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2022 (5) TMI 1190 - HC - VAT and Sales TaxLevy of Sales Tax - hire charges collected by the Assessee for letting out on lease its aircraft would amount to sales and the amenable to the sales tax under the Orissa Sales Tax Act, 1947 or not - HELD THAT - Whether in the present case the transaction in question is a sale, it is seen that in the present case there is no actual transfer of the possession of the aircraft in question to the user of the aircraft. The aircraft is at all times in control of the Pilot who is an employee of the Assessee. Even the maintenance of the aircraft is undertaken by the Assessee as are the statutory compliances in terms of the permit granted to the Assessee. Therefore, there is no real transfer of the right to use the aircraft in the manner as envisaged in 20TH CENTURY FINANCE CORPN. LTD. AND ANOTHER VERSUS STATE OF MAHARSHTRA 2000 (5) TMI 980 - SUPREME COURT and as explained in the subsequent decision in BHARAT SANCHAR NIGAM LTD. (BSNL) VERSUS UNION OF INDIA 2006 (3) TMI 1 - SUPREME COURT . The impugned order of the Tribunal to the above extent as well as the corresponding assessment order of the STO are hereby set aside and the order of the ACST is restored to file - revision petition disposed off.
Issues Involved:
1. Whether the receipts for rendering Air Transport Services constitute a "Sale" under Section 2(g)(iv) of the Orissa Sales Tax Act, 1947 (OST Act). 2. Whether the Tribunal was correct in distinguishing the Full Bench decision of the Tribunal on the same set of facts without providing any reason. Issue-Wise Detailed Analysis: 1. Whether the receipts for rendering Air Transport Services constitute a "Sale" under Section 2(g)(iv) of the OST Act: The primary issue was whether the hire charges collected by the Assessee for letting out its aircraft on lease amounted to a sale and were thus amenable to sales tax under the OST Act. The Sales Tax Officer (STO) had treated the hire charges as a transfer of the right to use the aircraft, deeming it a sale and subjecting it to sales tax at 16%. However, the Assistant Commissioner of Sales Tax (ACST) reversed this decision, noting that the Assessee did not transfer possession of the aircraft to the hirers, as control remained with the Assessee's pilot, and all operational costs were borne by the Assessee. The ACST concluded that this did not constitute a sale under Section 2(g)(iv) of the OST Act. The Tribunal, however, reversed the ACST’s decision, relying on the Supreme Court's judgment in 20th Century Finance Corporation Ltd. v. State of Maharashtra, which discussed the limitations on the State's power to levy tax on the transfer of the right to use goods. The High Court, after considering the judgments in 20th Century Finance Corporation Ltd. and Bharat Sanchar Nigam Limited v. Union of India, concluded that there was no actual transfer of possession of the aircraft to the user, and thus, the transaction did not constitute a sale. Therefore, the rendering of Air Transport Services by the Assessee does not amount to a "Sale" under the OST Act. 2. Whether the Tribunal was correct in distinguishing the Full Bench decision of the Tribunal on the same set of facts without providing any reason: The Tribunal had distinguished its Full Bench decision in the Assessee's own case, which had held that the charges received for hiring the aircraft services did not amount to a sale under Section 2(g)(iv) of the OST Act. The Tribunal based its distinction on the Supreme Court’s decision in 20th Century Finance Corporation Ltd., which it argued was not available when the Full Bench made its decision. However, the High Court noted that the Supreme Court in 20th Century Finance Corporation Ltd. did not address a situation where there was no actual delivery of possession, as in the present case. The High Court also referred to the subsequent explanation in Bharat Sanchar Nigam Limited, which clarified that delivery of possession is essential for a transaction to be considered a sale. The High Court concluded that the Tribunal erred in not following the binding precedent of its Full Bench and in distinguishing it without sufficient reason. Consequently, the Tribunal’s order was set aside, and the ACST’s order was restored. Conclusion: The High Court ruled in favor of the Assessee, holding that the rendering of Air Transport Services does not constitute a "Sale" under Section 2(g)(iv) of the OST Act and that the Tribunal was incorrect in distinguishing the Full Bench decision without adequate justification. The impugned order of the Tribunal and the corresponding assessment order of the STO were set aside, and the ACST’s order was restored. The revision petitions were disposed of accordingly.
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