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TMI Blog2010 (2) TMI 1094X X X X Extracts X X X X X X X X Extracts X X X X ..... Government under the Trade Tax Act, 1948, in view of the express mandate of article 286(1) of the Constitution of India. And also, in view of the legal position declared by the Supreme Court in 20th Century Finance Corpn. Ltd. [2000] 119 STC 182; [2000] 6 SCC 12, wherein, the vires of section 3F of the Trade Tax Act, 1948 were conditionally upheld by the apex court by expressly recording that the sales tax liability under the aforesaid provision, would not extend to "outside sales", and in respect of "inter-State sales". The ingredients of section 3 of the Central Sales Tax Act, 1956 must be deemed to have been satisfied by the deemed sales, contemplated through the lease agreements executed between the TCIL and the ONGC/BHEL. This determination has lead to the further conclusion, that the same constitute inter-State sales. The Central Government alone is however competent to levy sales tax on interState sales. That being so, the imposition of sales tax at the hands of the State of Uttar Pradesh on the revision petitioner, would be in clear conflict with the provisions of article 286(1) of the Constitution of India, as also the law declared by the apex court in 20th Century Fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not a matter of dispute that the purchase order dated December 27, 1989 and the movement of goods based thereon, from Mohali to Dehradun, were in pursuance of the agreement entered into by the revision petitioner with the ONGC dated November 1, 1988. The revision petitioner entered into another similar agreement (as it had earlier entered into with the ONGC) with M/s. Bharat Heavy Electricals Ltd. (hereinafter referred to as, the BHEL ) for installation of Digital ISND-EPABX along with allied accessories and spare parts, on rent and guarantee basis on February 24, 2000. The equipment contemplated by the said agreement, was not available with the TCIL at the time of execution of the said contract. Accordingly, a purchase order was placed by TCIL with M/s. Alcatel Business Systems (India) Ltd. (hereinafter referred to as, the ABSL ) on November 3, 2000. ABSL supplied the equipment in furtherance of the aforesaid purchase order from Bangalore (in the State of Karnataka) to Haridwar (in the State of Uttar Pradesh/Uttarakhand) on November 3, 2000. In furtherance of the aforesaid, an invoice dated January 24, 2001 was issued from Bangalore. It is not a matter of dispute that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, given by the TCIL to the ONGC, as well as, the BHEL. The assessing authority was of the view, that since both the lessor (ONGC/ BHEL) and the lessee (TCIL) were registered with the Trade Tax Office, Dehradun (in the State of Uttar Pradesh/Uttarakhand) and the agreements executed by the lessor and the lessee were in respect of equipment supplied for use in the State of Uttar Pradesh/Uttarakhand, section 3F of the Trade Tax Act, 1948 was invokable, for levy of sales tax on the transfer of the right to use goods. Accordingly, the rent received by the TCIL from the ONGC, as well as, from the BHEL was subjected to the liability of sales tax under the Trade Tax Act, 1948. Dissatisfied with the assessment order dated February 28, 2003, the revision petitioner, i.e., the TCIL, preferred an appeal under section 9 of the Trade Tax Act, 1948 before the Joint Commissioner (Appeals), Dehradun. By an order dated September 21, 2005, the appellate authority dismissed the appeal preferred by the TCIL, thereby confirming the order passed by the assessing authority dated February 28, 2003. Dissatisfied with the assessment order dated February 28, 2003 as well as the appellate order dated Sep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. v. Lt. Governor of Delhi [1978] 42 STC 386, the apex court held, that payments in lieu of food and drinks provided to guests staying in a hotel could not be divided into two components, one representing the value of food and drinks, and the other representing the charges for services rendered. The issue of avoidance of tax based on the aforesaid pronouncements, as well as, avoidance of Central sales tax leviable on inter-State sale of goods, was examined by the Law Commission of India. In its sixty first report, the Law Commission of India suggested certain amendments to the provisions of the Constitution of India. By the Constitution (Forty-sixth Amendment) Act, 1982, the Parliament inserted clause (29A) in article 366 of the Constitution of India. Clause (29A) (aforementioned) is being reproduced hereunder: (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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment may by law specify. A perusal of clause (1) of article 286 of the Constitution of India reveals, that it is not open to a State to frame law(s) for imposing or authorising the imposition of tax on the sale (or purchase) of goods from outside the State, i.e., on inter-State sale (or purchase) transactions. The other aspects of the aforesaid provision need not be deliberated here, as the same are irrelevant to the present controversy. From a collective reading of clause (29A) of article 366 of the Constitution of India, and article 286 of the Constitution of India, it emerges that sales tax is leviable even on transactions which do not fall