2024 (6) TMI 956 - HC - VAT and Sales Tax

Deemed sale - transfer of right to use within the provisions of Section 2 (40) of the Uttarakhand Value Added Tax Act, 2005 - upholding the assessment made by the Assistant Commissioner, Commercial Tax, when the First Appellate Court had not decided the appeal on merits - deduction on account of salary of driver, cleaner and cost of diesel and lubricants - deductible from the gross amount received from the Uttarakhand Transport Corporation or not. HELD THAT - For determining the net turnover, Rule 15 (2) prescribes the amount, which can be deducted from the total amount received by a dealer, and it includes (a) the amount representing the sale value of the goods covered by Sections 3, 4 5 of the Central Sales Tax Act, 1956; (b) the amount representing the value of the goods exempted under any of the provisions of the Act and; (c) the amount received as penalty for default in payment or as damages for any loss or damages caused to the goods by the person to whom such transfer was made, and as per the Explanation, the gross turnover meant the total amount received or receivable by a dealer in an assessment year as valueable consideration for the transfer of the right to use the goods whether such transfer was agreed to during that assessment year or earlier. The Supreme Court in the case of M/S. K.P. MOZIKA VERSUS OIL AND NATURAL GAS CORPORATION LTD. ORS. 2024 (1) TMI 443 - SUPREME COURT , while examining the case of Assam General Sales tax Act, 1993 and the Assam Value Added Tax Act, 2003, in the case of an assessee, who had agreed to provide different categories of motor vehicles, such as trucks, trailors, tankers, buses, scrapping winch chasis, and cranes, to the Oil and Natural Gas Corporation Limited to deliver its petroleum products, also examined the question whether hiring these motor vehicles / cranes, there was transfer of the right to use any goods and if there was a transfer of the right to use the goods, will it amount to a sale in terms of Clause (29A) (d) of Article 366 of the Constitution of India. After going through the salient features of the contract, the Supreme Court held that it was apparent that there was no intention to transfer the use of any particular tank truck in favour of ONGC. The contract was to provide tank trucks for the transportation of goods. In the above case, the Supreme Court had also referred to the case of STATE OF ANDHRA PRADESH AND ANOTHER VERSUS RASHTRIYA ISPAT NIGAM LTD. 2002 (3) TMI 705 - SUPREME COURT . The Supreme Court allowed the appeals of the assessees by holding that the contracts were not covered by the relevant provisions of the Sales Tax Act and of the VAT Act, as the contracts did not provide for the transfer of the right to use the goods made available to the person, who was allowed to use the same. The assesse had only entered into a contract to transfer the goods and there was no transfer of the right to use the vehicle, tankers etc. The Tribunal was not justified in treating the transactions in question as deemed sale as transfer of right to use within the provisions of Section 2 (40) of the Value Added Tax Act, 2005. Since the above said transaction was not taxable, there was no question that the deduction on account of salary of driver, cleaner and cost of diesel and lubricants was not deductible from the gross turnover received from the Uttarakhand Transport Corporation. Revision allowed.

Summary

Issues Involved:

A. Whether the transaction in question is a deemed sale as transfer of right to use within the provisions of Section 2 (40) of the Uttarakhand Value Added Tax Act, 2005?

B. Whether the assessment made by the Assistant Commissioner, Commercial Tax was justified when the First Appellate Court had not decided the appeal on merits?

C. Whether the deduction on account of salary of driver, cleaner and cost of diesel and lubricants is deductible from the gross amount received from the Uttarakhand Transport Corporation?

Summary:

Issue A: Deemed Sale as Transfer of Right to Use
The revisionist argued that the transaction should not be treated as a deemed sale u/s 2 (40) of the Uttarakhand Value Added Tax Act, 2005. The Tribunal, however, upheld the assessment orders treating the payments received for hiring the bus as a deemed sale. The Tribunal referred to Rule 15, which prescribes the determination of turnover relating to the transfer of the right to use goods, and concluded that the total amount received by the assessee was taxable as it exceeded Rs. 5 Lacs u/s 3 (7). The Tribunal's decision was based on the interpretation that the transaction fell under the category of "transfer of right to use goods" u/s 4 (5) (a).

Issue B: Justification of Assessment
The revisionist contended that the First Appellate Court had not decided the appeal on merits, and thus the Tribunal's upholding of the assessment was unjustified. The Joint Commissioner (Appeals) had previously allowed the appeals, holding that the giving of the bus on lease did not fall within the ambit of transfer of right to use, as there was no effective control by the Uttarakhand Transport Corporation on the bus. This was overturned by the Tribunal, which upheld the assessment orders.

Issue C: Deductibility of Expenses
The Tribunal held that the deduction on account of salary of driver, cleaner, and cost of diesel and lubricants was not deductible from the gross amount received from the Uttarakhand Transport Corporation. The Tribunal referred to Rule 15 (2) which prescribes the amounts that can be deducted from the total amount received by a dealer.

Court's Decision:
The High Court referenced the Supreme Court's judgments in State of Andhra Pradesh vs. Rashtriya Ispat Nigam Limited and K.P. Mozika vs. Oil and Natural Gas Corporation Ltd., which clarified that for a transaction to be considered a transfer of the right to use, there must be transfer of possession and control. The Court found that the revisionist did not transfer effective control of the bus to the Uttarakhand Transport Corporation, thus the transaction did not constitute a deemed sale. Consequently, the Tribunal's decision was set aside, and the common judgment and order dated 27th August 2011 by the Joint Commissioner (Appeal-II), Commercial Tax, Dehradun, was upheld. The revisions were allowed, and the transactions were not treated as taxable under the Uttarakhand Value Added Tax Act, 2005.