TMI Blog2011 (2) TMI 1255X X X X Extracts X X X X X X X X Extracts X X X X ..... for C.H. Pushyam Kiran for the Petitioner A. V. Krishna Kaundinya, Special Standing Counsel for Commercial Taxes and Ponnam Ashok Goud, Assistant Solicitor-General for the Respondent ORDER Ramesh Ranganathan, J:- In this batch of writ petitions the assessment orders passed by the third respondent, for the assessment years 2005-06 to 2008-09, are under challenge. W. P. No. 23839 of 2009 relates to the assessment year 2005-06, W. P. No. 23811of 2009 relates to the assessment year 2006-07, W. P. No. 23810 of 2009 relates to the assessment year 2007-08 and W. P. No. 23816 of 2009 relates to the assessment year 2008-09. The petitioner, a private limited company, is an advertising agency. It obtains licence space, on top of existing buildings and other areas, and erects metal structures on which advertisements are displayed. It is the petitioner's case that the advertisements originally used to be a painting on a metal sheet; at present it is done by printing on a vinyl sheet; the vinyl sheet is fixed to the steel structure ; they pay licence fee for use of the space, and for erection of the steel structures, to the owners or Other occupants of the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hird respondent passed the impugned orders of assessment holding that there was a transfer of the right to use goods. The entire revenue, for the said assessment years, was brought to tax at 12.5 per cent. Sri S. Ravi, learned senior counsel appearing on behalf of the petitioner, would submit that advertising services fall within the ambit of section 65(105)(e) of the Finance Act, 1994 whereunder service provided to any person by an advertising agency, in relation to advertisement, is liable to be charged to service tax. The learned senior counsel would refer to section 65(105)(zzzm) of the Finance Act to contend that advertisement services which the petitioner renders, in the form of making available space on their unipoles and steel structures for display of hoardings, would fall within the ambit of advertising services, and would not amount to a transfer of the right to use goods. According to the learned senior counsel the art work, on the vinyl sheets, is mostly provided by the customers, although in a few cases the art work is done by the petitioner ; services of third parties are utilized for the purpose of getting the vinyl made for the customers at their specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods under the Act ; these hoardings displayed by the customers can, at best, constitute a right to use immovable property ; the transfer of such a right is outside the purview of the Act ; even to come within the purview of deemed sale , under article 366(29A)(d) of the Constitution, the goods must be movable property, or an immovable property where there is an agreement to sever ; and the right to use space is not a right to use goods since space is not movable property falling within the definition of goods under the Act. Learned counsel would rely on Bharat Sanchar Nigam Ltd. v. Union of India [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 3 SCC 1 and Imagic Creative Pvt. Ltd. v Commissioner of Commercial Taxes [2008] 12 VST 371 (SC); [2008] 2 SCC 614 ; 47 APSTJ 85. On the other hand, Sri A. V. Krishna Kaundinya, learned Standing Counsel for Commercial Taxes, would submit that the petitioner is a lessee of the land on which it has constructed its own hoardings which are required to be removed after expiry of the lease ; the hoarding is moveable property ; the transaction between the petitioner and the owner of the land, and the transaction with his custome ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod of lease ; the petitioner had transferred the right to use the hoarding space for a particular period during which the customer has a legal right to put up whatever display material he would like to display, and is responsible for all the legal actions against such display if it affects public decency or morality; the ingredients of section 4(8), i.e., the transfer of the right to use, are satisfied in the instant case ; the hoardings, which are fastened to a steel structure attached to the earth, are to be treated as goods as defined in section 2(16); the letting of such hoardings is a deemed sale in terms of section 4(8) of the Act; the vinyl sheet is affixed on a hoarding which, in turn, is placed on the unipole or steel structure for display; such hoardings are movable and not immovable property ; the hoarding is a frame or structure placed either on the unipole or the steel structure ; the vinyl sheet, which is stuck to the hoarding, constitutes the display item ; during the display period, other products of the advertising agency or other advertising agencies are not permitted use of the unipole or the steel structure ; a licence is granted exclusively to one