2023 (4) TMI 866 - HC - VAT and Sales Tax

Classification of services - Deemed Sale - crane services given by the assessee to the Govt./Private institution - Transfer of right to use goods or Section 2(36) (iv) of the RVAT Act 2003 - HELD THAT - The crane as provided to the consumer-Transport Department, could also be interchanged/exchanged at any point in time during the sustenance of the contract. Therefore, without an iota of doubt, it could be said that the consumer-Transport Department did not enjoy the exclusive control and possession of the crane, for the reasons mentioned herein-above. Accordingly, the contract dated 13.10.2008, did not give rise to a transfer of the right to use goods as stipulated under Section 2(35)(iv) of the Act of 2003 read with Article 366(29A) of the Constitution of India. It is also noteworthy that as the contract dated 13.10.2008 was essentially a contract of service, the respondent-assessee had duly paid the amount of service tax leviable upon them. Therefore, in the facts and circumstances of the instant matter, the crane services provided by the respondent-assessee do not constitute sale as provided under Section 2(35)(iv) of the Act of 2003. In the case at hand, it is clear that the contract dated 13.10.2008 was a contract of service and not sale, as the consumer i.e. Transport Department had demanded the specific services of loading, unloading, lifting and shifting, by way of the said contract. It cannot be said that consumer had the exclusive right to use the crane or that the said crane was under the control and possession of the consumer, as is illustrated by the fact that the conditions in the contract provided for the respondent-assessee to undertake the care and maintenance of the cranes during the sustenance of the contract and also supply the services of a driver and helper alongside the crane. Therefore, inadvertently, keeping the control and possession within the realms of the respondent-assessee - this Court is of the view that the crane services provided by the respondent-assessee do not constitute sale as provided under Section 2(35)(iv) of the Act of 2003 and hence, the order of the learned Tax Board does not call for any interference of this Court. The control and possession of the crane, as evidenced by the requirements imposed under Condition Nos. 17 and 28, lay with the respondent-assessee only. Hence, there were no mitigating circumstances warranting the contract dated 13.10.2008 to encapsulate a sale as provided under Section 2(35)(iv) of the Act of 2003 read with Article 366(29A) of the Constitution of India. The question of law is answered in favour of the respondent-assessee and against the Revenue - the Sales Tax Revisions are dismissed.

Summary

Issues Involved:
1. Whether the crane services provided by the assessee fall within the ambit of Section 2(36)(iv) of the RVAT Act-2003 as a transfer of right to use goods.

Summary:

Issue 1: Whether the crane services provided by the assessee fall within the ambit of Section 2(36)(iv) of the RVAT Act-2003 as a transfer of right to use goods.

1. The revision petitions were admitted on the question of law: "Whether in the facts and circumstances of the case of Rajasthan Tax Board was justified in law in holding that the crane services given by the assessee to the Govt./Private institution will not fall within the ambit of Section 2(36)(iv) of the RVAT Act-2003 and will not fall within the ambit of transfer of right to use goods?"

2. The Assessing Officer found that the respondent-assessee provided crane services, which should be deemed a 'sale' under Article 366(29A) of the Constitution of India and Section 2(35)(iv) of The Rajasthan Value Added Tax Act, 2003.

3. The Appellate Authority upheld the levy of tax for the Transport Department but remanded the matter for other stakeholders. The Rajasthan Tax Board dismissed the Revenue's appeal, adjudicating in favor of the respondent-assessee.

4. The Revenue argued that the Tax Board's order was bad-in-law and perverse, relying on Section 2(35)(iv) of the Act of 2003 and the Apex Court judgment in Great Eastern Shipping Company Ltd. vs. State of Karnataka & Ors., which stipulated conditions for the transfer of the right to use goods.

5. The Revenue contended that the crane services met the conditions laid down by the Apex Court for the transfer of the right to use goods, as the cranes were under the control and disposal of the Transport Department for a fixed period.

6. The respondent-assessee argued that the contract was for hiring and leasing the crane, with the control and possession of the crane remaining with the assessee, supported by various judgments including Bharat Sanchar Nigam Ltd. & Anr. vs. Union of India & Ors.

7. The Tax Board found that the contract was a contract of service, not of sale, as the Transport Department did not have exclusive control over the cranes. The respondent-assessee was responsible for providing a driver, maintenance, and other services.

8. The Court observed that the contract was a service contract, and the crane services did not constitute a sale under Section 2(35)(iv) of the Act of 2003. The respondent-assessee had paid the service tax, indicating the nature of the contract.

9. The Court applied the "substance of the contract" test, concluding that the contract did not transfer the right to use goods exclusively to the Transport Department.

10. The Court dismissed the revision petitions, answering the question of law in favor of the respondent-assessee and against the Revenue, stating that the crane services provided did not constitute a sale under Section 2(35)(iv) of the Act of 2003.