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TMI Blog2019 (2) TMI 2009X X X X Extracts X X X X X X X X Extracts X X X X ..... tition on him." On 14th October, 2009, the following order was passed: "Mr. Sharma, learned counsel for the petitioner submits that he has no instruction in the matter and prays for deletion of his name from the Cause List. Paper Books have not yet been filed on behalf of the petitioner. Registry is directed to issue notice to the petitioner indicating the aforesaid facts and informing the necessity to engage counsel to represent its case within a period of four weeks from the date of receipt of such notice. List this matter in the month of January, 2010." And lastly on 30th January, 2019, the following order was passed: "After arguing the matter for some time, learned counsel for the petitioner seeks time to make further preparation of the matter. We make it clear that we are not extending the interim order dated 20.03.2001. List this matter on 13.02.2019." 3. These revisions arise out of S.A. Nos.1143 to 1147 of 1999-2000 decided by a common judgment dated 28.08.2000. Although the appeals referred to above relate to different assessment years, the dealer, namely, Steel Authority of India Ltd. (Rourkela Steel Plant, Rourkela) as well as the questions of law involved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (h) Whether, on its own finding of the learned Tribunal that matter was decided and settled vide its order dated 08.03.95 (received by assessee on 18.05.95) that certain turnover is taxable, imposition of interest u/s12 (4-a) of OST Act in the assessment year 1994- 95 for alleged non submitting correct return of said turnover is justified. (This question is confined to assessment year 1994-95). (i) Whether levy of interest on the assessee is justified without deciding the fact as to whether there was any mensrea or motive of assess in not returning the said turnover or non inclusion of said turnover was due to lack of communication and non receipt of correct facts." 5. At the time of argument, learned counsel for the petitioner does not press the questions of law at "a, c, f, g, h and i" and argues only on the questions of law at "b, d and e". 6. To substantiate his argument for question 'b', he takes us to the order of the Sales Tax Officer, Rourkela I (for short "the Assessing Officer") at pages 20 to 21 of the Paper Book, which reads as under: "In course of assessment proceedings it is also seen that the dealer company during the year 91-92 has effected supplies of mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us to the order of the Asst. Commissioner of Sales Tax, Rourkela (for short "the Appellate Authority"), more particularly paragraph-6 at pages 36, 37 and 38 of the paper book, which reads as under: "6. An important thrust of appellant's argument has been directed against the action of the learned Assessing Officer in levying tax on supply of materials from stock (store) worth Rs. 32,85,849.01 for the year 91-92 and Rs. 83,31,441.27 for the year 92-93 bricks, cement, rod, structural steel, bitumen to different contractors on cost recovery basis which was not included in the G.T.O. returned on the ground that the above materials were issued to the contractor for execution of work in the plant in order to ensure qualify and timely completion of the work. It is averred that the value of materials so supplied cannot be considered to be sale, since the contractors use the materials exclusively in execution of contract and rate is fixed to prevent the mis-utilisation of the said materials. The absolute ownership and title of the materials is retained by the (illegible) not assessee all through. The materials are ensured by the appellant assessee and the contractor are bound to return t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or short "the Tribunal") at pages 58 to 63 of the paper book where the Tribunal has considered the same in detail. For ready reference the same is reproduced hereunder: "The next point for determination before us is whether the materials like cement, rods, bricks structural steel, bitumen, etc., supplied to different contractors on cost recovery basis will constitute sale to be exigible to sales tax. Drawing our attention to Clause 4 of what is said to be Special conditions of contract for Civil Engineering Works, the learned Advocate for the appellant emphatically contends that the materials so supplied to the contractors for use in the modernization work always remained the absolute property of the appellant-Company and at no point of time, the ownership of goods passed on to the contractors and, therefore, there is no instance of sale assessable to sales tax. He pleads that the case of the appellant is squarely covered by the judgment of the Hon'ble High Court of Allahabad in the case of Oil & Natural Gas Commission, 102 STC 466, and the facts of the case laws relied upon by the forums below are distinguishable and, therefore, do not apply to the case of the appellant. