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TMI Blog2009 (2) TMI 747X X X X Extracts X X X X X X X X Extracts X X X X ..... idering, therefore, the matter in its entirety and in the interest of justice, this writ petition is disposed of making it clear to the respondents that the respondents shall not make any deduction at source, from the bills of the petitioner, of any amount(s), by way of sales tax or value added tax, until and unless the petitioner is informed as to how the transactions, in connection with giving of the petitioner's vehicle(s), on hire, to the respondent-Corporation, amounted to transfer of the right to use the vehicles from the end of the petitioner to the respondent-Corporation. - W.P. (C) No. 4392 of 2006 - - - Dated:- 27-2-2009 - ANSARI I.A. , J. I.A. ANSARI J. The petitioner, which is a company incorporated under the Companies Act, 1956, has filed this writ petition under article 226 of the Constitution of India, praying for issuance of appropriate writ(s) directing the respondents herein not to realize and/or deduct tax, at source, under the Assam Value Added Tax Act, 2003, from the bills of the petitioner for the works, which the petitioner has carried out on the basis of the verbal agreement entered into with the respondents herein. It is the pleaded case of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Constitution of India, had carried the same meaning as a sale defined in section 4 of the Sale of Goods Act, 1930. Hence, prior to the 46th Amendment, sales tax could be imposed only upon transfer of property in goods from one person to another. Consequently, sales tax could not be imposed upon transactions, which might have resembled sale, but did not involve transfer of property in goods. Because of this judicial interpretation, States were losing revenue on account of sales tax in respect of transactions like transfer of the right to use goods, transfer of property in goods involved in execution of works contract, supply of food by a hotelier, etc. With regard to the above, it may be pointed out that as far as back as in the year 1967, the Madras High Court, in A.V. Meiyappan v. Commissioner of Commercial Taxes reported in [1967] 20 STC 115, was confronted with the question as to whether a given transaction of lease can ever amount to sale . In A.V. Meiyappan [1967] 20 STC 115 (Mad), the court was examining an agreement entered into by an assessee, called lessor, with a limited company, called lessee, whereunder the assessee had made over to the lessee the outright ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale by incorporating those transactions, which might have resembled sale , but did not fall, within the traditional concept of sale , and were judicially held not to be exigible to sales tax. The idea behind this amendment was to create a concept of deemed sale by treating, with the help of a legal fiction, such a transaction as a sale even if the same did not fall within the ambit of the definition of sale as defined in the Sale of Goods Act. In other words, by bringing various transactions within the purview of the definition of sale , a transaction, which was, otherwise, not a sale , has been deemed to be a sale . This clause (29A) of article 366 states as under: (29A) 'tax on the sale or purchase of goods' includes (a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (c) a tax on the delivery of goods on hire-purchase or any system of payment by instalments; (d) a tax on the transfer of the right to use an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale within the meaning of the sales tax laws empowering thereby the State Legislature to impose tax, on such a transaction, as sale . In Assam too, under the Act, tax became exigible, by section 8(1)(f), on operating lease as mentioned in Schedule VII at the rate(s) specified in the Schedule. Section 2(33) of the Act provides that sale shall include any transfer of the use of any goods under an operating lease . Section 2(33) reads as under: 2(33): 'Sale', with all the grammatical variations and cognate expressions, means any transfer of property in goods by any person for cash, deferred payment or other valuable consideration, and includes: ... (iv) any transfer of the use of any goods under an operating lease. ... The expression operating lease has been defined, by section 2(25), to mean a lease other than a financial lease. Thus, any lease, other than a financial lease, is an operating lease within the sales tax laws in Assam. The term lease has been defined under section 2(19) of the Act as follows: 2(19) 'lease' means any agreement or arrangement whereby the right to use any goods for any purpose is transferred by one p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t arise. Having held that it is the transfer of the right to use any goods, which is exigible to sales tax, and that without such transfer, no sales tax can be imposed, the Supreme Court goes on to observe, in 20th Century Finance Corpn. Ltd. [2000] 119 STC 182; [2000] 6 SCC 12, that if the goods are available, then, the transfer of the right to use goods takes place, when the contract, in respect thereof, is executed, for, the right to use goods would stand transferred to the lessee, no sooner the contract is executed. The Supreme Court further observed, in 20th Century Finance Corpn. Ltd. [2000] 119 STC 182; [2000] 6 SCC 12, that if the goods are available, irrespective of the fact where the goods