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2015 (5) TMI 32 - BOMBAY HIGH COURT

2015 (5) TMI 32 - BOMBAY HIGH COURT - [2015] 82 VST 560 (Bom) - Transfer of the rights to use any goods - Leasing transaction - Dealer - Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the respondent is not a “dealer” within the meaning of the term as defined under section 2(4) of the “Maharashtra Sales on transfer of right to use any goods for any purpose Act, 1985” - Held that:- for a person to come within the definition of 'dealer', .....

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st be a consensus ad idem as to the identity of the goods. It is further necessary that the transferee should have a legal right to use the goods, all legal consequences of such use including any permissions or licences required therefor should be available to the transferee and for the period during which the transferee has such legal right, it has to be and to the exclusion of the transferor.

Having transferred the right to use the goods during the period for which it is to be trans .....

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ransportation of accessories was to be done by the respondent. It can further be seen that there is no provision in the contract that the legal consequences such as permissions or licences were to be transferred to the transferee. The ultimate control over the crane retained with the respondent. We find that the learned Tribunal, applying the judgment of Apex Court [2006 (3) TMI 1 - Supreme court], has rightly construed that the transaction which were entered into by the respondent with Offshore .....

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ribunal has referred the following two questions for our adjudication: (i) Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the respondent is not a dealer within the meaning of the term as defined under section 2(4) of the Maharashtra Sales on transfer of right to use any goods for any purpose Act, 1985 (hereinafter called as the Lease Act)? (ii) Whether on the facts and in the circumstances of the case, the Tribunal is justified in law .....

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ales Tax for determination of question as to whether he would fall under the term of dealer under the Maharashtra Sales Tax on the Transfer of Right to use any goods for any purpose Act, 1985 (hereinafter referred to as the 'Lease Act') along with Section 61 of the Bombay Sales Tax Act, 1959. The Additional Commissioner while dealing with the said Application held that the respondents would fall within the definition of a 'dealer' and as such, the transaction entered into by him .....

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ed counsel for the revenue has submitted that the learned Tribunal has grossly erred in holding that the respondent was not a dealer within the meaning of Section 2(4) of the Lease Act and that the transaction entered by the respondent/assessee with Offshore Hook-Up & Construction Services (I) Pvt. Ltd. did not come within the meaning of sale as defined as under 2(10) of the Lease Act. The learned counsel submitted that, the perusal of terms and conditions entered into between the respondent .....

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er section 2(4) of the Lease Act. 4. Ms. Badheka, the learned counsel for the respondent submitted that the learned Tribunal has rightly held that the respondent/assessee was not a dealer and the transaction was not a sale as defined as per the provisions of the Lease Act. The learned counsel submitted that the view taken by the learned Tribunal is in consonance with the view taken by the Apex Court in the cases of State of Andhra Pradesh & Anr. vs. Rashtriya Ispat Nigam Ltd., reported in 12 .....

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rred. The learned counsel, therefore, submitted that the view taken by the learned Tribunal is in accordance with law and as such, Reference needs to be answered accordingly. 5. The answer to the second question referred to us would be wholly dependent on the answer to question no.1. If we hold that the view of learned Tribunal that respondent is not a dealer as per the provisions of Section 2(4) of the Lease Act, the transaction as referred to in question no. 2 will have to be held as not taxab .....

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specified period) cash, deferred payment or other valuable consideration and includes the State Government or the Central Government which so transfers the right to use goods and also society, club or Association of persons which so transfers the right to use such goods to its members. 7. The term 'Sale' is defined under section 2(10) of the Lease Act as under: Sale means the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash deferred .....

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r as defined in the said Act. Consequently, for the transaction to be a sale within the meaning of the said Act, what is essential is transfer of right to use any goods for any purpose. The learned Tribunal has reproduced the terms of quotation as given by the Respondent to Offshore Hook-Up & Construction Services (I) Pvt. Ltd. and the terms of acceptance by the said Offshore Hook-Up & Construction Services (I) Pvt. Ltd., which are as under: To, M/s. Offshore Hook-Up & Constructions .....

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ates which we had given to you at your office. Then as per your request on telephone today, we agreed to hire out the crane to you for 20 days at the rate of 15 days, i.e. for 20 days ₹ 2,50,000/-. Terms (i) You will supply one small crane for extension of Boom and dismantle of Boom when required. (ii) The working hours of the Crane will be one shift of 12 hours. (iii) Driver, cleaner, diesel and oil will be ours. (iv) Transportation of accessories will be ours. (v) The period of hire will .....

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le reply soon. Thanking you, Yours faithfully, For General Cranes. And Acceptance letter dated 22.06.1990 by M/s. Offshore Hook-Up & Construction Services (India) Pvt. Ltd, Ref: OHCS/GNB/30346/90/695 dated June 22, 1990 M/s. General Cranes, Near Pitroda Automobile works, T.J. Road, Sewree, Bombay-400 015. ATTN. MR. D.J. PITRADO Gentleman, Sub: Hire of 75 Tonnes Capacity Mobile Crane with 140 ft. Boom With reference to your quotation dated 21.06.1990 OHCS is pleased to hire your crane on the .....

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made after crane reaches the worksite at Uran LPG Plant. 8. Roads for working condition of crane will be adequate. 9. Hire charges will commence only from when the boom is assembled and crane is ready for operation and will cease on written demobilization orders or 20 (twenty) days of operation which is latter. 10. Hire charges shall be ₹ 2,50,000/- (Rupees Two Lakhs fifty thousand only) for 20 (twenty) days 12 (twelve) hours shift/day on a lump-sum basis for crane, crane operators and ri .....

