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TMI Blog2006 (4) TMI 489X X X X Extracts X X X X X X X X Extracts X X X X ..... buses. Orders of the assessing authority have been confirmed in first appeals. The applicant filed second appeals before the Tribunal. The Tribunal by the impugned order allowed the appeals in part. The Tribunal has reduced the turnover but upheld the orders of the assessing authority levying the tax on the hire charges under section 3F of the Act. Heard learned counsel for the parties. Learned counsel for the applicant submitted that the buses were provided to IFFCO, BPCL and GEC, companies for transportation of their employees from their residence to the factory and from factory to their residence. He submitted that the effective control over the vehicles have never been passed on to the aforesaid three companies and always remained with the applicant. He submitted that the driver and other employees of the vehicles were of the applicant; road permit was in the name of the applicant; diesel and other maintenance expenses were borne by the applicant; prices were fixed with reference to the kilometer; applicant had to take the insurance for the vehicles and the workmen. It was also agreed that in case of failure to provide the vehicle every day, the applicant would be liable for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the above we are pleased to inform you that your offer has been accepted on the following terms and conditions: (1) You will place at the disposal of IFFCO three 50/52 seater buses Model 1987. These will be used and will run as per the directives of representative of IFFCO. Generally, the vehicle will run between IFFCO and Allahabad, but sometimes it may be required to go outside Allahabad. (2) You will ensure availability of drivers, spare tyres, tools and other necessary items and ensure that the vehicle is available for use everyday. (3) This contract will be valid for a period of one year with effect from July 1, 1987. (4) Performance guarantee in the form of demand draft bank guarantee for five per cent of the total contract value as per pro forma invoice will be submitted by you failing which the same would be recovered from your first running bill. This deposit will be non-interest bearing and would be returned after satisfactory completion of the contract. (5) The vehicle will have foam seats and fitted with seat covers and curtains of good quality and the same must be maintained. Seat must be of 4" foam and back must be of height of 3" thick foam. (6) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise) with its registered office at Naini, Allahabad from Allahabad City to Bharat Pumps and Compressors Ltd. and back as and when required including out of station journeys and whereas M/s. Bharat Pumps and Compressors Ltd., have agreed to engage of minibus of the said transporter on the following terms and conditions: (1) That the transporter will run a minibus No. CIE-35 (Tata 4071986 model) in good running condition for transporting the employees/customers of Bharat Pumps and Compressors Ltd., from Allahabad City to Bharat Pumps and Compressors Ltd., and back as and when required including out of station journeys. That in case of the above minibus being out of order, the transporter shall provide an alternative/substitute minibus after due approval of such minibus by the company for such period as the company thinks reasonable. (2) That the minibus will be operated for company's duties round the clock as per the timings fixed from time to time from various places in Allahabad city to Bharat Pumps and Compressors Ltd., Naini, and back including out of station journeys. (3) That the minibus will pickup/drop company's employees/ customers from different places/pickup poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) only before operating the minibus in the company and after award of contract. (11) In case of any breach of contract by the transporter, BPC shall be entitled to forfeit in their favour the security deposit for that particular minibus, without prejudice to the rights of M/s. Bharat Pumps and Compressors Ltd., to take legal recourse for the said breach in the matter as deemed fit. (12) That the responsibility of keeping the minibus in good running condition as also to bear the cost of fuel, etc., including the salary and wages of the staff employed by the transporter for running of this minibus, would exclusively be of the transporter and Bharat Pumps and Compressors Ltd., will in no way be responsible to pay any part of such expenditure as mentioned hereinbefore. (13) That the transporter shall obtain the route permit, etc., for running this minibus and M/s. Bharat Pumps and Compressors Ltd., shall in no way be responsible for obtaining such permit, etc., payment of taxes such as passenger tax, surcharge, insurance charges, to concerned authorities will be the liability of the contractor and Bharat Pumps and Compressors Ltd., will in no way be responsible to pay any part of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1-15 June 5, 1988. Mohd. Wasim Khan 31, Mission Road Allahabad. Sub: Hiring of your 35 seater 608 Tata bus (New) for transporting our employees. Dear Sir, With reference to your verbal request for hiring your 608 Tata new bus (35 seater) directly for transporting our employees and our subsequent negotiations, we confirm having agreed to hire your bus on following mutually agreed terms and conditions: (1) You will give us on hire your 608 Tata Bus (new) 35 seater capacity for transporting our employees between our factory at Naini and their residences at various points in Jhunsi-Nibi-Sahson Bazar in three shifts 'A' 'G' and 'B', i.e., to bring the employees at 6.00 AM, 8.00 AM and 2.30 PM and leave at 2.40 PM., 4.40 PM and 11.10 PM respectively on all working days. (2) You will provide the necessary driving staff, two drivers in the bus, for satisfactory running of the vehicle as per route and time schedule laid down by us and amended from time to time. The payment of salary and overtime allowance to drivers, insurance, taxes, permits, etc., will be your responsibility and will be borne by you. (3) Your vehicle will pick up and drop the company's e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s permission from the company in writing. (10) This contract for transporting the employees of the company shall be for a period of three years from May 1, 1988 and renewal on further three year basis can be considered at mutually agreeable terms at the end of each three year period. (11) The agreement may be terminated by either party by giving one month's notice in writing. However, in case of negligence, misbehaviour, misconduct on the part of driving staff or if the vehicle is found to be detrimental to the interest of the company or its