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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 ..... has discussed the judgment of the Hon ble Supreme Court and has come to the conclusion that no material was produced on record to give any benefit in favour of the assessee. Whether the learned Tribunal is justified in holding that the receipts of hire charges recovered from contractors by appellant falls within ambit of deemed sales as contemplated u/s 2(g)(iv) of the Orissa Sales Tax Act? - Whether the receipt of hire charges of machinery s from inter-department of the assessee for account purpose is sale to self as contemplated u/s 2(g)(iv) of the Orissa Sales Tax Act? - HELD THAT:- The questions have rightly been decided by learned Tribunal, wherein it is observed that the contract was not completely placed on record - We need not reproduce the complete reasoning of learned Tribunal, which have been reproduced in the preceding paragraphs. The questions those have been raised by the petitioner are basically emanating from finding of fact and therefore, no question of law arises for our consideration. In that view of the matter, all reference are required to be answered in favour of the Department against the assessee - tax revision dismissed. - TREV Nos. 01, 02, 03, 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions are taken up together for adjudication. The petitioner is a Govt. of India undertaking engaged in manufacturing and selling iron and steel as well as chemical fertilizer. After completion of assessment for the respective years demands were raised. Being aggrieved by the orders of assessment 1st Appeals were preferred by the dealer. Ultimately, the revisional orders came to be passed which are under challenge in these revisions. 4. The questions of law framed by learned counsel for the petitioner, read as under: (a) Whether the learned sales Tax tribunal is justified in holding that the assessee is a dealer and carried on business in unserviceable materials/used discarded materials/scrap specially in view of judgment of Orissa High Court in case of Assessee reported in volume 70 STC page 2 and volume 116 STC page 21, which till date hold the field having not been set aside by Apex Court. (b) Whether the learned Tribunal is justified in not deleting the Tax free and First Point Tax Paid goods turnover from the taxable turnover and as such the order is illegal arbitrary. (c) Whether levy of tax on the turnover of materials supplied to contractor on cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bricks, cement, rod, structural steel and bitumen to different contractors on cost recovery basis amounting to ₹ 32,85,849.01. The amount so realized from the contractors has not been included in the G.T.O. returned for the year. On being pointed out at the time of assessment it is submitted by the Dy. Manager, (F A) a written deposition which is kept in the record that the above materials have been issued to the contractor for execution of works inside the plant in order to ensure the quality of the work and timely execution of works. The materials were issued from their stock on cost recovery basis. The value of materials thus issued to the contractors cannot be considered as sale because the contractors used the materials in assessees works only and the rates have been fixed to prevent mis-utilisation of the materials. The ownership and the title of the materials remained with the assessee as such and cannot be considered as sale. The materials are ensured by the assessee and the contractors are bound to return the left over materials after execution of the works. It is further submitted that the cement and bricks are liable to first point tax as such the bricks and cemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bound to return the left over materials after completion of work. Moreover, since due tax has been paid on purchase of cement, bricks, the further levy of tax on such materials stand unjustified. In order to fortify his view points/stand to the effect of non-levy of tax on the value of the materials issued to the contractors on cost recovery basis for exclusive utilization thereof in his own work, the appellant has furnished a copy of the document pertaining to special condition of the contractor which, inter alia stipulates at clause-4(i)- All the materials supplied to the contractor, shall removed from the work site and shall at all times be open to the inspection of the employer, but the responsibility for loss, damage or theft of these materials, after they have handed over to the contractor, will rest on him. Cost of steel, cement and rolling materials supplied to the contractor by the employer shall be recovered from the contractors bill in full. These materials will be issued to the contractor on receipt of formal demand from him. The employer will take possession of any such materials found surplus and in perfectly good condition at the time of completion or determi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not apply to the case of the appellant. The learned S.R. for the Revenue on the contrary argues that the Special Conditions of contract on which the learned Advocate for the appellant is very much emphatic carry no meaning in view of the judgment of the Hon ble Supreme Court of India in several cases and particularly in the recent case Rashtriya Ispat Nigam V Andhra Pradesh, (1998) 109 STC 425, affirming the judgment of the Hon ble High Court of Andhra Pradesh and discarding a similar