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TMI Blog2015 (5) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... e prior permission before the vehicles are sent for repairs with obligation to indicate in advance the period of non-availability of the vehicles on such account. The owner is not entitled to “withdraw the bus from operation without prior written consent” of DTC nor can it use these vehicles “for any other purpose at any time”, nor “transfer or otherwise alienate (except with prior written permission of DTC) vehicles” during the period of agreement. It is under a general obligation to “abide by the orders” of DTC or an officer authorized by it. Both the majority and concurring opinion in Bharat Sanchar Nigam Limited (2006 (3) TMI 1 - Supreme court) emphasize that the goods should be “ultimately delivered”, for the transaction to constitute a “sale” within the extended meaning, defined by Article 366(29A) of the Constitution of India. Rashtriya Ispat Nigam Limited (2002 (3) TMI 705 - SUPREME COURT OF INDIA) spells out that where even access or physical control of machinery or such like goods are made over, such a transaction by itself would not be transfer of the right to use if effective control is maintained by the owner. In the present case, the owner bears responsibility for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 2005-06. 2. The following substantial question of law arises for consideration:- Whether the agreement between the appellant and Delhi Transport Corporation giving on hire two Deluxe buses for being plied as per requirement of the latter on the routes and as per schedule specified its transfer of right to use of goods so as to be liable to VAT under Section 2(zc)(vi) of DVAT Act. 3. It is essential to take note at this stage of background facts. 4. The appellant is a partnership firm approved by the Government of India as a tourist operator engaged in the business of providing vehicles on rental basis. It stands registered (TIN No. 07550344859) for purposes of Value Added Tax (VAT) with the concerned authorities in Delhi. It had entered into agreements with Delhi Transport Corporation (DTC) in January, 2005 for providing buses to it on the terms and conditions mutually settled. It received an amount of ₹ 1,03,73,994/- from DTC on account of hire charges for running its buses under the said agreements during the period 2005-06. 5. Notice dated 12.02.2007 was issued and served on the appellant for audit for assessment year (AY) 2005-06 in respect of whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce. 8. Article 366(29A) reads as under:- (29A) tax on the sale or purchase of goods includes- (a) a tax on the transfer, otherwise than in pursuance of a contact, 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) invoked in the execution of a works contract; (c) a tax on the delivery of goods on hire purchase or any system of payment by installments; (d) a tax on the 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; (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. As noted in Bharat Sanchar Nigam Ltd. (supra), clause 29A was added to Article 366 by the (Forty-sixth) Amendment pursuant, inter alia, to the recommendations of the Law Commission in its report submitted in 1974. The Constitutional Amendment, thus, introduced an expansive meaning to the expression sale of goods including within its ambit certain transactions which thus far would be beyond its purview mainly on account of the element of actual transfer of title of goods being absent. By legal fiction, transactions in the nature of those covered by clause (a) to (f) of Article 366(29A) are to be treated as deemed sale for purposes of levy of sales tax (since substituted by VAT), as observed in Bharat Sanchar Nigam Ltd. (supra) in cases wherein the sale element could be isolated and be subjected to such tax. 14. Noticeably, clause (vi) of the definition of the word sale provided under Section 2(1) (zc) of DVAT Act is more or less similarly worded as clause (d) of Article 366(29A), both quoted above. The focus is on the transfer of the right to use goods for valuable consideration (present or deferred) for any purpose, it being immaterial whether the transfer is fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to use those goods, would not arise. (emphasis supplied) 19. In a separate, but concurring, judgment authored by Hon ble Dr. Justice AR. Lakshmanan, it was observed thus:- 97. To constitute a transaction for the transfer of the right to use the goods, the transaction must have the following attributes: (a) there must be goods available for delivery; (b) there must be a consensus ad idem as to the identity of the goods; (c) the transferee should have a legal right to use the goods-consequently all legal consequences of such use including any permissions or licences required therefore should be available to the transferee; (d) for the period during which the transferee has such legal right, it has to be 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. (emphasis supplied) 20. The case reported as