employee, the company will have the exclusive right to terminate the contract without giving any notice or compensation and company's decision will be final in this matter. (12) The vehicle when not transporting shift employees to and fro Naini works may be used on any other duty in the interest of the company's work. (13) Necessary repairs, replacement of essential parts and timely maintenance including the use of mobil oil, lubricants, etc., will be carried out by you with a view to keep the vehicle always in good working condition. (14) All taxes, Government dues or other obligatory levies imposed by the authorised agencies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... classes of dealers." Similar question came up for consideration in Kandoi Transport v. Sales Tax Officer, Assessment unit, Barbil [1992] 43 STL 67 (Orissa). In this case also the petitioner entered into a contract with M/s. Minerals and Metals Trading Corporation of India Ltd., for transportation work including loading, unloading and stacking. The contention of the transporter was that there was no transaction of sale and that the contract was for purely labour and service. The department, however, contended that "hire charges" received by the transporter come within the definition of "sale price". Considering the enlarged definition of "sale" in view of the Constitutional amendment, the Orissa High Court held as follows: "In order to decide whether a transaction is of 'sale', the determinative factor is whether any transfer of right of user is involved. By way of illustration we may indicate that if 'A' allows his vehicle to be used by 'B' for a consideration, and the vehicle is placed at the control, custody and possession of 'B', it may be a case of transfer of the right to use the vehicle for any purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on before the apex court in the case of State of Andhra Pradesh v. Rashtriya Ispat Nigam Limited reported in [2002] 126 STC 114; [2002] UPTC 273 (SC); JT [2002] 2 SC 493. The apex Court had affirmed the order of the Andhra Pradesh High Court and held as follows (page 116 of STC): "The High Court after scrutiny and close examination of the clauses contained in the agreement and looking to the agreement as a whole, in order to determine the nature of the transaction, concluded that the transactions between the respondent and contractors did not involve transfer of right to use the machinery in favour of the contractors and in the absence of satisfying the essential requirement of section 5E of the Act, i.e., transfer of right to use machinery, the hire charges collected by the respondent from the contractors were not exigible to sales tax. On a careful reading and analysis of the various clauses contained in the agreement and, in particular, looking to clauses 1, 5, 7, 13 and 14, it becomes clear that the transaction did not involve transfer of right to use the machinery in favour of contractors. The High Court was right in arriving at such a conclusion. In the impugned order, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the apex court in the case of State of Uttar Pradesh v. Union of India reported in [2003] 130 STC 1; [2003] UPTC 404 (SC); JT [2003] 1 SC 574, the observations of the Constitution Bench of the apex court in the case of 20th Century Finance Corporation Ltd. v. State of Maharashtra reported in [2000] 119 STC 182; [2000] UPTC 593; [2000] 6 SCC 12 and other decisions of the apex court and held as follow (page 123 of 145 STC): "In the State of Uttar Pradesh v. Union of India [2003] 130 STC 1 (SC); [2001] 3 SCC 239 it was also held: 'Handing over of the possession is not sine qua non of completing the transfer of the right to use any goods, as was held by a Constitution bench of this court in 20th Century Finance Corporation Ltd. v. State of Maharashtra [2000] 119 STC 182 (SC); [2000] UPTC 593 (SC); [2000] 6 SCC 12. . . Once DoT connects the telephone line of the assigned number of the subscriber to the area exchange, access to other telephones is established. There cannot be denial of the fact that giving such an access would complete the transfer of the right to use the goods.' With respect, the decision in 20th Century Finance Corporation Ltd. v. State of Mahar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so recognised that for oral contracts the situs of the transfer may be where the goods are delivered (see para 26 of the judgment). In our opinion, the essence of the right under article 366 (29A) (d) is that it relates to user of goods. It may be that the actual delivery of the goods is not necessary for effecting the transfer of the right to use the goods but the goods must be available at the time of transfer, must be deliverable and delivered at some stage. It is assumed, at the time of execution of any agreement to transfer the right to use, that the goods are available and deliverable. If the goods, or what is claimed to be goods by the respondents, are not deliverable at all by the service providers to the subscribers, the question of the right to use those goods, would not arise. In State of Andhra Pradesh v. Rastriya Ispat Nigam Ltd. [2002] 126 STC 114 (SC); [2002] UPTC 273 (SC); [2002] 3 SCC 314, it was claimed by the sales tax authorities that the transaction by which the owner of certain machinery had made them available to the contractors was a sale. The court rejected the submission saying that: '. . . the transaction did not involve transfer of right to use th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quently all legal consequences of such use including any permissions or licenses required therefor should be available to the transferee; (d) For the period during which the transferee has such legal right, it has to be to the exclusion to the transferor--this is the necessary concomitant of the plain language of the statute, viz., a 'transfer of the right to use', and not merely a licence to use the goods; (e) Having transferred the right to use the goods during the period for which it is to be transferred, the owner cannot again transfer the same rights to others." Thus, in the light of the ratio laid down by the apex court, on the terms of the agreement-referred hereinabove, it has to be examined whether there was transfer of right to use the vehicles. No doubt, vehicles are available at a deliverable stage, but the question is whether they have been delivered at any stage. Whether transferee had got a legal right to use the vehicles--consequently all legal consequences of such use including any permission or licence required therefor was available to the transferee and for the period during which the transferee has such legal right there was a complete exclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X
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