strictly within the definition of the term sale , under the Sales of Goods Act, 1954 (as amended), in view of the liberal definition of the term sale in sub-clauses (a) to (f) of clause (29A) of article 366 of the Constitution of India. The aforesaid enlarged definition of the term sale , for the levy of sales tax, at the hands of a State, would however be subjected to the embargo expressed in article 286 of the Constitution of India, namely, that a State cannot levy tax on sale (or purchase) of goods from outside the State, i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (a) outside the State and (b) in the course of import of goods into the territory of India. Yet, there are other limitations on the taxing power of the State Legislature by virtue of clause (3) of article 286. Although Parliament has enacted law under clause (3)(a) of article 286 no law so far has been enacted by Parliament under clause (3)(b) of article 286. When such law is enacted by Parliament, the State Legislature would be required to exercise its legislative power in conformity with such law. Thus, what we have stated above, are the limitations on the powers of States Legislatures on levy of sales tax on deemed sales envisaged under sub-clause (d) of clause (29A) of article 366 of the Constitution. It would be further relevant to mention, that in Builders Association of India's case [1989] 73 STC 370 (SC); [1989] 2 SCC 645, the submission advanced on behalf of the State, that clause (29A) of article 366 of the Constitution of India, conferred power on State Legislatures to levy tax independently of the power emerging out of entry 54 of the State List contained in the Seventh Schedule to the Constitution of India, was rejected. The apex court in Builders Associat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contract is concluded. The third view is that the place where the goods are sold or delivered would be the situs of sale. The fourth view is, that where the essential ingredients, which complete a sale, are found in majority would be the situs of sale. There would be no difficulty in finding out situs of sale where it has been provided by legal fiction by the appropriate Legislature. In the present case, we do not find Parliament has, by creating any fiction, fixed the location of sale in case of the transfer of right to use goods. We, therefore, have to look into the decisional law. Having made reference to various judgments, the issue under reference was then concluded as under (at page 201 of 119 STC): We, therefore, find that the location or delivery of goods within the State cannot be made a basis for levy of tax on sales of goods. Under general law, merely because the goods are located or delivery of which has been effected for use within the State would not be the situs of deemed sale for levy of tax if the transfer of right to use has taken place in another State. Therefore, the contention, on behalf of the respondents that there would be no completed transfer o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .T.C. Classic Finance and Services v. Commissioner of Commercial Taxes [1995] 97 STC 330 (AP), and accepted by the apex court in 20th Century Finance Corpn. Ltd. v. State of Maharashtra [2000] 119 STC 182; [2000] 6 SCC 12? (ii) Whether the Commercial Tax Tribunal has erred in law in relying the minority view given in the aforesaid 20th Century Finance Corpn. Ltd. case [2000] 119 STC 182 (SC); [2000] 6 SCC 12 and not following the majority view given by the apex court on the point that the tax was leviable only under Central sales tax treating it as interState transaction? During the course of hearing, principal reliance by the rival parties was placed on the judgment rendered in 20th Century Finance Corpn. Ltd.'s case [2000] 119 STC 182 (SC); [2000] 6 SCC 12. Therefore, before examining the controversy raised in the instant revision petition, it will first and foremost be necessary, to understand the controversy which came up for consideration in the aforesaid case, as also the conclusions rendered thereon. Before adverting to the conclusions drawn in the aforesaid case, it would be necessary to mention, that the judgment rendered in 20th Century Finance Corpn. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd.'s case [2000] 119 STC 182 (SC); [2000] 6 SCC 12 was narrated in paragraph 2 of the said judgment. The same is also being extracted hereunder: 2. The appellants in the civil appeals and the petitioners in the writ petitions filed under article 32 of the Constitution and transferred petition, and respondent in Civil Appeal Nos. 6218 to 6223 of 1995 are companies incorporated under the Companies Act, 1956 and some have their registered offices at places outside the respondentStates and others have inside the States. They carry on business of leasing diverse equipments. According to them, they entered into master lease agreements with the lessee, i.e., party who desired to take equipment for use on hire. The appellants and the petitioners agree to give on lease diverse machinery/equipments listed in the lease summary schedule, subject to terms and conditions stipulated in the master lease agreements. The lease summary schedule only mentions the board category of equipment proposed to be leased and the correct value thereof. The master lease agreement provides that orders for individual equipment will be placed by the appellants at the