Commissioner, VAT, Trade and Taxes Department v. International Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and services. Not only the contracts cannot be artificially split up so as to enable the sale element to be taxed, further, the States cannot treat the contract as only a contract of sale of goods and tax the whole value of the transaction as a sale of goods. Since the parties have not intended the contract to be mutilated/severable inasmuch as no different values are specified in the subject contract towards goods value separately and the value of services separately, it is not permissible by the DVAT Act to impose sales tax on the whole transaction value because that would amount to the State to entrench upon the Union List and tax services by including the cost of such services in the value of the goods. Thus, the contract in question being a composite contract is to be treated as a contract for services and no sales tax can be imposed on the contracts in question... 24. The Revenue places reliance on Krushna Chandra Behera and Another v. State of Orissa and Others 1991 83 STC 325, a decision rendered by High Court of Orissa involving similar transaction by Orissa State Road Corporation having taken a bus on hire under a contract from its owner. The contention of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operations to third party or to the vehicles; and, also remains responsible for payment of fines/penalties for violation of traffic rules and for the driver to be produced in the court of law or before police authorities. The money collectible from the users in the form of passenger fare or luggage charges, besides charges levied for advertising, use of telephone, etc., is the revenue of DTC which also bears tax liability in the nature of passenger tax, permit fee, toll tax, Adda tax, city entry fee, etc. 27. The contract also stipulated that the owner shall be obliged to keep the bus in neat, clean and presentable condition and for purposes of upkeep, make the necessary arrangements with service centres/dealers/repair shops, etc. on the routes where they were deployed as per schedule decided upon by the DTC. In terms of the contract, it is the owner who would arrange fuel (on reimbursable basis), lubricant, tubes, spare parts, etc. 28. The consideration for the registered owner of the vehicle under the contract is hire charges as per ASRTU contract (subject to deduction of tax liability at source), payable against fortnightly billing cycles besides reimbursement of the cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce but it was a case of transfer of right to use the goods/buses by the lessee exclusively without any interference by the appellant during the period of agreement... (emphasis supplied) 31. The Tribunal upheld the order imposing penalty recording the reasons as under:- 16. The Act i.e. DVAT Act, 2004 came into existence w.e.f, 01.4.2005 and the appellant could not get himself registered though liable to be registered as on 01.04.2005 under the existing provisions of the Act, this Tribunal is of the considered view that such like appellants were liable to be registered earlier also for such like transaction and hence there existed no reasonable cause for the appellant for not getting themselves registered from the date of their liability of registration as upheld by this Tribunal as above, the orders as such suffers from no infirmity or illegality which resulted in passing the penalty orders notice u/s 33 of the DVAT Act of which constitutionality and virus has been upheld by Their Lordships in case of Sales Tax Bar Association (Regd.) Vs Govt. of NCT of Delhi Ors. decided on 07.12.2012 in WP (C) No. 4236/2012 by Hon ble Delhi High Court wherein Their Lordships held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the machinery for the works other than the project work of the respondent. 33. This Court is unconvinced by the Revenue s submissions that the facts of the present case are distinguishable from those in International Travel House (supra). That DTC has control over ticket collections or absolutely collects all the revenues or that bus maintenance and repair is subject to its prior approval, are ipso facto not decisive either by themselves or cumulatively in concluding that there was a transfer of the right to use the vehicles. Both the majority and concurring opinion in Bharat Sanchar Nigam Limited (supra) emphasize that the goods should be ultimately delivered , for the transaction to constitute a sale within the extended meaning, defined by Article 366(29A) of the Constitution of India. Rashtriya Ispat Nigam Limited (supra) spells out that where even access or physical control of machinery or such like goods are made over, such a transaction by itself would not be transfer of the right to use if effective control is maintained by the owner. In the present case, the owner bears responsibility for any mishappening or accident. It commits to be the bus owner at all times; ..... X X X X Extracts X X X X X X X X Extracts X X X X
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