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2016 (4) TMI 405 - DELHI HIGH COURT

2016 (4) TMI 405 - DELHI HIGH COURT - [2016] 90 VST 1 (Del) - Denial of C Forms for the years 2002-03 and 2003-04 - Whether the transfer of right to use equipment under the impugned transaction was not an interstate sale even though the goods moved from Maharashtra to Delhi and whether the only pre-condition for issuance of C-Form is that the buyer is a registered dealer and the goods are mentioned in his registration certificate as required for use in electricity generation and distribution - .....

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ppellant is a registered dealer and the goods in question find mention in the registration certificate as required for the use in the electricity generation and distribution. Consequently, there was no valid ground to deny the Appellant C Forms in relation to the lease transactions undertaken with RASL during the years 2002-03 and 2003-04. Therefore, the VAT Officer is directed to issue C Forms as requested by the Appellant for the transactions of the years 2002-03 and 2003-04. - Appeal disp .....

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ax Act, 1956 ( CST Act ) read with Section 81 of the Delhi Value Added Tax Act, 2004 ( DVAT Act ) is directed against the impugned order dated 14th July 2008 passed by the Appellate Tribunal ( AT ) dismissing the appeal of the Appellant. The AT upheld the order dated 30th November 2006 of the Objection Hearing Authority ( OHA ) which in turn upheld the order dated 7th July 2006 of the Sales Tax Officer/VAT Officer, (Ward 63) declining to issue C forms to the Appellant for the year (for ₹ 9 .....

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ASL [as Lessor] and the Delhi Vidyut Board ( DVB ) [Lessee], the predecessor of the Appellant. After the restructuring of DVB, with the Appellant having succeeded the DVB, the latter's rights and liabilities under the aforementioned lease agreement vested in the Appellant. It is stated that in terms of the above agreement, the equipment in question was sent by RASL, the Lessor in Maharashtra to the Appellant, the Lessee in Delhi. 3. By the 46th Constitutional Amendment, Article 366 of the Co .....

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years 2002-03 and 2003-04. 4. It may be mentioned here that the above application was also made for the year 2005-06 and C Form for the said year which was initially refused, was ultimately allowed in appeal. The Appellant further states that for the years 2004-05 and 2006-07, C Forms in relation to the aforementioned lessee for payment made pursuant to the very same lease agreement between RASL and the Appellant have been issued by the VAT Officer. Therefore, the present case only concerns the .....

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sessee was dismissed by the AT by the impugned order primarily on the ground that the transaction was not an inter-state sale. In coming to the said conclusion the AT referred to the decisions of the Supreme Court in 20th Century Finance Corporation Limited v. State of Maharashtra (2000) 6 SCC 12 and Bharat Sanchar Nigam Limited v. Union of India (2006) 3 SCC 1. The AT came to the conclusion that since the situs of the sale was Delhi and the agreement transferring the right to use the equipment .....

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earned counsel for Respondent No. 3 (State of Maharashtra). 7. While admitting this appeal on 22nd October 2008, the following questions of law were framed for consideration: (1) Whether the AT was correct in law in holding that the transfer of right to use equipment under the impugned transaction was not an interstate sale even though the goods moved from Maharashtra to Delhi pursuant to the lease agreement dated 25th May 2000? (2) Whether the only pre-condition for issuance of C-Form is that t .....

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to (b)...... (d) 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 (e)...... (f)...... and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made 9. This was simultaneous with the insertion of Entry 92-A in the U .....

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forementioned amended definition of sale in terms of Article 366 (29-A) of the Constitution is a transaction of sale whereunder the right to use an equipment for valuable consideration is transferred to a lessee by a lessor. It is deemed to be a sale by the lessor in favour of the lessee. Where such sale partakes character of inter-state sale then it is the Parliament which alone has the competence to collect sales tax to the exclusion of the States. Section 2 (g) (iv) of the CST Act defines sal .....

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ement of goods from one State to another; or (b) is effected by a transfer of documents of title to the goods during their movement from one State to another. Explanation I - where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee. Explanation 2- Where the movement of goods commences and t .....

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ads as under: 9. Levy and Collection of Tax and Penalties.-(1) The tax payable by any dealer under this Act on sales of goods effected by him in the course of inter-State trade or commerce, whether such sales fall within clause (a) or clause (b) of Section 3, shall be levied by the Government of India and the tax so levied shall be collected by the Government in accordance with the provisions of sub-section (2), in the State from which the movement of the goods commenced Provided that, in the ca .....

