2022 (6) TMI 98 - HC - VAT and Sales Tax

Levy of Sales Tax - delivery/rental charges - said charges represents pre-sale charges or not - levy of tax on cylinder holding charges under section 3-A of the Act, on the ground that there has been a transfer of right to use the goods, when the cylinders are delivered to the customers - levy of penalty - whether cylinder delivery charges and handling charges are liable to be taxed or not? - HELD THAT - This issue is no longer res integra and it is answered by the Honourable Supreme Court in the decision in STATE OF ORISSA AND ANOTHER VERSUS ASIATIC GASES LTD. 2007 (5) TMI 322 - SUPREME COURT where it was held that the cylinders filled with medical oxygen/industrial gas were loaned to the customers. The loan was free from payment of charges for 14 days. The over-retention charges were levied after 14 days. In the circumstances the levy was on the transfer of the right to use the goods for consideration. The cylinder delivery charges and handling/rental charges are liable to be taxed and it was rightly held by the first respondent - there are no infirmity in the order passed by the first respondent warranting interference - petition dismissed.

Summary

Issues Involved:
- Tax liability on cylinder delivery charges and handling charges

Analysis:
The petitioners, manufacturers and dealers of Industrial gases, challenged the assessment orders by the second respondent levying sales tax on delivery/rental charges and cylinder holding charges for various assessment years. The petitioners argued that charges for cylinder holding and return are not taxable under the Act based on a circular issued by the Special Commissioner and Commissioner of Commercial Taxes. They contended that delivery charges are separately shown in sale bills and should not be part of the sale price. The petitioners relied on a Division Bench decision that excluded freight and delivery charges from the sale price when separately charged. The first respondent Tribunal dismissed all appeals, leading to the writ petitions.

The Special Government Pleader for the second respondent cited a Supreme Court decision in State of Orissa vs. Asiatic Gases Limited, where it was held that charges for over-retention of gas cylinders constitute a transfer of the right to use goods for consideration and are taxable. The Court emphasized that containers are integral to goods like medical oxygen, and the transfer of the right to use goods includes charges for over-retention. The Court rejected the argument that a legal transfer of goods is necessary for deemed sales, emphasizing that the levy is on the transfer of the right to use goods for consideration.

The High Court analyzed the Supreme Court decision and held that cylinder delivery charges and handling/rental charges are taxable based on the transfer of the right to use goods for consideration. The Court found no error in the first respondent's order and dismissed the writ petitions, upholding the tax liability on the mentioned charges. The judgment aligned with the Supreme Court's interpretation and precedent, concluding that the charges in question are subject to taxation.

In conclusion, the High Court dismissed the writ petitions, upholding the tax liability on cylinder delivery charges and handling/rental charges based on the transfer of the right to use goods for consideration, as established by the Supreme Court precedent. The Court found no grounds for interference in the first respondent's order, aligning with the legal interpretation provided by the Supreme Court decision cited during the proceedings.