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ack lights, boom lights in working conditions. You are requested to mobilize your crane immediately to have it operational at our Uran LPG Plant site by or before 25th June, 1990. Thanking you, Yours faithfully, For OHCS (I) Pvt. Ltd. sd/- RAKESH SILAICHIA ADMN. MANAGER 9. What would amount to transfer a right to use any goods for any purpose has been construed by the Apex Court in the case of State of Andhra Pradesh vs. Rashtriya Ispat Nigam Ltd. (supra). The facts in the present case are almos .....

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nsfer of right to use any goods'. Upholding the reasoning given by the High Court, the Apex Court observed thus: The High Court after scrutiny and close examination of the clauses contained in the agreement and looking to the agreement as a whole, in order to determine the nature of the transaction, concluded that the transactions between the respondent and contractors did not involve transfer of right to use the machinery in favour of the contractors and in the absence of satisfying the ess .....

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usion. In the impugned order, it is stated and rightly so in our opinion, that the effective control of the machinery even while the machinery was in use of the contractor was that of the respondent-company, the contractor was not free to make use of the machinery for the works other than the project work of the respondent or move it out during the period the machinery was in his use; the condition that the contractor would be responsible for the custody of the machinery while it was on the site .....

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r 1988-89, it is an additional factor and circumstance, which supports the stand of the respondent. 10. The said judgment of the Apex Court fell for consideration before the Larger Bench consisting of three Hon'ble Judges of the Apex Court in the case of Bharat Sanchar Nigam Ltd. & Anr. vs. Union of India & Ors., reported in (2006) 145 STC 91(SC). The Apex Court has considered the said judgment in paragraph 76, which reads thus: 76. In State of Andhra Pradesh vs. Rashtriya Ispat Niga .....

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to make use of the machinery for the works other than the project work of the respondent.. 11. After considering the various judgments, the Apex Court has laid down as to what would constitute a transaction to come within the ambit of 'the transfer of the right to use the goods'. It will be appropriate to refer to paragraph 98 of the judgment of the Apex Court in Bharat Sanchar Nigam Ltd. & Anr. vs. Union of India & Ors. (supra) - 98. To constitute a transaction for the transfer .....

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on 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 licence 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. 12. In the judgment, it has been held that to constitute a transaction for the transfer of the right to use the goods, it is necessary that there must be a consen .....

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id down is that 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. It would thus be seen that unless all the requirements are transferred, the transaction will not come within the meaning of Transfer of the rights to use any goods . 13. Though Ms. Badheka has relied on the judgments of various High Courts and also of Tribunals, we do not find it necessary to refer to all of them. It will be .....

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considering the terms and conditions of contract and considering the judgment of the Apex Court in the case of Bharat Sanchar Nigam Ltd. & Anr. vs. Union of India & Ors. (supra) has observed thus: 12. That takes us to the question that whether the contract in question is at all a contract of sale of goods as envisaged in Article 366(29-A)(d) inasmuch as there is transfer of the right to use for whatever period by S.T. Appeal No. 10/2009 Page 14 the respondent to NDPL. In order to determ .....

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t 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 licences 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 .....

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of right to use goods as envisaged in Article 366(29-A)(d). The S.T. Appeal No. 10/2009 Page 15 admitted position which emerges is that the transferee, namely NDPL, has not been made available the legal consequence of the legal right to use the goods viz. the permissions and licences with respect to the goods. In the present case, the permissions and licences with respect to the Cabs are not available to the transferee and remained in control and possession of the respondent. It is the Driver o .....

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The judgments which were cited during the course of arguments, namely, State of A.P. v. Rashtriya Ispat Nigam Ltd., (2002) 3 SCC 314 and Aggarwal Bros. V. State of Haryana, (1999) 9 SCC 182 have been duly explained by the Supreme Court in BSNL s case. The crucial ‟ factor in this regard differentiating the two cases was the intention to transfer the right to use. Whereas in the case of Rashtriya Ispat Nigam Ltd., there was no intention to transfer the right to use, in the case of Aggarwal .....

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took a view that since the permissions and licences with respect to the cabs are not available to the transferee and the cabs remained in control and possession of the respondent/assessee, there was no element of transfer of right to use the goods. 14. Again, the Gauhati High Court in the case of Indian Oil Corporation Ltd. vs. Commissioner of Taxes, Assam & Ors., reported in (2009) 22 VST 70 had an occasion to consider a similar provision under the Assam General Sales Tax Act. In the said .....

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of the vehicles hired by the petitioner-company. The petitioner was also issued subsequent communication and also show cause notice. The petitioner approached the Assam High Court challenging the jurisdiction to issue notice. The petition was resisted on the ground that act of hiring vehicles by the petitioner-company amounted to transfer of the right to constitute the lease and, therefore, not eligible to tax under the Act. It was contended that the transfer of right to use the vehicle constitu .....

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o the lessee for the use by the latter at his will and it is this transfer of the effective control of the goods, which attracts sales tax. 15. After taking into consideration the various clauses of contract entered between the assessee and the owners of the vehicles, the Division Bench held that there was no transfer of right to use so as to term the said as within the meaning the said Act to make it taxable. The Court, therefore, found that show cause notice issued was without jurisdiction and .....

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