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4) of Section 8 in connection with the purchase of such goods; and (b) where such subsequent sale has been effected by an unregistered dealer in the State from which such subsequent sale has been effected. 14. A collective reading of the aforementioned provisions reveals that three kinds of transactions are outside the purview of State Sales Tax, i.e., sale outside the State; sale in the course of import or export of goods; and a sale in the inter-State trade. 15.1 The question as to whether a t .....

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red under the various State Sales Tax Legislations, for e.g., Maharashtra, Uttar Pradesh, Rajasthan, Andhra Pradesh, Haryana, Karnataka and Tamil Nadu, who had entered into master lease agreements for leasing diverse machinery/equipment in terms of which, the dealers would place purchase orders on the suppliers or manufacturers for supply of individual items or equipment. The dealers disbursed the value of equipment to the suppliers, who at their instance, delivered the equipment to the lessees .....

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ective of the place where the lease agreement may have been executed. The question that arose was whether a State can levy sales tax on transfer of right to use goods merely on the basis that the goods put to use are located within its State irrespective of the fact that (a) the contract of transfer of right to use has been executed outside the State; (b) sale had taken place in the course of inter-State trade; and (c) sales are in the course of export or import into Indian territory. The case o .....

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inter-State trade or commerce, as held in Bengali Immunity Co. Ltd v. State of Bihar AIR 1955 SC 661. Further, the State legislature cannot by law, treat sales outside the State and sales in the course of import as 'sales within the State' by fixing the situs of sales within its State in the definition of sale, as it is within the exclusive domain of the appropriate legislature, i.e. Parliament to fix the location of sale by creating legal fiction or otherwise." 15.3 The Constitutio .....

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the location or delivery of goods within the State cannot be made a basis for levy of tax on sales of goods. Under general law, merely because the goods are located or delivery of which has been effected for use within the State would not be the situs of deemed sale for levy of tax if the transfer of right to use has taken place in another State. Therefore, the contention, on behalf of the respondents that there would be no completed transfer of right to use goods till the goods are delivered is .....

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oods. Where a party has entered into a formal contract and the goods are available for delivery irrespective of the place where they are located the situs of such sale would be where the property in goods passes, namely, where the contract is entered into. 15.5 It further held as under: 28........where the goods are in existence, the taxable event on the transfer of the right to use goods occurs when a contract is executed between the lessor and the lessee and situs of sale of such a deemed sale .....

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hose in para 35 (a) to (e), which are relevant for the purposes read as under: 35. As a result of the aforesaid discussion our conclusions are these: (a) The State in exercise of power under Entry 54 of List II read with Article 366 (29A) (d) are not competent to levy sales tax on the transfer of right to use goods, which is a deemed sale, if such sale takes place outside the State or is a sale in the course of inter-State trade or commerce or is a sale in the course of import or export. (b) The .....

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use and the situs of sale would be the place where the contract is executed and not where the goods are located for use. (d) In cases where goods are not in existence or where there is an oral or implied transfer of the right to use goods, such transactions may be effected by the delivery of the goods. In such cases the taxable event would be on the delivery of goods. (e) The transaction of transfer of right to use goods cannot be termed as contract of bailment as it is deemed sale within the m .....

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urchaser would differ from case to case. Where the lease agreement occasioned the movement of goods from one State to another then, clearly it would partake of an inter-state sale within the meaning of Section 3 (a) of the CST Act. The observation in para 25 of 20th Century Finance Corporation Limited v. State of Maharashtra (supra) has to be read as a whole. It is only when the goods are available in the State and the agreement for transfer of the property in goods from the seller to the buyer .....

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greement which was entered into in Delhi. Even going by the decision of the Supreme Court in 20th Century Finance Corporation Limited v. State of Maharashtra (supra) it cannot possibly be said that the situs of the sale was Delhi only because the agreement was entered into in Delhi. There can be no doubt that the lease agreement in the present case resulted in the movement of the goods from one State of another, and therefore, answers description of the inter-State trade under Section 3 (a) of t .....

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a Pradesh (supra) did not involve an inter-state sale at all. Para 3 of the said judgment states that the contracts in question were for providing transportation service for ready-mix concrete by hiring specially designed transit mixers. These transit mixers were never transferred and the effective control over running and using of these vehicles, as well as the disciplinary control over the drivers, always remained with the Petitioners. Therefore, the decision in G.S. Lamba and Sons v. State of .....

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