TMI Blog2006 (8) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... another place and the possession of the Vehicle was always remain with the opp. party. 3. Heard learned Counsel for the parties. 4. Learned Standing Counsel filed Supplementary-affidavit annexing copy of terms and conditions in the case of I. I. T. Kanpur and also the agreement in the case of Hindustan Aeronautics Limited. He submitted that as per Clause-15 of the terms and conditions in the case of I. I. T., the plying of the Bus and the transportation was subject to the superintendence and control of the Institute and the contractors, their servants and agents had to carry out directions given by the Institute. He submitted that the aforesaid terms of the contract shows that for all practical purposes, the movement of Vehicle was under the control of Institute, thus, the case falls under Section 3-F of the Act. He submitted that in the case of Hindustan Aeronautics Limited also the movement of Vehicle was under the control of the Company. Learned Counsel for the opp. party relied upon the order of the Tribunal and further submitted that as per the terms and conditions of the agreement, all the expenses, namely, fuel, Lubricants, maintenance, road taxes, Insurance, passenger ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all and will from time to time and at all times keep indemnified the Institute against the actions, proceedings, claims and expenses of every nature whatsoever instituted preferred, made suffered or occasioned in consequence of and perusal to and arising on or as a result of plying and operation of the Bus by the Contractors, their servants and Agent, under terms and conditions of there present, or otherwise however. 12. The Contractors shall arrange at their own cost for adequate insurance cover against accident to the vehicle and the passengers. 13. The Contractor shall operate and ply the Bus entirely at their own risk and responsibility and shall observe all rules and regulations and comply with all previous of law in that behalf. 14. Notwithstanding anything to the contrary contained in the Agreement the Institute shall be entitled to terminate the Agreement with one week's notice but without payment of any kind in the event of any failure or neglect on the part of the Contractors to observe and perform any of the stipulations, condition and obligation contained in these presents and on the part of the Contractors to be observed and performed, security deposit wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t their addresses unless either of them has to the other notified any change of address. Any notice given by post shall be deemed to have been served at the expiration of 40 hours from the date of posting. 23. IIT, Kanpur will have the right to get into contract with other contractor to run similar services as well as to run services by their own Buses. AGREEMENT CONTRACT FOR PROVIDING BUSES TO COMPUTE H.A.L. EMPLOYEES TO AND FRO FACTORY FROM DIFFERENT PARTS OF THE CITY This agreement made on 17th day of July, one thousand nine hundred eighty seven BETWEEN M/S HINDUSTAN AERONAUTICS LIMITED, KANPUR DIVISION, KANPUR (hereinafter called the 'Company' of the First part, therein represented through its Senior Manager, Maintenance, which expression shall mean and include its successors and assigns) and M/S CHHABRA TOURIST BUS SERVICE, 111-A/20-B, G. T. Road, Ashok Nagar, Kanpur of the second part (hereinafter called the 'Transporter' and representative Sri Rajendra Kumar Chhabra, therein on behalf of the said Transport Company, which expression shall mean and include its successors and assigns of the second part. WHEREAS, the Transporter vide his letter No. Nil d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondition, shall be replaced by the Transporter within a period of 7 days on notice from the Company, provided further that such replacement shall not disrupt the function of the employees of Company. 9. The Transporter shall provide the Buses on Sundays/Holidays and during odd hours on a notice of 7 days by the Company. 10. The Transporter shall engage adequate staff required for the urgent needs of the Buses and the company shall not be liable for whatsoever the loan, damage and OR body injury and cost to your staff. 11. The Transporter shall employ only the License holders drivers and approved cleaners. 12. The Buses to be supplied by the Transporter shall be duly registered and covered under Insurance. 13. The Transporter shall obtain permits from the Regional Transport Officer for plying his Buses for commuting the employees of the Company and shall provide all permits for inspection of the Company. 14. The Transporter shall not ply OR shall not use the Buses on the area of permits issued from the Company for any other purpose and the Buses shall be required for display name plates and in BLOCK LETTERS- HAL KANPUR ROUTE in Hindi script both in the front and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansporter. In witness whereof, the parties have signed this agreement on the day mentioned hereinbefore. Signature of the parties. Witnesses. 1. 2. For M/S Hindustan Aeronautics Ltd. Kanpur Division, Kanpur. Witnesses. 1. 2. HINDUSTAN AERONAUTICS LTD. Kanpur Division Kanpur Telex-325-243-HALK IN Telegram Supersonic Kanpur 7thAug., 1990 Ref. PL/5860/187/Cibt,(Pt. Case) M/S Chhabra Tourist Bus Service, 111-A/20-B, Ashok Nagar. Near Coca Cola Co.), G.T. Road, Kanpur-208012. SUB: AMENDMENT TO THE CONTRACT FOR COMPUTING HAL EMPLOYEE TO AND FRO FACTORY FROM DIFFERENTPARTS OF CITY FOR THE PERIOD 17.7.90 TO 16.7.91. REF; 1-Acceptance letter No. PL/5860/187/Cont.)Pt. Case) dt. 2.5.90, 2- Your acceptance letter No. Nil dated 5.7.90. Dear Sirs, The existing contract for commuting HAL employees has been extended for a period of one year from 17.7.1990 to 16.7.1991 vide our acceptance letter dated 2.5.90 for operating 14 routes in General Shift and 3 routes in 'A' Shift being run as per existing arrangements for which you are being paid ₹ 1,80,625/- per month. 