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TMI Blog2009 (8) TMI 1109X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Tripura for the State Government's thermal power plants. According to the agreements executed between the parties, namely, GAIL, on the one hand, and the NEEPCO and the Government of Tripura, on the other, GAIL charges sale price for sale of gas and also raises transportation charges for transporting gas from the place, where it receives gas from the ONGC, to the place(s), where it delivers gas to the NEEPCO and/or to the State Government's thermal plant. For the purpose of transportation of gas from the place(s), where GAIL receives gas from ONGC, up to the place(s), where GAIL delivers gas to NEEPCO or the State Government, within the State of Tripura, GAIL has laid underground pipelines on the land purchased by GAIL. The pipelines belong to, and has been in exclusive possession of GAIL at all relevant point of time. According to the agreements aforementioned, on expiry of the period of contract of sale of gas by GAIL to NEEPCO and the State Government, GAIL would remain at liberty to dismantle the pipelines and sell the same to any person. Though the sale of gas by GAIL to NEEPCO and the State Government had been started long time back, the Government had not imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntesting respondents, section 3AA of the TST Act, 1976, permits making of such deductions at source and, hence, the directions given by the contesting respondents to respondent No. 3, namely, NEEPCO, is legal and that it is the duty of NEEPCO to realise tax as required by the impugned letter, dated January 1, 1999, aforementioned, issued by respondent No. 2, namely, Superintendent of Taxes, Charge I, Agartala, West Tripura. I have heard Mr. A.K. Bhowmik, learned senior counsel appearing on behalf of the petitioner, and Mr. N.C. Paul, learned Senior Government Advocate, appearing on behalf of the State respondent Nos. 1 and 2. I have also heard Mr. S.C. Saha, learned counsel appearing on behalf of respondent No. 3, and Mr. S. Deb, learned senior counsel appearing on behalf of respondent No. 4, namely, ONGC. While considering the present writ petition, it needs to be borne in mind that before introduction of the 46th Amendment of the Constitution of India, composite contracts, such as, works contract, hire-purchase contract, catering contracts, etc., were not assessable as contracts for sale of goods inasmuch as the contracts, which were indivisible, could not have become subject t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Madras v. Gannon Dunkerley & Co. (Madras) Ltd. reported in [1958] 9 STC 353, the Supreme Court gave a new approach to the definition of "sale" by prohibiting States from taxing transfer of property in goods involved in the execution of indivisible works contract. This decision also affected the revenue of the States. The State's revenue was further reduced to a great extent in view of the decision in K.L. Johar and Co. v. Deputy Commercial Tax Officer reported in [1965] 16 STC 213, wherein the apex court decided that the State can tax only the depreciated value of the goods. Yet another decision of the apex court, in State of Himachal Pradesh v. Associated Hotels of India Ltd. reported in [1972] 29 STC 474, closed the door of a big revenue, earning area by the States, when the apex court held that supply of food by a hotelier was essentially one of services by the hotelier and that it is, as a part of the amenities incidental to the service, that a hotelier serves meals at specified hours. Because of the traditional concept of "sale", which the courts adhered to, while interpreting as to whether a given transaction amounts, or does not amount, to "sale", the 46th Amendment Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer of the right to use any goods, which, before the amendment, so made, the State Legislature was not competent to do. What the insertion of clause (29A) has done is that various transactions, enumerated therein, which were, otherwise, not sales, have to be deemed, by a legal fiction, as sales. Such sales are commonly called "deemed sales". Under clause (29A)(d), a transfer of the right to use goods" for any purpose and for any period, for cash, deferred payment or other valuable consideration, shall be deemed to be a sale of goods by the person making the transfer, delivery or supply, and a purchase of those goods by the person to whom transfer, delivery or supply is made. Consequent upon the above amendments of the Constitution, almost all the States have amended their respective definitions of the word "sale", in the sales tax statutes, by incorporating identical language used by the Constitution. Indisputably, the expression "transfer of the right to use any goods" cannot be equated with the expression "transfer of property in goods", because the transfer of the "right to use any goods" is not the same as the "transfer of the goods" itself; but when the definition of "sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State Government may, from time to time by notification in the Official Gazette and subject to such conditions as it may impose, fix a higher rate of tax not exceeding forty per cent or any lower rate of tax payable under this Act on account of the sale of any taxable goods or class of taxable goods specified in such notification; and thereupon the Schedule shall be deemed to be amended accordingly. (2) If the State Government is of opinion that it is necessary or expedient so to do for increasing the production of goods or for protection or encouragement of industry within the State, it may, by notification in the Official Gazette subject to such restrictions and conditions, exempt from payment of tax, either in whole or in part, the sale of any taxable goods or class of taxable goods by any dealer or class of dealers for such period as may be specified therein. (3) Subject to such restrictions and conditions as may be prescribed, the State Government may make an exemption, or reduction in rate, in respect of any tax payable under this Act on the sales of any taxable goods to such person or class of persons as may be prescribed. (4) Where exemption from the levy of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act, whatever goods are used by him either as goods or in some other form, such utilisation of goods would, by legal fiction, be deemed to be a sale of those goods used in execution of the works contract. What clearly surfaces from the above discussion is that unless a person is a "dealer", he cannot be made liable to pay sales tax on the "transfer of the right to use any goods for any purpose". A minute scrutiny of clause (b) of section 2 of the TST Act, 1976, reveals that, by fiction of law, while a person, who executes a works contract, has been made, and shall be treated as, a "dealer" under the TST Act, a person, who "transfers the right to use any goods for any purpose", has not been included within the definition of "dealer". Considered in this light, it becomes clear that without broadening the definition of the word "dealer" and without including, within the expression "dealer", a person, "who transfers the right to use any goods for any purpose, in the present case, such a person could not have been subjected to levy of sales tax. To put it a little differently, no one, who "transfers the right to use any goods for any purpose", can be treated as a "dealer" and made li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for, such transfer of property in goods would be deemed to be a "sale" of the goods by the person making the transfer. Section 3AA makes it obligatory for a person, responsible for making payment of any sum to any person, who is liable to pay sales tax under section 3A, to deduct, at the time of credit of such sum, to the account of the person or at the time of payment thereof in cash or by issue of a cheque or draft or any other mode, such amount towards "sales tax" as may be prescribed. Thus, section 3AA permits deduction, at source, only in respect of transfer of property in goods involved in the execution of works "contract" and not in respect of "transfer of the right to use any goods for any purpose". This apart, from the fact that the TST Act does not create a charge on any person, who transfers his right to use any goods for any purpose, section 3AA cannot be invoked for the purpose of deducting, at source, any amount, as sales tax, from such a person. I, now, turn to rule 3A(2), which reads as under: "Rule 3A. (2) Every person responsible for making payment to any person for discharge of any liability on account of valuable consideration payable for any transfer of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (1) of section 44, enacted rule 3A(2) and impose thereby an obligation to make deduction, at source, from the bills of the transferor of the right to use goods. The relevant observations, made in Smt. Namita Paul [2009] 20 VST 799 (Gauhati); [2008] 1 GLT 49, read as under (at pages 818-819 of VST): "35. What crystallizes from the above discussion is that unless the TST Act is suitably amended by either expanding the definition of 'dealer' or by making appropriate changes in the provisions of section 3, which is the charging section, no person, who transfers the right to use any goods for any purpose, can be held liable to pay sales tax under the TST Act. What also crystallizes from the above discussion is that rule 3A(2) is, in the light of the discussion held above, ultra vires the TST Act. 36.. In the result and for the reasons discussed above, while the appeals, preferred by the State Government, fail and the same shall accordingly stand dismissed, the appeals, preferred by the writ petitioners, are hereby allowed. 37.. In view of the fact that rule 3A(2) has been held to be ultra vires, no authority vests in the Department of Revenue, Government of Tripura, to eith ..... X X X X Extracts X X X X X X X X Extracts X X X X
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