instance of lessees and that the equip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable event on the transfer of the right to use any goods. Article 366(29A)(d) empowers the State Legislature to enact law imposing sales tax on the transfer of the right to use goods. The various subclauses of clause (29A) of article 366 permit the imposition of tax thus: sub-clause (a) on transfer of property in goods; sub-clause (b) on transfer of property in goods; sub-clause (c) on delivery of goods; sub-clause (d) on transfer of the right to use goods; sub-clause (e) on supply of goods; and sub-clause (f) on supply of services. The words 'and such transfer, delivery or supply. . .' in the latter portion of clause (29A), therefore, refer to the words transfer, delivery and supply, as applicable, used in the various sub-clauses. Thus, the transfer of goods will be a deemed sale in the cases of sub-clauses (a) and (b), the delivery of goods will be a deemed sale in case of sub-clause (c), the supply of goods and services respectively will be deemed sales in the cases of sub-clauses (e) and (f) and the transfer of the right to use any goods will be a deemed sale in the case of sub-clause (d). Clause (29A) cannot, in our view, be read as implying that the tax under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, the taxable event on such a deemed sale would be the execution of the contract for the transfer of right to use goods. But in case of an oral or implied transfer of the right to use goods it may be effected by the delivery of the goods. 28.. No authority of this court has been shown on behalf of the respondents that there would be no completed transfer of right to use goods unless the goods are delivered. Thus, the delivery of goods cannot constitute a basis for levy of tax on the transfer of right to use any goods. We are, therefore, of the view that where the goods are in existence, the taxable event on the transfer of the right to use goods occurs when a contract is executed between the lessor and the lessee and situs of sale of such a deemed sale would be the place where the contract in respect thereof is executed. Thus, where goods to be transferred are available and a written contract is executed between the parties, it is at that point situs of taxable event on the transfer of right to use goods would occur and situs of sale of such a transaction would be the place where the contract is executed. (emphasis(1) is ours) When examined closely, it emerges that the prim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not in existence or where there is an oral or implied transfer of the right to use goods, such transactions may be effected by the delivery of the goods. In such cases, the taxable event would be on the delivery of goods. (e) The transaction of transfer of right to use goods cannot be termed as contract of bailment as it is deemed sale within the meaning of the legal fiction engrafted in clause (29A)(d) of article 366 of the Constitution wherein the location or delivery of goods to put to use is immaterial. It is essential to notice and emphasize here, that in so far as the present controversy is concerned, only the conclusions recorded at (a) and (d) above will be relevant. Conclusion (a) would be relevant because, learned counsel for the revision petitioner had primarily canvassed the proposition, that the levy of tax in the instant case was not sustainable, as the deemed sale in the present controversy must be deemed to be an inter-State sale. Since the facts of the present controversy also reveal, that the goods to be transferred to the lessees (ONGC/BHEL) were not in existence when the TCIL executed the right to use contracts with the ONGC and the BHEL, conclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods, wherein the goods are not in existence at the time of execution of the contract, the minority expressed its determination in the following manner: 75. We shall now examine the contention that the transfer of right to use the goods is complete on executing the master lease only and nothing more need be done. In the factual matrix, in the case of the appellants, there is a master lease which is entered into between the appellants and the hirer for leasing of an equipment. The equipment, on that date, is not in existence. After execution of the master lease, the appellants will place an order for purchase of an equipment with the manufacturer purporting to be at the instance of the hirer with the instruction that the same be delivered at his place. On the aforementioned premise, can the transfer of the right to use the equipment be complete on execution of the master lease and the appellants' liability under sub-clause (d) to pay sales tax would commence immediately even though the equipment in regard to which 'the right to use' has been transferred to the hirer is not in existence? But then it is conceded that transfer in sub-clause (d) will not be effectual whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he taxable event would arise at the place where the transfer is completed. It was further observed that in case where the contract for use of goods is oral, the taxable event would arise at the place of the delivery of the goods. In case of a contract in writing, the taxable event would be subject to the terms and conditions of the contract based on the intention of the parties, i.e., at the place where