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TMI Blog2009 (8) TMI 1109X X X X Extracts X X X X X X X X Extracts X X X X ..... ted:- 14-8-2009 - ANSARI I.A. , J. I.A. ANSARI J. The Gas Authority of India Limited, a Government of India undertaking, which is registered under the Companies Act, 1956, having its head office at New Delhi and several units throughout the country, including one at Agartala (hereinafter referred to as the GAIL ) purchases gas from respondent No. 4, namely, Oil and Natural Gas Corporation Limited (hereinafter referred to as, the ONGC ), which is also a Government of India undertaking and is registered under the Companies Act, 1956, having one of its project offices at Agartala. At the time of purchase of gas from the ONGC, the ONGC realises sales tax as chargeable under the Tripura Sales Tax Act, 1976, (in short, the TST Act, 1976 ). Upon so purchasing gas, GAIL, in turn, sells the gas to North Eastern Electric Power Corporation Limited (hereinafter referred to as, the NEEPCO ) a Government of India undertaking, and also to the Government of Tripura for the State Government's thermal power plants. According to the agreements executed between the parties, namely, GAIL, on the one hand, and the NEEPCO and the Government of Tripura, on the other, GAIL charges sale pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned, set aside and quashed. Respondent Nos. 1 and 2, namely, State of Tripura and Superintendent of Taxes, Charge I, Agartala, have resisted the writ petition by contending, inter alia, that the transportation charges collected by GAIL, for transporting gas from ONGC to the NEEPCO, is a taxable event under the TST Act, 1976, and the Rules framed thereunder inasmuch as such transportation of gas, according to the contesting respondents, amounts to transfer of the right to use and shall, therefore, be deemed to be a sale within the meaning of sale as defined in section 2(g) of the TST Act, 1976, and that such transfer of the right to use is chargeable under section 3 read with section 3A of the TST Act, 1976, and, hence, the contesting respondents were within the ambit of their power, in insisting upon NEEPCO, to deduct sales tax from GAIL's bills in respect of transportation charges, which GAIL raises. This apart, according to the contesting respondents, section 3AA of the TST Act, 1976, permits making of such deductions at source and, hence, the directions given by the contesting respondents to respondent No. 3, namely, NEEPCO, is legal and that it is the duty of N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of 49 years, for a consideration. The sales tax authorities were of the view that though the transaction was termed as lease for 49 years, the assessee had actually effected a sale of the negative print of the picture for a consideration and, therefore, the transaction was liable to sales tax under the Madras General Sales Tax Act, 1959. The Madras High Court, however, turned down the imposition of sales tax by holding that even if a copyright is regarded as species of movable property, the transaction did not connote a sale at all inasmuch as there was no transfer of property in the goods in such a case and the transaction was, therefore, not liable to payment of sales tax. The decision of the Madras High Court, in A.V. Meiyappan [1967] 20 STC 115, created immense difficulty for the States for quite a long time, because novel device of leasing out of the films resulted into avoidance of huge amounts of sales tax. This apart, in State of Madras v. Gannon Dunkerley Co. (Madras) Ltd. reported in [1958] 9 STC 353, the Supreme Court gave a new approach to the definition of sale by prohibiting States from taxing transfer of property in goods involved in the execution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified period) for cash, deferred payment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made; The effect of the amendment, which has been introduced to article 366, by inserting clause (29A), is that a State Legislature has become competent to impose sales tax, amongst others, on the transfer of the right to use any goods, which, before the amendment, so made, the State Legislature was not competent to do. What the insertion of clause (29A) has done is that various transactions, enumerated ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny goods shall be deemed to be a sale of those goods by the person making the delivery or transfer and a purchase of those goods by the person to whom such delivery or transfer is made, but does not include a mortgage, hypothecation, charge or pledge; . . . From a careful reading of section 2(g)(ii), it becomes clear that sale includes transfer of the right to use any goods for any purpose (whether or not for a specified period), for cash, deferred payment or other valuable consideration. Bearing in mind that the transfer of the right to use any goods for any purpose amounts to sale within the meaning of section 2(g)(ii), when I turn to section 3, I notice that section 3 reads as follows: 3. Liability to tax and exemption from tax. (1) Every dealer in taxable goods shall pay a tax on his turnover at the rate specified in column (3) of the Schedule attached to this Act: Provided that subject to the provisions of sections 14 and 15 of the Central Sales Tax Act, 1956 the State Government may, from time to time by notification in the Official Gazette and subject to such conditions as it may impose, fix a higher rate of tax not exceeding forty per cent or any lower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Tripura and includes Government and any person making a sale under section 3A. From a careful reading of the definition of the word dealer , what clearly emerges is that every person, who sells taxable goods in the State of Tripura, is not a dealer , for, he becomes a dealer only when he sells taxable goods manufactured, made and processed by him in Tripura or brought by him into Tripura from any place outside Tripura for the purpose of sale in Tripura. This, in turn, shows that if a person purchases taxable goods in the State of Tripura and sells the same within the State of Tripura, he does not become a dealer and on such a sale, no sales tax can be imposed by invoking the provisions of section 3. By amendment, which Tripura Sales Tax (Third Amendment) Act, 1984, has introduced, a person, making a sale, under section 3A, has been included within the meaning of the expression dealer . Section 3A is meant for a person, who executes a works contract, for, in the execution of works contract, whatever goods are used by him either as goods or in some other form, such utilisation of goods would, by legal fiction, be deemed to be a sale of those goods used in execution of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of the goods involved in the works contract which has actually been paid to the dealer during the period, shall be taken into account for determining the turnover for that period. 3AA. Deduction of tax at the time of payments. Any person responsible for paying any sum to any person liable to pay tax under section 3A of the Act, shall at the time of credit of such sum to the account of the person or at the time of payment thereof in cash or by issue of a cheque or draft or any other mode, deduct such amount towards sales tax as may be prescribed. In the backdrop of the definition of dealer given in section 2(b), when sections 3A and 3AA of the TST Act are carefully analysed, it becomes abundantly clear that a person, who executes a works contract, shall, by a legal fiction, which section 2(b) creates, be treated as a dealer and such a person, on being treated as a dealer , becomes, under section 3A, liable to pay sales tax for transfer of property in goods involved in the execution of works contract, for, such transfer of property in goods would be deemed to be a sale of the goods by the person making the transfer. Section 3AA makes it obligatory for a person, respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2008] 1 GLT 49, had the occasion to consider the vires of rule 3A(2). Having examined the scheme of the TST Act, 1976, and considering the fact that section 3, which is the charging section, imposes liability to pay sales tax on a dealer and the definition of the dealer does not include a person, who transfer the right to use any goods for any purpose , concluded that when the statute itself, i.e., the TST Act, 1976, has not imposed any liability to pay tax on a person, who transfers the right to use any goods for any purpose, the rule-making authorities, by taking recourse to its rule-making power, could not have made such a rule as rule 3A(2) was. Rule 3A(2) was, therefore, held, in Smt. Namita Paul [2009] 20 VST 799 (Gauhati); [2008] 1 GLT 49, as ultra vires making it clear that no provision, in the statute exists providing for compulsory deduction at the time of making payment for transfer of the right to use goods. Hence, in such circumstances, the rule-making authority could not have, by taking recourse to sub-section (1) of section 44, enacted rule 3A(2) and impose thereby an obligation to make deduction, at source, from the bills of the transferor of the right to us ..... X X X X Extracts X X X X X X X X Extracts X X X X
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