2019 (5) TMI 502 - HC - VAT and Sales Tax

Imposition of tax u/s 3-F of UPVAT Act - deemed sale - transfer of right to use of goods / vehicle - transport of petroleum products, which are purchased by the parties from Hindustan Petroleum Corporation Limited - contention of the counsel for the applicant is that the control and possession of the truck tanker remained with the applicant and that the maintenance, salary of the driver and every employees, insurance and other expenses are borne by the applicant alone - HELD THAT - The bare perusal of Section 3-F of the Act shows that the provision of Section 3-F is applicable only in cases where there is transfer of right to use the goods. It is clear that for the transfer of right to use the goods and to invoke the provisions of Section 3-F of the act, it is necessary that there should be transfer of effective control of the goods in favour of the party. Revision allowed.

Summary

Issues:
1. Interpretation of Section 3-F of the U.P. Value Added Tax Act
2. Application of the provision in a transporter's case
3. Transfer of right to use goods for taxation under Section 3-F

Interpretation of Section 3-F of the U.P. Value Added Tax Act:
The judgment revolves around the interpretation of Section 3-F of the U.P. Value Added Tax Act, which deals with the rate of tax on the right to use goods or goods involved in the execution of a works contract. The court examines the provision and its applicability to cases involving the transfer of the right to use goods.

Application of the provision in a transporter's case:
The case involves a transporter engaged in transporting petroleum products, with an agreement specifying conditions related to the operation of tank trucks. The applicant contests the imposition of tax under Section 3-F, arguing that control and possession of the truck tanker remained with them, and that expenses such as maintenance, salaries, and insurance were borne solely by the applicant. The court evaluates the nature of the agreement and the actual transfer of possession and control in determining the tax liability.

Transfer of right to use goods for taxation under Section 3-F:
The judgment references precedents such as Kando Transport & Others Vs. S.T.O. Assessment Unit, Rashtriya Ispat Nigam Ltd. vs. Commercial Tax Officer, and M/s Ahuja Goods Agency to establish the principle that for the transfer of right to use goods under Section 3-F, there must be a transfer of effective control of the goods to the party. The court emphasizes the importance of delivery of possession in determining the applicability of the provision.

In conclusion, the court allows the revision petition filed by the assessee, setting aside the order of the Tribunal and emphasizing the necessity of delivery of possession for the transfer of right to use goods under Section 3-F of the U.P. Value Added Tax Act.