per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... movable or immovable property, and also includes all growing crops, grass and things attached to or for making part of the land which are agreed to be severed before sale or under the contract of sale. What are goods , in a sales transaction, remains primarily a matter of contract and intention. The seller and the purchaser would have to be ad idem as to the subject-matter of the sale or purchase. The court would have to arrive at the conclusion as to what the parties had intended when they entered into a particular transaction of sale, as being the subject-matter of sale or purchase. In arriving at a conclusion the court would have to approach the matter from the point of view of a reasonable person of average intelligence. (Bharat Sanchar Nigam Ltd. [2006] 3 VST 95 (SC) ; [2006] 145 STC 91 (SC) ; [2006] 3 SCC 1). Section 2(34)(d) of the Act defines tax to mean a tax on the sale or purchase of goods payable under the Act, and to include 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. Section 4 of the Act relates to charge to tax and, under sub-section (8) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy is whether the chattel is movable to another place of use in the same position, or is liable to be dismantled and re-erected at the latter place ? If the answer is yes to the former it must be a movable property and, thereby, it must be held that it is not attached to the earth. If the answer is yes to the latter, it is attached to the earth. (T. T. G. Industries Ltd. v. Collector of Central Excise [2004] 4 SCC 751). The question whether a chattel is imbedded in the earth so as to become immovable property is to be decided on the principles of annexation to the land. The twin tests are the degree or mode of annexation, and the object of annexation. The degree and nature of the annexation is an important element for consideration for, where a chattel is so annexed that it cannot be removed without great damage to the land, it affords a strong ground for thinking that it was intended to be annexed in perpetuity to the land. The mode of annexation and the object of annexation are applicable as relevant tests. The test is whether the annexation is with the object of permanent beneficial enjoyment of the land or building. Attachment, in order to qualify for the expression attac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttal Engineering Works (P) Ltd. [1977] 106 STC 201 (SC) ; [1997] 1 SCC 203). Once a machine is fixed, embedded or assimilated in a permanent structure, the movable character of the machine becomes extinct. The same cannot, thereafter, be treated as movable. (Solid and Correct Engineering Works [2010] 2 GSTR 481 (SC); [2010] 5 SCC 122). In T. T. G. Industries Ltd. [2004] 4 SCC 751, a machine was erected at the site by the assessee on a specially made concrete platform at a level of 25 ft height. Considering the weight and volume of the machine, and the processes involved in its erection and installation, the Supreme Court held that it was immovable property which could not be shifted without dismantling, and then re-erecting it at another site. In the order of assessment dated September 25, 2009, the third respondent observed that it was difficult to state with precision as to what constituted an annexation ; it was a question which depended on the circumstances of each case and mainly on two circumstances as indicating the intention, i.e., the degree of annexation and the object of annexation ; the degree of annexation can be such that the hoardings or structures can be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affixed to the unipole/steel structures ; and the hoardings, on which such vinyl sheets are affixed, are detachable from the unipoles/steel structures ; such hoardings may fall within the ambit of goods under section 2(16) of the Act. On the other hand if, as contended by Sri S. Ravi, learned senior counsel, the unipoles/steel structures are permanently embedded to the earth by way of a deep foundation, and, therefore, held to be immovable property ; and the vinyl sheets are affixed to the steel structures/ unipoles, (and not on separate hoardings which are in turn affixed to the unipoles/steel structures), then it would be the vinyl sheets which may alone constitute goods liable to tax under section 4(8) of the Act, and not the unipoles/steel structures embedded to the earth. While the burden is, undoubtedly, on the petitioner-assessee to establish the nature of the transaction, and such initial onus cannot be placed on the Revenue, the fact remains that the aforesaid jurisdictional facts are required to be determined, on an examination of all relevant factors, for the assessing authority to exercise jurisdiction under section 4(8) of the Act. It is only if the vinyl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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