contention taken by the petitioner in the said case. For better appreciation, it will be appropriate to extract below the Clause 4 of the Special Terms of the Contract on which the learned Advocate for the appellant harps most: All materials supplied to the contractor, shall remain the absolute property of the employer which shall not on any account, be removed from work site and shall at all times be open to inspection by the employer but the responsibility for loss, damage or theft of these materials, after they have been handed over to the contractor, will rest on him, cost of steel, cement and roofing materials supplied to the contractor by the employer shall be recovered from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we find, though it is stated that materials supplied to the contractor shall remain the absolute property of the contractor, yet it is said in the same breath the responsibility for loss, damage or theft of those materials, after those were handed over to the contractor, will rest on him. Once the responsibility for loss and damage or theft is on the contractor, it could hardly be said that the employer retains the absolute property right over the goods. It appears to be an artificial arrangement to claim that the employer retains property over such goods and these goods are used and utilized for his own work. It is also pertinent to notice that the employer does not issue these materials to the contractor on his own volition but it is issued to the contractor on demand by him. It is further to be noticed that the contractor shall not be entitled to return any such materials unless so required by the employer. In such a case contractor gets freedom to utilize those materials in the manner he likes. The cost of materials supplied to the contractor by the employer are recovered. Since the transactions are between two independent parties, the materials supplied by one party to the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ); (1989) 1 SCC 335. There effect, over all, in the same . (M/s.Rashtriya Ispat NigamV. State of Andhra Pradesh, 109 STC 425) The law with regard to the controversy we are dealing with now is abundantly settled by the Hon ble Supreme Court in the case of M/s.N.M.Goel Co., Vs. Sales Tax Officer, Rajnandgaon, reported in 72 STC 368; (1989) 1 SCC 335, and, therefore, the case law reported in (illegible) STC 456 brought under reference by the learned Advocate for the appellant does not render any assistance to the appellant. Receipts towards supply of materials by the appellant to its contractors have been rightly subjected to tax and the learned ACST is fully justified in sustaining the same. 7.2 Learned counsel therefore contended that in view of the decision of the Hon ble Supreme Court in State of Tamil Nadu v. Raman Co. and others and State of Tamil Nadu v. Govindan Co., [1994] 93 STC 185 (SC), where the decision of the Madras High Court in Govindan Co. v. State of Tamil Nadu, in [1975] 35 STC 50(Mad.) was confirmed, the question is required to be answered in favour of the assessee-petitioner. 8. Learned counsel for the petitioner also takes us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neries for a agreed period to the contractors on recovery of hire charges. So the transaction comes under the extended meaning of sale as per the provisions laid down u/s 2(g) of the O.S.T. Act and the amount of ₹ 10,57,657.88 is now added in the sale turnover of the dealer and taxed at the appropriate rate. 8.1 And also the order of the learned Tribunal at Pages 63 to 69 of the paper book, which reads as under: The next dispute revolves round the taxability of hire charges received by the Appellant from different contractors towards hiring out its machineries like cranes, dozers, pumps, air compressor, jack-hammer, road roller, tractors, etc., to different contractors for utilization in the modernization work. It is submitted by the learned Advocate for the appellant that to establish sales U/s.2(g)(iv) of O.S.T. Act Revenue should have established transfer of right to use . In case of appellant no such transfer took place. Machineries are to be indented through a certificate of requirement from the concerned Engineer and on such certificate the concerned Department engaged its own operator to run the machine. Cost of operation for each machine is fixed earl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssession with the hirer/lesser for purpose of executing specified work and for this the appellant realizes consideration. This consideration cannot escape taxation under the OST Act. There have been a good number of instances where transfer of right to use goods have been taxed. Transfer of right to use chairs, tables, carpets, crockery let out for limited hours and consideration received therefore has been held to be taxable (77 STC 470). Where buses were hired by Corporation and the owner of the bus was bound by orders and direction of corporation with regard to journey, timings and route and driver was provided by the owner of the bus, it was held that the transaction was taxable (K.C. Behera Vs. State of Orissa, 83 STC 325), where oxygen, acetylene in cylinders were given to customers for use, the customer was held to have physical possession of cylinders and hire charges therefore was taxable (86 STC 539). Where hoarding fastened to structures erected on land required on losses and it was let out to companies for advertisement, rent for letting out was held to be taxable (69 STC 1). Hire