9911796707
TMI Blog2011 (6) TMI 698X X X X Extracts X X X X X X X X Extracts X X X X ..... s (Assessments-4), Bangalore Rural, Bangalore, by order dated March 14, 2006 while dismissing the appeal. 2. The material facts for deciding the question of law that arises for determination in this appeal are as follows: The appellant herein is a partnership firm being fleet owners doing transport contract business at Varthur Hobli, Koramangala, Bangalore. The appellant had not registered as a dealer under the Karnataka Sales Tax Act, 1957. During the course of inspection, it was noticed that the dealer was engaged in transporting concrete mixture to M/s. Grasim Industries Limited, Bangalore, for purposes of transportation of ready mix concrete taking into consideration the periodical rentals which would amount to transfer of right to use any goods, taxable under section 5C of the Karnataka Sales Tax Act (hereinafter called as, "the Act"). Inspite of liability to tax on the dealer, he has failed to obtain registration under section 10 of the Act and documents including the documents dated October 11, 2002 was seized and proceedings were initiated under section 28(6) of the Act from October 1, 2002 to March 31, 2003. The proceedings culminated with the confirmation order under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S.T.A. No. 267 of 2006 dated October 30, 2008 wherein order was passed holding that the transaction under the agreement dated October 11, 2002 is taxable under section 5C of the Act. 5. We have heard learned counsel appearing for the revision-petitioner and the learned Government Advocate appearing for the respondent and the reply arguments of the learned counsel appearing for the petitioner. 6. Having regard to the contentions urged by the counsel appearing for the parties, the question of law that arises for determination in this petition is: (i) Whether the order passed by the Karnataka Appellate Tribunal dated October 31, 2008 in S.T.A. No. 66 of 2006, having regard to the facts and circumstances of the case and contents of the agreement in holding that the assessee has right to use 12 vehicles, possession of which was handed-over to M/s. Grasim Industries and wherefore exigible to tax under section 5C of the Act is justified or calls for interference in this revision? 7. The learned counsel appearing for the petitioner has taken us through the contents of the agreement dated October 11, 2002. He has mainly relied upon clauses A, B, F and H which read as follows: "(A) Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and that was only service provided. In support of his contention, he has relied upon a decision of the High Court of Andhra Pradesh in W.P. No. 6685 of 1989 dated December 15, 1989 in the case of Rashtriya Ispat Nigam Ltd. v. Commercial Tax Officer, Company Circle, Visakhapatnam [1990] 77 STC 182 (AP) wherein the High Court was considering the question about scope of the transaction under section 5 of the Andhra Pradesh General Sales Tax Act, 1957 and the hire charges collected by a person on supply of machinery for execution of his work to any contractor. He has relied on the following observation in paras 7, 9 and 14 of the order which is as under (pages 186-188 in 77 STC): "It is this category of bailment of goods that is the tax base under section 5E of the Act. The taxable event under section 5E is the transfer of the right to use any goods. What does this phrase connote? This means that unless there is a transfer of the right to use the goods, no occasion for levying tax arises; providing a facility which involves the use of goods nor even a right to use the goods is not enough, there must be a transfer of that right. . . . 9. The essence of transfer is passage of contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the hire charges collected by the petitioner from the contractors are not exigible to sales tax." 9. The learned counsel submitted that the said order passed by the High Court of Andhra Pradesh has been confirmed by the Supreme Court in State of Andhra Pradesh v. Rashtriya Ispat Nigam Ltd. reported in [2002] 126 STC 114 (SC); AIR 2002 SC 1303, wherein the order passed by the High Court has been confirmed. 10. The learned counsel also submitted that the quantification of the penalty impost is excessive and the appellant was under the bona fide impression that since only the service of the vehicle was provided to M/s. Grasim industries and there was no transfer of use of vehicles, transaction was not taxable under section 5B and therefore, the assessee has not registered under the Act and there is no wilful violation of the provisions of the Act and therefore, penalty may be reduced. 11. The learned Government Advocate submitted that the terms of the agreement would clearly show that the agreement clearly provides for right to transfer of the use of the vehicle belonging to the assessee to the first party in the agreement to M/s. Grasim Industries. The vehicle will be in the po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vehicles are made available on 24 x 7 basis, i.e., 24 hours on all the seven days of the week. The first party agrees that the second party may require up to two days a month for maintenance and upkeep of the vehicle and therefore, allowed two days in a month for this activity and not to pay consideration as fixed in clause I. It is clear from the clause dealing with the payment that in clause (i) in consideration of services rendered as contained in the agreement, the first party agrees to pay a sum of Rs. 3,718 per day per vehicle to the second party for vehicle available for actual use and subject to rates mentioned in the clause are all inclusive and not tax or cess of any nature was by the first party. Clause (i) also provides that the first party also agrees to reimburse the second party for the diesel and lubricants as per the Schedule A to the agreement. 15. It is clear from the abovesaid clause in the agreement that in the present case where the subject-matter of transfer is the vehicle transfer to effective use of such vehicle, the possession of 12 vehicles to transport the produce of the first party has been handed-over to the first party by the assessee. The first part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent case. 17. However, the decision relied upon by the learned Government Advocate in Harbans Lal v. State of Haryana [1993] 88 STC 357 (P&H) which has also been relied upon by the first appellate authority is similar to the present case wherein, on perusal of the agreement in the said case wherein the petitioner-company was engaged in the business of conducting tours and also entering into contract for hiring of its buses for the purposes of transportation of personnel of the company. In the agreement entered into between M/s. Eicher Tractor Limited to make available four buses to ferry the employees of M/s. Eicher Tractor Limited from New Delhi to M/s. Eicher Tractor Limited, Faridabad in the morning and back from M/s. Eicher Tractor Limited to Delhi. Having regard to the terms of the agreement which is similar in the present case, it was held that it can be held that effective control of the vehicle remains with the owner after the agreement is executed cannot be said that the effective control of the vehicle remains with the owner after the contract executed. There is acquisition of possession of the buses as distinguished from its custody by the M/s. Eicher Tractor Ltd. an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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