TMI Blog2011 (6) TMI 698X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Respondent : Smt. Sujatha, Government Advocate, ORDER:- The order of the court was made by V.G. SABHAHIT J.- This petition is filed by the assessee being aggrieved by the order passed by the Joint Commissioner of Commercial Taxes (Appeals), Bangalore, dated August 31, 2005, wherein the two appeals filed by the appellant herein challenging the assessment order passed under section 12(3) of the Karnataka Sales Tax Act, 1957 read with rule 18(3) of the Karnataka Sales Tax Rules, 1957 for the period ending March 31, 2003 and March 31, 2004 determining the taxable turnover at ₹ 2,79,95,630 and ₹ 2,79,95,630 and ₹ 5,71,54,812 and ₹ 5,71,54,812, respectively declared total taxable turnover as nil respectively for both the periods was concluded by the Deputy Commissioner of Commercial Taxes (Assessments-4), Bangalore Rural, Bangalore, by order dated March 14, 2006 while dismissing the appeal. 2. The material facts for deciding the question of law that arises for determination in this appeal are as follows: The appellant herein is a partnership firm being fleet owners doing transport contract business at Varthur Hobli, Koramangala, Ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asim Industries and assessee had lost the possession of the said vehicles following the judgment of the Punjab and Haryana High Court in Harbans Lal v. State of Haryana [1993] 88 STC 357 (P H), the appellate authority confirmed the order of assessment including imposition of penalty. Being aggrieved by the said order passed by the appellate authority, two appeals were preferred before the Karnataka Appellate Tribunal in S.T.A. Nos. 266 and 267 of 2006. 4. The Karnataka Appellate Tribunal by order dated October 31, 2008 dismissed both the appeals confirming the order passed by the appellate authority. Being aggrieved by the order passed by the Karnataka Appellate Tribunal this revision is filed by the assessee and prayer in this revision is restricted to S.T.A. No. 266 of 2006 and the assessee-petitioner has accepted the order passed in S.T.A. No. 267 of 2006 dated October 30, 2008 wherein order was passed holding that the transaction under the agreement dated October 11, 2002 is taxable under section 5C of the Act. 5. We have heard learned counsel appearing for the revision-petitioner and the learned Government Advocate appearing for the respondent and the reply arguments of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts supplied by the first party at the required intervals. 8. In support of his contention that the agreement is only for providing services of the 12 vehicles belonging to the assessee to the first party in the agreement, M/s. Grasim Industries Ltd. There is no effective transfer of the control of the vehicle and the abovesaid clause would clearly show that vehicles can be taken back for two days for repair and the driver will be provided by the assessee and driver shall possess licence for driving the vehicle and necessary orders for regulation of traffic imposed should be maintained by the assessee and not by M/s. Grasim Industries and therefore, the vehicles continued to be in effective control of the assessee and the driver who was in custody of the vehicle on behalf of the assessee and therefore, there is no transfer of any right to use the vehicles and that was only service provided. In support of his contention, he has relied upon a decision of the High Court of Andhra Pradesh in W.P. No. 6685 of 1989 dated December 15, 1989 in the case of Rashtriya Ispat Nigam Ltd. v. Commercial Tax Officer, Company Circle, Visakhapatnam [1990] 77 STC 182 (AP) wherein the High Court was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 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. As the fundamental requirement of section 5E is absent, the hire charges collected by the petitioner from the contractors are not exigible to sales tax. 9. The learned counsel submitted that the said order passed by the High Court of Andhra Pradesh has been confirmed by the Supreme Court in State of Andhra Pradesh v. Rashtriya Ispat Nigam Ltd. reported in [2002] 126 ST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plant in Bangalore by providing requisite solutions to carter to their varied needs, whereas the second party-assessee was looking for advancing their business interests in Bangalore and have approached the first party to offer their services of transporting needs of the first party. It is well-settled that mere title given to the agreement does not by itself be conclusive and the actual terms and conditions of the agreement have to be taken into account. It is clear from the agreement that as per the agreement the assessee will maintain and provide a dedicated fleet to transport the produce of the first party from their plant to the various customers in the city of Bangalore. The number of vehicles requires to be dedicated for the use would be subject to change in requirement in mutual agreement on the said contract and change and that the assessee shall ensure adequate number of vehicles are made available on 24 x 7 basis, i.e., 24 hours on all the seven days of the week. The first party agrees that the second party may require up to two days a month for maintenance and upkeep of the vehicle and therefore, allowed two days in a month for this activity and not to pay consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work and there was no transfer of right to use in favour of the contractor. The assessee had undertaken to supply machinery to the contractor for the use and for purposes of being used, in execution of the contract work of the petitioner and received charges for the same. However, there is restriction that the machinery should not be shifted to another work and therefore, underthose circumstances, it was held that the effective control of the machinery was continued to be with the Rashtriya Ispat Nigam Ltd. In the same case which has been confirmed by the honourable Supreme Court it has been laid down that whether this transfer of right to use or not is a question of fact which is to be determined in each cases having regard to the terms of contract under which there is said to be transfer of right to use and therefore the said decision is not helpful to the counsel for the petitioner in the present case. 17. However, the decision relied upon by the learned Government Advocate in Harbans Lal v. State of Haryana [1993] 88 STC 357 (P H) which has also been relied upon by the first appellate authority is similar to the present case wherein, on perusal of the agreement in the said c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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