giving control of the goods was postulated. The minority clarified to observe, that the transfer will be complete where the contract is executed and the control of the goods, which are subject-matter of the contract, is given to the hirer. In paragraph 84 of the judgment, while recording the aforesaid conclusions, the minority expressed its views illustratively through a series of hypothetical sets of facts. Two illustrative instances recorded by the minority view (in paragraph 84 of the judgment) caught our attention. The same are being extracted hereunder (at pages 223 and 224 of 119 STC): . . . Let us take an example the hirer is in Delhi, the lessor is in Mumbai and the goods are in West Bengal, the contract of the transfer of right to use any goods is entered into in Mumbai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e [1989] 75 STC 217 (Bom) except for the fact that in cases before the High Court of Andhra Pradesh assessment of tax for the years 1989-90 to 1994-95 was in fact made under the provisions of the Andhra Pradesh General Sales Tax Act. The crucial question before the High Court was when on the basis of master lease, the contract to take the equipment on lease, entered into between the respondent and the hirer, the respondent placed an order with the supplier at Calcutta with instructions to deliver it to the hirer at Hyderabad, was the movement of the equipment from Calcutta to Hyderabad pursuant to the sale of the equipment or deemed sale under sub-clause (d)? The Division Bench of the Andhra Pradesh High Court proceeded on the footing, following, among others, the judgment of the Bombay High Court in 20th Century Finance Corporation [1989] 75 STC 217, as well as the earlier judgments of the Andhra Pradesh High Court, that the transaction referred to in sub-clause (d) is a specie of bailment and on the interpretation of the contract of the master lease, it held that the transfer of right to use the equipment (deemed sale) was complete on execution of the master lease and that the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at before an unspecified equipment reaches the hirer, the sale of the equipment by the respondent itself would not be complete. The deemed sale under sub-clause (d) is only a consequential transaction which follows the completion of the sale in favour of the respondent and cannot precede it. Despite the conclusions recorded in the paragraphs extracted herein above, certain vital observations were also recorded by the minority in paragraph 96. The same is, therefore, also being reproduced hereunder: 96. The transaction in question, namely, entering into master lease between the hirer and the respondent and placing the order for purchase of an equipment desired to be taken on lease by the hirer as an order for purchase of an equipment at the instance of the hirer is an attempt to save sales tax either on sale of the equipment or on the deemed sale. The Revenue can have no grudge against a person who so arranges his affairs as to minimise his tax liability under the provisions of a taxing statute. Indeed, it is expected of the Revenue to ensure that correct tax as ordained by the statute is paid by every assessable person no more no less. But that does not mean the tax evasion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3F is a charging section which provides tax on transfer of right to use any goods and it is extracted as under: '3F. (1) Notwithstanding anything contained in section 3A or section 3AAA or section 3D but subject to the provisions of sections 14 and 15 of the Central Sales Tax Act, 1956, every dealer shall, for each assessment year, pay a tax on the net turnover of (a) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment of other valuable consideration; or (b) . . . at such rate not exceeding fifteen percentum as the State Government may, by notification, declare and different rates may be declared for different goods or different classes of dealers. (2) For the purposes of determining the net turnover referred to in sub-section (1), the following amounts shall be deducted from the total amount received or receivable by a dealer in respect of a (a) transfer referred to in clause (a) of sub-section (1) whether such transfer was agreed to during that assessment year or earlier, (i) the amount representing the sale value of the goods covered by sections 3, 4 and 5 of the Central Sales Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , noted in the statement, we shall examine the Explanation to section 2(10) of the Maharashtra Act. The impugned Explanation says that for purposes of sub-clause (d) the transfer of the right to use any goods shall be deemed to have taken place in the State of Maharashtra, if the goods are in the State of Maharashtra at the time of their use irrespective of the place where the agreement for such transfer of the right to use such goods is made and whether the assent of the party is prior or subsequent to such transfer. From the above provision, it is evident that the taxable event in respect of the deemed sale under sub-clause (d) is treated not at the place where the transfer of the right to use the goods is complete but is fixed by a deeming provision contained in the impugned Explanation in the State of Maharashtra. From the above, it is also apparent that this deeming provision runs counter to the import of sub-clause (d) of clause (29A), discussed above; it has no nexus with the taxable event, that is, with the transfer of right to use any goods. Indeed, it appears to us that in the guise of fixing the situs of the sale by the legislation, which is held permissible by the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce and Services case [1995] 97 STC 330, wherein section 5E of the Andhra Pradesh General Sales Tax Act, 1957 was applied to levy tax on the assessee. The Division Bench, while dealing with the issues canvassed, inter alia, reasoned and held as under (at page 344 of STC): . . . The placing of the purchase order by the assessee with the manufacturer was because of the lease agreement with the customer. Both are integrally connected; one cannot be split up from the other . . . Independent of the lease agreement, such a transaction could not have been possible. In the absence of the lease transaction, it is plain, there was no possibility for the assessee to place the purchase order with the manufacturer. It is not the case of the Department, in so far as Special Appeal No. 1 of 1995 is concerned, that there was any single transaction in which, independently, without the request of a customer, a purchase order was placed by the assessee with any manufacturer. As it is the admitted case of the Department that the consignee is the customer (the lessee) and the invoice was raised against the assessee, the delivery was effected by way of entrustment to a common carrier outside t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is because of a clause in the contract or as an incident of contract, the same shall be deemed to have taken place in the course of inter-State trade or commerce. In the transaction illustratively discussed by the Commissioner, the transport of goods from one State to another was an incident of the contract between the assessee and the lessee. The very hiring itself is the incident of the contract of sale, which occasioned the inter-State movement of the goods from Madras to Andhra Pradesh. Without this contract, the goods would not have moved out of Madras. This aspect we have already discussed while dealing with the question whether the purchase order and the lease agreement are separate or constitute one integral transaction. It is true that Explanation II(a) to section 2(n) of the Act lays down that notwithstanding anything contained in the Indian Sale of Goods Act, 1930, a sale or purchase of goods shall be deemed for the purpose of the Act to have taken place in the State, wherever the contract of sale or purchase might have been made, if the goods are within the State. If construed literally, this implies that goods which are the subject-matter of inter-State transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase order would not have been placed by the TCIL with the NDEL/ABSL. Consequently, for the same reasons as have been recorded in I.T.C. Classic Finance and Services case [1995] 97 STC 330 (AP), it was submitted, that the right to use agreement was nothing but an inter-State sale. And, therefore, the same cannot be subjected to the imposition of sales tax at the hands of the State Government. In order to give further credence to his aforesaid submission, based on the decision rendered by the Andhra Pradesh High Court in I.T.C. Classic Finance and Services case [1995] 97 STC 330 (AP), learned counsel for the revision petitioner invited our attention to the decision rendered in 20th Century Finance Corpn. Ltd. case [2000] 119 STC 182 (SC); [2000] 6 SCC 12, and more particularly, to the observations recorded in paragraph 53 thereof, which are being extracted hereunder (at page 213 of 119 VST): 53. Following what we have stated above, we are of the opinion that the decision of the Bombay High Court in 20th Century Finance Corpn. Ltd. v. State of Maharashtra [1989] 75 STC 217 (under appeal) is erroneous, whereas, we affirm the decision of the Andhra Pradesh High Court in I.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made to order. Before the assessing authority, the petitioner contended that since the goods were not in existence, the transfer of right to use did not take place at Haridwar where the agreement was executed. According to the petitioner, the placing of the purchase order by the petitioner with the manufacturers/suppliers was only because of the lease agreement between petitioner and Bharat Heavy Electricals Ltd., and, therefore, the purchase order was an integral part of the lease and, therefore, the purchase order could not be separated from the lease. According to the petitioner in the present case the petitioner received rental orders from Bharat Heavy Electricals Ltd., in terms of the lease agreement and in pursuance of the rental orders the petitioner placed purchase orders pursuant to which computers were delivered from Bangalore and Delhi to Bharat Heavy Electricals Ltd. at Haridwar and therefore the transactions were in the nature of inter-State trade. According to the petitioners all the computers were supplied against rental orders placed by Bharat Heavy Electricals Ltd. under the above lease. According to the petitioner all the computers were supplied from outside th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... controversy were similar to the facts in Tata Elxsi Limited's case [2004] 134 STC 403 (Uttara), learned counsel for the revision petitioner, then, invited our attention to section 