2. Additional Routes are required to be run for commuting HAL employees in &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... namely Fuel, Lubricants etc. were borne by the opp. party and they were responsible for any accident etc. Thus, the effective control of the Vehicles have never been passed on to I. I. T., Kanpur and Hindustan Aeronautics Limited and always remain with the opp. party, thus, the case is not covered under Section 3-F of the Act. 8. Section 3-F of the Act reads as follows. Section 3-F. Rate of tax on the right to use any goods or goods involved in the execution of a works contract. Notwithstanding anything contained in Section 3-A, or Section 3-AAA or Section 3-D, the turnover relating to the business of transfer of the right to use any goods for any purpose or of transfer of the property in goods involved in the execution of a works contract shall be determined in the manner prescribed and shall be liable to tax at such rate not exceeding fifteen percent, as the State Government may, by notification, declare, and different rates may be declared for different goods or different classes of dealers. 9. Similar question came up for consideration in Kando Transport and Ors. v. S.T.O. Assessment Unit, Barbil and Ors. (1992) 43 STL 67 Orissa. In this case also the petitioner ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or. This is how the court held that the hire charges collected by the petitioner from the contractors were not exigible to sales tax. To come to this conclusion, the Andhra Pradesh High Court relied on Corpus Juris Secondum, Vol. 87 page 892 which emphasised that the essence of transfer is passage of control over the economic benefits of property which results in terminating rights and over relations in one entity and creating them in another. While construing the word transfer due regard must be had to the thing to be transferred. A transfer of the right to use the goods necessarily involves delivery of possession by the transferor to the transferee. Delivery of possession of a thing must be distinguished from its custody. It is not uncommon to find the transferee of goods in possession while transferor is having custody. 11. Against the aforesaid decision of the Andhra Pradesh High Court, the State of Andhra Pradesh filed Special Leave Petition before the Apex Court in the case of State of Andhra Pradesh and Anr. v. Rashtriya Ispat Nigam Limited . Apex Court had affirmed the order of the Andhra Pradesh High Court and held as follows: The High Court after scrutiny and clos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transit risk was of the petitioner and not of the distillery. It was the duty of the transporter to abide by all the laws relating to the motor vehicle and the excise. From theses factors, it is manifest that there was no transfer of possession even of the vehicle, which were being used for carrying the goods. On these facts Division Bench held that in the absence of transfer of possession of vehicle there was no transfer of right to use the goods and the provisions of Section 3-F of the Act shall not applicable. 13. In Writ Petition (Civil) No. 183 of 2003, Bharat Sanchar Nigam Ltd. and Anr. v. Union of India and Ors. decided on 02.03.2006, the Larger Bench of Apex Court considered the scope of transfer of right to use the goods. Hon'ble Justice Ruma Pal, J. in her judgment has considered the decision of the Apex Court in the case of State of U.P. and Anr. v. Union of India and Anr. , the observations of the Constitution Bench of the Apex Court in the case of 20th Century Finance Corporation Ltd. and Anr. v. State of Maharashtra and other decisions of the Apex court and held as follows: 14. In the State of U.P. v. Union of India (supra) it was also held: Handing ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer of right to use goods would occur and situs of sale of such a transaction would be the place where the contract is executed. In determining the situs of the transfer of the right to use the goods, the Court did not say that delivery of the goods was in essential for the purposes of completing the transfer of the right to use. The emphasized portions in the quoted passage evidences that the goods must be available when the transfer of the right to use the goods take place. The Court also recognized that for oral contracts the situs of the transfer may be where the goods are delivered (see para 26 of the judgment). In our opinion, the essence of the right under Article 366(29A)(d) is that it relates to user of goods. It may be that the actual delivery of the goods is not necessary for effecting the transfer of the right to use the goods but the goods must be available at the time of transfer must be deliverable and delivered at some stage. It is assumed, at the time of execution of any agreement to transfer the right to use, that the goods are available and deliverable. If the goods, or what is claimed to be goods by the respondents, are not deliverable at all by the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action 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 licenses 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 license 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. 16. Thus, in the light of the ratio laid down by the Apex Court, on the terms of the agreement-referred hereinabove, it has to be examined whether there was transfer of right to use the vehicles. No doubt, vehicles were available at a deliverable stage, but the question is whether they have been delivered at any State. Whether ..... 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