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TMI Blog2002 (10) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... returned within the said period, the instruction in the bill provides for payment of a rent of 75 paise per day for the period after the expiry of ten days up to a period of 20 days and thereafter at the rate of Re. 1 per day till it is returned to the assessee. In the assessments for the two years, i.e., 1985-86 and 1986-87, the assessee had received certain amounts by way of rent for the delayed return of the cylinders. The assessing authority had included the said amount as turnover exigible to tax under the Act in view of section 5(1)(iii) of the Act. The assessee filed appeal against the assessment order before the Deputy Commissioner (Appeals), A.I.T. and S.T., Ernakulam wherein the assessee, inter alia, challenged the inclusion of the rent. The first appellate authority agreed with the assessing authority and rejected the claim. This was confirmed by the Tribunal in second appeal. 3.. Mrs. S.K. Devi, learned counsel appearing for the assessee, submits that the transaction in question cannot be brought to tax under section 5(1)(iii) of the Act for the reason that there is no transfer of right to use the cylinder by the assessee. The counsel further submits that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the customers and the sale bill will very clearly show that the sale is only of gases. As such the instruction on the reverse of the bills clearly provides for return of the cylinders within ten days of the supply and in case the cylinder is not returned within the stipulated period, the customers are obliged to pay rent at the rate of 75 paise per day for 20 days and thereafter at the rate of Re. 1 per day till the cylinders are returned to the petitioner. The petitioner had received certain amount by way of rent from the customers also. Now, we have to consider the question as to whether the said rents received by the petitioner can be brought to tax under section 5(1)(iii). Section 5(1)(iii) of the Act reads as follows: "5. Levy of tax on sale or purchase of goods.-(1) Every dealer other than a casual trader or agent of a non-resident dealer whose total turnover for a year is not less than fifty thousand rupees and every casual trader or agent of a non-resident dealer, whatever be his total turnover for the year, shall pay tax on his taxable turnover for that year, (i).................. (ii)................. (iii) in the case of transfer of the right to use any goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain amounts by way of rent for the delayed return of the cylinders by the customers will not fall within the meaning of the expressions "transfer of the right to use any goods". The Andhra Pradesh High Court in Industrial Oxygen Company Pvt. Ltd. v. State of Andhra Pradesh [1992] 86 STC 539 considered the question whether sales tax was exigible under section 5-E of the Andhra Pradesh General Sales Tax Act on the hire charges for the gas cylinders in which gas was sold. The petitioner in that case is a manufacturer of industrial gases such as oxygen, acetylene, etc. It filled the gases produced by it in cylinders and sold them to customers. The gas cylinders in which the gas was sold were given on loan to customers for their use on a rent-free basis for a limited period. After that stipulated period, hire charges per cylinder per day were charged by the petitioner. The hire charges so recovered were brought to tax under section 5-E of the Andhra Pradesh General Sales Tax Act, 1957. The Andhra Pradesh High Court has taken the view that the cylinders were goods and they were actually being handed over to the customers by the petitioner, and the customers had physical possession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received charges for the same. The question arose is as to whether the charges received for supplying sophisticated machinery can be assessed to sales tax under section 5-E of the Andhra Pradesh General Sales Tax Act, 1957. The High Court of Andhra Pradesh, on a consideration of the agreement of the respondent with the contractors, found that the effective control of the machinery, even while the machinery was in use, was with the respondent, the contractors were not free to make use of the machinery for other works or move the machinery out during the period the machinery was in use and held that the transactions between the respondent and the contractors did not involve the transfer of right to use the machinery in favour of the contractors and the hire charges could not be brought to tax under section 5-E. The Supreme Court has affirmed the said decision by holding that the transaction did not involve the transfer of the right to use the machinery in favour of the contractors and that in the absence of satisfying the essential requirement of section 5-E, the hire charges collected by the respondent from the contractors were not exigible to sales tax. The observation made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n total disregard of the terms of the contract and as such there was no transfer of the right to use the cylinders beyond the free loan period of 14 days and the rent charged can only be treated as penalty. The Andhra Pradesh High Court in fact has not set out any principle or logic behind the conclusion reached by them to the effect that the consideration received by the assessee will amount to consideration for transfer of the right to use the goods. The High Court also assumed that mere possession of the cylinders with the customers will amount to transfer of goods. 8.. Now, we will advert to the decisions relied on by the learned Government Pleader. It must be noted that the decisions of the Supreme Court in State of Maharashtra v. Britannia Biscuits Company Limited [1995] 96 STC 642, Premier Breweries v. State of Kerala [1998] 108 STC 598; (1998) 1 KLT 186 and Kalyani Breweries Ltd. v. State of West Bengal [1997] 107 STC 190; (1998) 6 KTR 277 are not concerned with section 5(1) of the Act and, therefore, the principles laid down in regard to the question as to whether the deposit for return of tins or bottle deposits can be treated as taxable turnover has no relevance so far ..... X X X X Extracts X X X X X X X X Extracts X X X X
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