3 of the Central Sales Tax Act, 1956. Section 3 (aforesaid) is being reproduced hereunder: 3. When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce. A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase, (a) occasions the movement of goods from one State to another; or (b) is effected by a transfer of documents of title to the goods during their movement from one State to another. It was pointed out by the learned counsel for the revision petitioner, that section 3 (extracted hereinabove), in fact, defines the term inter-State sale . It is submitted that the aforesaid definition should be applied to the facts of the present case to determine whether the transactions between the TCIL and the ONGC/BHEL are in the nature of inter-State sales . It is submitted that the permissibility to impose sales tax on an inter-State sale, is exclusively in the domain of the Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of inter-State character of a sale the situs is immaterial. Where a State, while defining the expression sale , makes the situs relevant for the purposes of deciding a deemed sale it cannot touch inter-State sale. This is because any State law concerning deemed sale covered by article 366(29A)(a) to (f) of the Constitution must satisfy the requirement of article 286 as also the provisions of the Central Sales Tax Act, 1956. In fact, article 366(29A) explains the expression 'sale or purchase of goods' occurring in article 286 and also occurring in entry 54 of List II of the Constitution and further article 366(29A) amplifies the said expression 'sale or purchase of goods' by a fiction. For the purposes of taxation, however, a deemed sale cannot be distinguished from an ordinary sales. Therefore, in cases of inter-State sales falling under section 3(a) of the Central Sales Tax Act, 1956 it is not relevant to consider the situs of the sale or the State in which the property in the goods happens to pass. (iv) A sale can occasion the movement of the goods sold only when the terms of the sale provide that the goods shall be moved or if the movement of the goods is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts of the petitioner. If the assessing authority finds that computers were not in existence on the date of the lease then he has to consider also the status of the purchase order. He has to find out whether the purchase order was an integral part of lease or whether purchase order was a separate transaction vis-a-vis the lease. . . Based on section 3 of the Central Sales Tax Act, 1956, as also the observations recorded by the Division Bench of this court (extracted herein above) in Tata Elxsi Limited's case [2004] 134 STC 403 (Uttara), it is the submission of the learned counsel for the revision petitioner, that the purchase orders in the instant case were executed by the TCIL with the NDEL/ABSL, after the TCIL had executed the lease agreements with the ONGC/BHEL allowing the lessee(s) the right to use . But for the aforesaid right to use agreements executed by the TCIL with the ONGC/ BHEL, the purchase orders would not have been placed by the TCIL with the NDEL/ABSL. It is submitted that the purchase orders were placed by the TCIL, only to fulfil the lease agreements authorising right to use of goods. The purchase orders had to be placed by the TCIL with the NDEL/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revision petitioner was, that in recording its conclusions, the authorities, while passing the impugned orders, had relied on the minority view expressed in 20th Century Finance Corpn. Ltd. v. State of Maharashtra [2000] 119 STC 182 (SC); [2000] 6 SCC 12. In this behalf, it was pointed out that there was divergence of views expressed by the Andhra Pradesh High Court in I.T.C. Classic Finance and Services v. Commissioner of Commercial Taxes [1995] 97 STC 330 and the one rendered by the Bombay High Court in 20th Century Finance Corporation Ltd. v. State of Maharashtra [1989] 75 STC 217. The majority view had upheld the position expressed by the Andhra Pradesh High Court, whereas, the minority view upheld the contrary position expressed by the Bombay High Court. In adjudicating the controversy on the basis of the view expressed by the minority, it was submitted, that the authorities under the Trade Tax Act, 1948 had seriously erred in recording its conclusions. It was contended that the decision in the matter could only have been based on the majority view, which represents the declared position of law on the subject. We shall now deal with the first contention advanced by the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for the respondent, does not, in any manner whatsoever, repudiate the submission advanced at the hands of the learned counsel for the revision petitioner. Having examined the sole objection raised by the learned counsel for the respondent, we have considered the first contention advanced by the learned counsel for the revision petitioner. By a fiction of law, a contract authorising right to use goods, constitutes a deemed sale (article 366(29A)(d) of the Constitution of India). Such a contract, authorising right to use of goods as consideration, flowing from one party is set of by the agreed financial consideration flowing to the other. The consideration from the TCIL to the ONGC/BHEL in the present controversy is represented by the right to use EPABX systems. The rent agreed to be paid by the