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. (iv) The contractor shall return the surplus steel to RSP. The contractor shall transport the surplus steel from site to place within Rourkela Steel Plant or Rourkela Steel Township as directed by the Site Engineer free of cost. (v) The wastage norms (irrecoverable loss) shall be 2% for reinforcement steel, recoveries shall be made at the rates indicated in Claust-17. (vi) The full credit at issue rate shall be given for the return of reinforcement steel of length seven metres and above. However, the contractor shall judiciously cut and use the reinforcement steel and exercise the control to minimize the cut lengths. (vii) The credit rate for return of reinforcement steel below 7 meters length will be at the prevailing scrap rate less 7% towards handling charges upto 3% scrap (over and above 2% irrecoverable loss). (viii) Penal recovery shall be applicable for the scrap beyond 3 and the contractor will be allowed credit at the same rate as in (vii) above. (ix) Penal recovery rate for all types of steel shall be 300% extra over issue rate. On a reading of the above said contract, we find, though it is stated that materials supplied to the contractor shall remain the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Though in the case of Goel the dispute related to entry tax, the ratio laid down being materials equally applies to the levy of sales tax. In the case of Rashtriya Ispat Nigam, reported in 102 STC 454 the Hon'ble High Court of Andhra Pradesh with the clauses of the contract similar to that in the case of the appellant held that supply of stores materials to contractors on cost recovery basis constituted sales. In appeal before the Hon'ble Supreme Court, it was submitted by the learned counsel for the petitioner that there were differences between the case of Ispat Nigam and Goel's case (72 STC 368) that in Goel's case had the liberty to retain the goods that were supplied to him by the employer, the deduction of value thereof was on supply not on use; there was penal provision which would operate for non return of such goods; the contract was the word sale; and there was no restriction dismissing the appeal, there Lordship held "we find no materials difference between the contracts that we are to construe here (illegible) the contract in Goel's case (1989) 72 STC 368 (SC); (1989) 1 SCC 335. There effect, over all, in the same". (M/s.Rashtriya Ispat NigamV. State of Andhra Prades ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh, deferred payment or other valuable consideration. Thus in view of the definition of sale the instant dealer-ca is required to pay sales tax on the amount received towards hire charges for issue of machineries of the transfer of right to use the machineries have been vested to the contractors on the basis of recovery of hire charges. In this connection the judgment made by the Hon'ble Orissa High Court in case of Krushna Chandra Behera and others-vrs-State of Orissa and others (1991) 83-STC page 325 that fall all practical purposes the general control of the vehicle under the agreement rested with the corporation even though the driver was provided by the Corporation to the buses. There was possession of the bus by the Corporation and loss of possession by the owner. Consequently there was transfer of right to use the bus and it was a case of sale within the extended meaning of the term in Section 2(g) of the O.S.T. Act'47. In view of the above decision the things discussed in the foregoing para is a case of transfer of ownership of machineries for a agreed period to the contractors on recovery of hire charges. So the transaction comes under the extended meaning of sale as per t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case there is no dispute that the appellant has hired out machinery etc., to contractors and received consideration for such hiring out transactions though for a limited/specified period. This type of transaction has been judicially recognized as "deemed sale". In case of transfer of right to use goods, it is delivery of possession to the lessee by the lessor for its use which has been made taxable. In this case, the ownership is with the lessor but the possession with the lessee. It is, therefore, said that the lease is the outcome of rightful separation of ownership and possession. In order to scrutinize the entire gamut of transactions, it was necessary to see the agreement between the appellant and the contractor but instead of furnishing the agreement, a copy of what is said to be relevant portion Mukand Contractor No.104.1 in the form of excerpt was furnished before us from which it is difficult to deduce a firm conclusion. Assuming what is stated before us is correct, the machineries remain in possession with the hirer/lesser for purpose of executing specified work and for this the appellant realizes consideration. This consideration cannot escape taxation under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s only furnished. What we have read therefrom, the contractor in the case on hand was not only in custody but in possession of the machinery. This distinguishes remarkably from Rashtriya Ispat Nigam case and the case law cited could not, therefore, be made available for its application to the present case. The learned Advocate for the appellant cited the case reported in (1997) 105 STC 409- Tripura Bus Syndicate Vs. State of Tripura, wherein the Government of Tripura requisitioned a large number of vehicles belonging to different operators for election purposes. The owner of the vehicle provided drivers, provided fuel cost. There was no endorsement of use by the Government in the respective registration book of the vehicle. No attempt was made to get the vehicles insured under Motor Vehicles Act, 1988. These hard