question find mention in the registration certificate as required for the use in the electricity generation and distribution. Consequently, there was no valid ground to deny the Appellant C Forms in relation to the lease transactions undertaken with RASL during the years 2002-03 and 2003-04. Therefore, the VAT Officer is directed to issue C Forms as requested by the Appellant for the transactions of the years 2002-03 and 2003-04. - Appeal disposed of

Summary

Issues Involved:
1. Whether the transfer of the right to use equipment under the impugned transaction was an interstate sale.
2. Whether the only pre-condition for issuance of C-Form is that the buyer is a registered dealer and the goods are mentioned in his registration certificate as required for use in electricity generation and distribution.

Issue-wise Detailed Analysis:

1. Interstate Sale Determination:
The primary issue was whether the transfer of the right to use equipment under the lease agreement between the Appellant and RASL constituted an interstate sale. The Appellate Tribunal (AT) had dismissed the appeal on the grounds that the transaction was not an interstate sale, citing the decisions in 20th Century Finance Corporation Limited v. State of Maharashtra and Bharat Sanchar Nigam Limited v. Union of India. The AT concluded that since the agreement was executed in Delhi and the goods were used in Delhi, the transaction did not qualify as an interstate sale.

However, the High Court analyzed the definition of 'sale' under Article 366 (29-A) of the Constitution and Section 3 of the CST Act. It emphasized that the movement of goods from one state to another occasioned by the lease agreement qualified as an interstate sale. The Court referred to the Constitution Bench judgment in 20th Century Finance Corporation Limited, which ruled that the situs of sale is determined by where the property in goods passes, not merely by the location of goods. Since the goods moved from Maharashtra to Delhi pursuant to the lease agreement, the transaction was deemed an interstate sale under Section 3(a) of the CST Act. Consequently, the AT's decision was incorrect.

2. Pre-condition for Issuance of C-Form:
The second issue was whether the only pre-condition for the issuance of C-Form is that the buyer is a registered dealer and the goods are mentioned in his registration certificate for use in electricity generation and distribution. The Court noted that the Department did not dispute that the Appellant met these pre-conditions. The Appellant was a registered dealer, and the goods in question were listed in the registration certificate for the specified use. Therefore, there was no valid ground for denying the issuance of C-Forms for the transactions during the years 2002-03 and 2003-04.

Conclusion:
The High Court concluded that the AT erred in holding that the transfer of the right to use equipment was not an interstate sale. The lease agreement occasioned the movement of goods from Maharashtra to Delhi, qualifying it as an interstate sale under Section 3(a) of the CST Act. Additionally, the Appellant satisfied the pre-conditions for the issuance of C-Forms. Consequently, the orders of the OHA and the AT were set aside, and the VAT Officer was directed to issue C-Forms for the specified transactions within two weeks. The appeal was disposed of with no orders as to costs.