TMI Blog2000 (9) TMI 1025X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that the amount received for over-detention of cylinders does not form a part of sale price. The assessing officer levied sales tax on the ground that the same are nothing but consideration for transfer of right to use cylinders by manufacturer-dealer to its customers and accordingly taxed the same at 8 per cent. Being aggrieved by the aforesaid order, petitioner preferred an appeal before the Assistant Commissioner. It was urged before him that the amount which has been received for over-detention of cylinders is nothing but penalty and does not fall within the meaning of section 2(g)(iv) of the Orissa Sales Tax Act, 1947 (for short "the Act") so as to attract levy of tax. The argument of the petitioner did not find favour with the Assistant Commissioner who confirmed the order of the assessing officer. The petitioner thereafter preferred second appeal before the Tribunal. The Tribunal held the same as "rental of cylinders" for transferring right to use for cylinders by the dealer to the customers and held that consideration received towards sale enumerated in section 2(g)(iv) of the Act, which was rightly taxed. 3.. Before the forums below, petitioner filed the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titled to get all steps, civil or criminal for the purpose of taking possession thereof and remove the same from the custody of the buyers or any person holding the same under the buyers. Clause 7 of the contract provides that cylinders of petitioner supplied to the buyers shall be at the sole risk of the buyers until they are returned to the manufacturer and the buyer agrees to indemnify the petitioner against any loss or destruction of the cylinders not returned within the specified period or damage or lost to the cylinders or any part thereof. 4.. Petitioner has filed one sample copy of the bill charged for overdetention of the cylinders which indicated that the same was collected as detention charges. From a reading of the contract, the following aspects emerge. (i) possession of cylinders full of gases was handed over to the buyers as a loan for a period of 14 days without charging any additional charges; (ii) from the date cylinders are handed over to the buyers the same remain in the custody of the buyers; (iii) for first 14 days petitioner agrees that such possession and custody of cylinders shall remain with the buyers; and (iv) thereafter if cylinders are detained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod are deprived of possession and custody of the cylinders given on rent to the buyers. This possession and custody of the buyers till 14 days is permissible but beyond 14 days is without authority for which petitioner as provided for charging certain amount for early return of the cylinders. In other words, after 14 days there is no permission for keeping possession and custody of the cylinders from the petitioner to the buyers. Therefore, consideration received is by way of penalty. Let us take the case of a goods wagon being sent to a consignee. Freight was charged for transportation of the said goods in wagon but if goods are not unloaded from the wagon within a stipulated period, demurrage is required to be paid. Can in this case the demurrage for over-detention of the wagon can be termed as transfer of right to use? The answer is obviously in the negative as there is no permission for using the wagon beyond the free period. Therefore, in this case over-detention beyond 14 days is without permission of the petitioner and the buyers are required to pay certain amount which can only be termed as penalty till possession and custody of the cylinders are handed over by them to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to make use of the machinery for purposes of execution of the work of the petitioner and there is no transfer of right to use as such in favour of the contractor. We have reached this conclusion because the effective control of the machinery even while the machinery is in the use of the contractor is that of the petitioner-company. The contractor is not free to make use of the same for other works or move it out during the period the machinery is in his use. The condition that he will be responsible for the custody of the machinery while the machinery is on the site does not militate against the petitioners' possession and control of the machinery. For these reasons, we are of the opinion that the transaction does not involve transfer of the right to use the machinery in favour of the contractor.....". This Court in Krushna Chandra Behera v. State of Orissa [1991] 83 STC 325 had the occasion to interpret the scope of term "transfer of right to use" when the banner scheme was introduced and the buses were running under the said scheme. This Court has held that such amount received by the bus owners would amount to consideration for transfer of right to use. In paragrap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows: ".......In the present case, however, the cylinders did not continue to be in the possession of the petitioner herein; possession of the cylinders was delivered to the customers. These facts satisfy the requirement of section 5-E." Accordingly, it was held that consideration received for such overdetention of the cylinders amounts to transfer of right to use. In Harbans Lal v. State of Haryana [1993] 88 STC 357, the High Court of Punjab and Haryana had the occasion to interpret the similar transaction as in this case and at pages 368 and 369 it was held as follows: "From the perusal of the case law, referred to above, it can safely be deduced that delivery of possession of the goods to the transferee by the transferor is one of the essential ingredients where the transferee is put in effective and general control of the goods as distinguished from a mere custody or a licence to use the same. Whether there is a transfer of the right to use the goods or not is essentially a question of fact which has to be determined in each case having regard to the terms of the contract under which there is said to be transfer of the right to use goods......". At page 373 it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is sense the term means that the owner of property delivers it to another person with the intent of passing the rights which he had in it to the latter." In Corpus Juris Secundum, Volume 87, page 892, it has been held as follows: "The essence of transfer is passage of control over the economic benefits of property which results in terminating rights and other 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. When a taxi cab is hired under 'rent-a-car' scheme, and a cab is provided, usually driver accompanies the cab; there the driver will have the custody of the car though the hirer will have the possession and effective control of the cab. This may be contrasted with the case when a taxi car is hired for going from one place to another. There the driver will have both the custody as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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