facts clearly established that the vehicles at all material times remained under the control, supervision and ownership of the petitioner. There was not a single incidence of transfer of vehicle to respondent, the State of Tripura. The charges were paid to the owner of the vehicles on the basis of the mileage covered and since there was no transfer of right to use the ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Orissa [1991] 83 STC 325 (Orissa); the petitioners hired out a bus belonging to them to the Orissa State Road Transport Corporation, under a contract under which the owner had to abide by all orders and directions of the general manager of the Corporation or any officer authorized by him in this behalf in regard to the starting station of the journey, operation, haltage, destination, timing and routes, issued from time to time. The owner could not use the vehicle covered by the agreement in any route except in accordance with the orders and directions issued by the Corporation under the agreement. Though the driver was provided by the owner he was answerable to the Corporation. The question before the court was whether the agreement represented a transfer of the right to use goods within the extended definition of "sale" in section 2(g) of the Orissa Sales Tax Act, 1947. 17. In 20th Century Finance Corpn. Ltd. v. State of Maharashtra [2000] 119 STC 182 (SC), it has been held that the delivery of goods may be one of the elements of transfer of right to use, but the same would not be condition precedent for a contract of transfer of right to use goods. It is explicit that the trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to use any goods alone is the necessary condition. The agreement provides as follows: '... the Corporation hereby agrees to deploy its cutter Auction Dredger MOT Dredge-II in the dredging work...' There are stipulation to do a work to dredge the sea-bed, with men and machine deployed for the purpose, against a valuable consideration. So we find it a works contract, without transfer of property in goods in execution of such a contract. There is nothing in the agreement to prove that there was a transfer of right to use the dredger. The clauses in the agreement brought to our notice by Mr. Ray amply prove that there was no transfer of right to use the dredger in this case. 12. Mr. S.K. Paul, the learned State Representative, disputes the agreement, stating that this agreement was not made for the purpose of work/sale which is currently in dispute. Even if this contention is accepted, things will not a take a different shape. The learned STO had taxed the appellant on mobilization charge, and demobilization charge. There was such charges, even if it is held that the agreement was an oral one. This proves that the dredger moved from non-Orissa State to Paradeep on the basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d plough has been transferred to the landlord, even without such an understanding between them even if one thinks it in the lines of a bailment? The answer is always in the negative. So we find that the learned ACST is not justified in confirming imposition of tax on the appellant in this case. His order, therefore, fails. 16. In the result, appeals filed by the dealer-assessee are allowed in full. Tax paid, if any, qualifies for refund in accordance with law." 10. Learned counsel for the opposite parties-Department, on the other hand, takes us to the order of learned Tribunal and contended that the question (b) which has been placed into service will not arise inasmuch as learned Tribunal has framed questions of law for adjudication, which read as under: (i) That imposition of tax on the auction sales of the discarded materials runs contrary to the judgments of the Hon'ble High Court of Orissa in the case of the appellant itself, reported in 70 STC 2 and 116 STC 21, and also the finding of the Full Bench of this Tribunal in S.A.Nos.1423 to 1426 of 1993-94 disposed of on 8.3.95, relating to the assessments of the appellant for the years 1986-87 to 1988-89 holding that auctio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se should have completely deleted the enhancement instead of confirming the same at Rs. 31.10 crores i.e. 10% of the disclosed turnover. (ix) That the facts and circumstance of the case in no way warrant charging of interest U/s.12(4a) of the OST Act for alleged filing of incorrect returns and withholding of substantial tax payable and there being no mens rea, the leaned ACST should have deleted the same. 10.1 And in that view of the matter, the learned Tribunal has no occasion to deal with the question now raised before this Court. On the contrary, the Tribunal has observed at page 66 of the paper book, which reads as under: "xxx xxx xxx The facts and circumstances are altogether different in the present case. As stated above, the agreement was not supplied in its entirety. Portion/excerpts from here and there from the agreement was only furnished.xxx" 11. Before proceeding with the matter, it will not be out of place to mention that argument which has been canvassed by the learned counsel for the petitioner is substantially a questions of fact. The Tribunal while considering the matter has confirmed the findings arrived at by both the authorities and after discussing the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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