ONGC/BHEL constitutes the financial consideration flowing to the TCIL. The consideration flowing to the ONGC/BHEL, in the present ase, is not transfer of property in goods contemplated by sub-clauses (a) and (b) of clause (29A) of article 366 of the Constitution of India, but a mere transfer of right to use goods contemplated under sub-clause (d) of article 366(29A) of the Constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner, would also be relevant for us to arrive at a conclusion, on way or the other, on the instant aspect of the matter. Although the purchase order was placed by the TCIL, the goods were to be delivered to the ONGC/BHEL. The representatives of the ONGC/BHEL were identified by the purchase orders as the consignees to receive the goods dispatched by the NDEL/ABSL. Furthermore, the ONGC/BHEL had also been given the authority to determine suitability of the goods purchased. It is therefore apparent that the goods purchased had to be delivered to the ONGC/BHEL and not to the party which had placed the purchase orders, i.e., the TCIL. The goods were to be inspected by the ONGC/BHEL (before and after their delivery) and not by the party which had placed the purchase order, i.e., the TCIL. We are, therefore, satisfied in concluding, that the lease agreements, executed by the TCIL with the ONGC/BHEL, as also the purchase orders placed thereafter by the TCIL with the NDEL/ABSL, are so connected with one another that they must be deemed to be a part and parcel of the same transaction. Having arrived at the conclusion, that the purchase orders as also the lease agreements, constitute a pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, contemplated through the lease agreements executed by the TCIL with the ONGC/ BHEL, as inter-State sales. It is, therefore, contended that the submission advanced by the learned counsel for the revision petitioner, based on section 3 of the Central Sales Tax Act, 1956, as also the judgment rendered by this court in Tata Elxsi Limited's case [2004] 134 STC 403 (Uttara), is liable to be rejected. We have given our thoughtful consideration to the second aspect of the contention advanced by the learned counsel for the revision petitioner (noticed in the foregoing paragraph as also in paragraph 36 hereinabove). For an effective determination of the second contention advanced by the learned counsel for the revision petitioner, the only exercise required to be carried out by us is, to determine whether or not the ingredients of the definition of the term inter-State sale , recorded in section 3 of the Central Sales Tax Act, 1956, in respect of the transactions recorded as lease agreements in the present controversy authorising ONGC/BHEL the right to use goods , stands satisfied. In case it is concluded that the aforesaid ingredients are satisfied, then the inevitable conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Central Sales Tax Act, 1956 must be deemed to have been satisfied by the deemed sales, contemplated through the lease agreements executed between the TCIL and the ONGC/BHEL. This determination has lead to the further conclusion, that the same constitute inter-State sales. The Central Government alone is however competent to levy sales tax on interState sales. That being so, the imposition of sales tax at the hands of the State of Uttar Pradesh on the revision petitioner, would be in clear conflict with the provisions of article 286(1) of the Constitution of India, as also the law declared by the apex court in 20th Century Finance Corpn. Ltd. [2000] 119 STC 182; [2000] 6 SCC 12, specially while interpreting section 3F of the Trade Tax Act, 1948, inasmuch as, the vires of the aforesaid provision (under which tax has been levied in this case) has been upheld subject to the condition that the sales tax is not levied on an outside sale or an inter-State sale . We shall now deal with the third contention advanced by the learned counsel for the revision petitioner (noticed in paragraph 37 hereinabove). So as to repudiate the submission advanced by the learned counsel fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erlook the contention advanced by the learned counsel for the respondent to substantiate his submission. It is the pointed assertion of the learned counsel for the respondent, that if the observations recorded by the minority view in paragraphs 94 to 96 are taken into consideration, the impugned orders passed by the assessing authority, as also, the appellate orders, will have to be upheld. The submission advanced by the learned counsel for the respondent, in our view, is intertwined in an unnecessary jugglery of words. A closer examination of the observations recorded by the minority view in paragraphs 94 to 96 reveal that the deliberations recorded therein were aimed at determining which of the two views expressed by the High Courts (the one expressed by the Division Bench of the Andhra Pradesh High Court in I.T.C. Classic Finance and Services case [1995] 97 STC 330, or the one expressed by the Bombay High Court in 20th Century Finance Corporation Ltd.'s case [1989] 75 STC 217 was correct). The minority view, during the course of the deliberations in paragraphs 94 to 96, arrived at the conclusion that the view expressed by the Bombay High Court in 20th Century Finance Corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X
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