charges for meters meant for recording consumption of electricity was held taxable (9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 charges could not be brought to the net of taxation. This is not the case before us. As such, it could not be applied to the case on hand. The learned Advocate also cited the case of Kandoi Transport Vs. Sales Tax Officer, (1992) 43 STC 167 of the Hon ble High Court of Orissa. In this case, the Hon ble High Court observed that the intention of the parties, the mode of use and several other surroundings and relevant aspects were not considered by the assessing officer and, therefore, the order of assessment was quashed. But the Hon ble Court issued direction to assessing officer to consider whether the transaction of the petitioner involved transfer of right to use and amounted to a sale. This case is not helpful to the applicant. In the absence of the detailed terms and conditions of the contract before us relating to hiring out of the machineries and with the limited materials before us, we proceed to decide the matter keeping in view the various cases we have referred to earlier supra. In the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elivery 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 transfer of right to use any goods involves both passing of right in as well as domain of the goods in which right to use the goods is transferred. 19. Various clauses of the agreement entered into between the corporation and the PPT were brought to the notice of the Tribunal and after taking into consideration the provisions of the agreement and various case laws, the learned Tribunal, which is the final fact-finding authority, came to the following conclusion: 11. Now, with this background position of law relating to transfer of right to use any goods as a sale within the meaning of provisions under Section 2(g)(iv) of the OST Act, possession and effective control of the goods is not determinative of whether or not a sale took place by way of transfer of right of its use, as the Honourable Supreme Court stated in unambiguous terms that the sale by way of transfer of right to use any goods is not a bailment as supposed to be in case of Krushna Chandra Behera v. State of Orissa [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obilization 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 of or as a direct result of the oral agreement, and even if it is held (erroneously, of course) that it is the transfer of possession of goods that make it a sale within the meaning of the provisions of section2(g)(iv) of the OST Act, the State Act cannot tax it, as it would be a sale in course of inter-State trade or commerce, under Section 3(a) of the CST Act. The decision of the honourable Supreme Court at para 35(c), see page 205 of [2000] 119 STC 182 (SC) (20th Century Finance Corpn. Ltd. v. State of Maharashtra) of the judgment, on which Mr. Paul relies is effective only on a pre-finding of the fact of transfer of right to use any goods, para 35(c) (supra) is determinative of situs of sale and not the sale, under Section 2(g)(iv) of the OST Act, and our primary object in this case is to find out whether there was such a sale. 13. Mr. Paul infers it to be a case of transfer of right to use the dredger from the fact of a charge for the idle time. Although no such infer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C 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 auction sales of such discarded materials shall not be exigible to tax. (ii) That the learned ACST has committed an error in law by sustaining levy of tax on the sales turnover pertaining to canteen run by the appellant catering meals, snacks, tiffins, biscuits, cigarettes, cold drinks etc., at subsidized rates, at two different rates, i.e. 4% on 70% of the sales and 12% on 30% of sales and that too without exclusion of the sales turnover of tax free goods and first point tax paid goods like cigarette, breads, soft drinks and biscuits, etc, on which exemption was claimed. (iii) That the materials supplied by the appellant to its contractors on cost recovery basis under agreements never constituted sales and, therefore, the findings of the learned ACST sustaining levy of tax thereon applying the ratio of the case law which does not fit into the case of appellant is erroneous. (iv) That the fora below, in the facts and circumstances of the case, ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut 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 law has come to the conclusion. 12. In our considered opinion, the question which has been poised for our consideration whether deletion of tax free and first-point tax paid goods from taxable turnover, is warranted or not, on the basis of ratio of Madras High Court does not arise, as there was nothing on record to show that earlier tax was paid or materials to that effect was ever produced before any of the authority. Even if learned Tribunal s observation on Madras High Court is taken into consideration, in our considered opinion, learned Tribunal while considering the law has discussed the judgment of the Hon ble Supreme Court and has come to the conclusion that no material was produced on record to give any benefit in favour of the assessee. 13. In that view of the matter, the question b is required to be answered in favour of the Department against the assessee. 14. Likewise, questions d and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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