are located, and a written contract is entered into between the parties, the taxable event on such a deemed sale would be the execution of the contract; but in the case of an oral or implied transfer of the right to use goods, such transfer may be effected by the delivery of the goods. Having so observed, the Supreme Court, in 20th Century Finance Corpn. Ltd. [2000] 119 STC 182; [2000] 6 SCC 12, pointed out that no authority could be shown to support the view that there would be no co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cur and situs of sale of such a transaction would be the place, where the contract is executed. Relying upon the decision in 20th Century Finance Corpn. Ltd. [2000] 119 STC 182; [2000] 6 SCC 12, the apex court held, in State of Uttar Pradesh v. Union of India reported in [2003] 130 STC 1; [2003] 3 SCC 239, that handing over of possession of the goods is not sine qua non for completing the transfer of the right to use such goods. In Bharat Sanchar Nigam Ltd. v. Union of India reported in [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 3 SCC 1, a three-judge Bench had the occasion to consider the question as to whether delivery of goods is at all necessary for the purpose of effecting the transfer of the right to use the goods. To the question, so put, the Supreme Court responded by holding that the essence of the right, under article 366(29A)(d), is that it relates to user of goods and though, in a given case, actual delivery of the goods may not be necessary for effecting transfer of the right to use the goods, yet the goods must be available at the time of the transfer, must be deliverable and delivered at some stage. The apex court pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt held that delivery of goods, at some stage, is necessary in order to complete the transfer of the right to use the goods. To put it a little differently, though situs of a deemed sale does not depend on the place of delivery of goods, the taxable event is not complete, in the light of decision in Bharat Sanchar Nigam Ltd. [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 3 SCC 1, until the time the delivery of the goods takes place, for, it is upon delivery of the goods that the transfer of the right to use the goods is completed. This delivery may, however, be actual or constructive. In other words, a deemed sale cannot be treated as complete until the time the contract is executed by delivery of the goods inasmuch as the transfer of the right to use goods does not take place until the time the transferor delivers the goods, which is the subject of contract, though, for the purpose of determining the situs of such a deemed sale , it is the place, where the agreement is executed, which will be treated as the place of the deemed sale provided that the agreement is in writing; but in a case of oral agreement, it may be effected by the delive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. [2006] 3 VST 95; [2006] 145 STC 91; [2006] 282 ITR 273; [2006] 3 SCC 1, that the delivery of the goods may not take place simultaneously with the transfer of the right to use the goods, but the goods must be in existence, deliverable, when the right is sought to be transferred, and must, at some stage, be delivered. It is, therefore, clear that in order to constitute a transfer of right to use goods, there must be parting with the possession of the goods for the (1)See para 72 of 3 VST. limited period of its use in favour of the lessee by the lessor. The effective control of the goods must not remain with the owner, but must stand transferred to the lessee for the use by the latter at his will and it is this transfer of the effective control of the goods, which attracts sales tax (See Alpha Clays v. State of Kerala reported in [2004] 135 STC 107 (Ker)). In Rashtriya Ispat Nigam Ltd. reported in [2002] 126 STC 114; [2002] 3 SCC 314, it was claimed by the sales tax authorities that the transaction, whereby the owner of certain machinery had made available, his machinery to the contractor, amounted to sale. Dealing with this contention of the sales tax authorities, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ex court in Bharat Sanchar Nigam Ltd. [2006] 3 VST 95; [2006] 145 STC 91; [2006] 282 ITR 273; [2006] 3 SCC 1, (page 125 of STC; page 128 of VST) read as under: ...when the assessee had hired shuttering in favour of the contractors to use it in the course of construction of the buildings it was found that possession of the shuttering materials was transferred by the assessee to the customers for their use and, therefore, there was deemed sale within the meaning of sub-clause (d) of clause (29A) of article 366. What is noteworthy is that in both the cases there were goods in existence which were delivered to the contractors for their use. In one case there was no intention to transfer the right to use while in the other there was. In Bhopal Sugar Industries Ltd. v. Sales Tax Officer, Bhopal reported in [1977] 40 STC 42, the apex court has pointed out that mere use of the words such as agent or agency buyer or seller cannot be sufficient to lead to an irresistible inference that the parties concerned did, in fact, intend that the status, so described in an agreement, shall stand conferred on the party concerned. The apex court has further pointed out, in Bhopal Su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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