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2015 (6) TMI 1043 - SIKKIM HIGH COURT

2015 (6) TMI 1043 - SIKKIM HIGH COURT - [2015] 86 VST 337 (Sik) - Whether the transfer of cement, steel and explosives by the Petitioner to the contractors vide their respective agreements was a ‘sale’ under Section 2(m) of the Act, 1983 - Held that:- for the purpose of instant case, sub-clause (b) and (d) of clause (m) of Section 2 of the Act, 1983 are relevant. Sub-clause (b) talks about the transfer of goods involved in the execution of works contract and sub-clause (d) talks about the transf .....

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r approval and then the deductions of their sale price were to be made. Thus, it is clear that the above event of supply of specified goods were clearly covered under sub-clauses (b) and (d) of clause (m) of Section 2 of the Act, 1983 and were ‘sale’ within the meaning of such clauses. As we have already held that, there was transfer of goods involved in the execution of works contract with the transfer of right to use the goods. Thus the taxation authorities have rightly held that the said inst .....

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ney, Advocate (Legal Retainer, CTD) for State-Respondents. JUDGMENT The Petitioner is a Company incorporated under the Indian Companies Act, 1956. It is a Government of India enterprise under the Ministry of Power, having its Corporate Office at Faridabad, Haryana. The Petitioner had entered into an Agreement with the State Government of Sikkim for construction and operation of 510 MW capacity of Teesta Stage-V Hydroelectric Power Project. The construction of the project was started in November, .....

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lied by the Petitioner and the cost of these materials were to be deducted from the approved bill amount(s) of the contractors at the rate already fixed by the Petitioner. 3. On the above factual aspects, an assessment was made by the Deputy Commissioner of Commercial Tax Division, Government of Sikkim, for the period in between 1998-1999 to 2004-2005 and an Assessment Order was passed under Section 13 of the Sikkim Sales Tax Act, 1983 (hereinafter referred to as the Act, 1983 ). The Deputy Comm .....

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ultimately imposed a tax liability on the sale of those goods to the tune of ₹ 14,18,62,067/-. An Appeal (No. 01 of 2009) filed against the said Assessment Order was also dismissed by the Joint Commissioner vide an Order dated 27.11.2010, on the ground that the relationship between the Petitioner and its contractors was that of seller and buyer respectively and there was a transfer of property in goods effected from one hand to another and was sale under Section 2(m) of the Act, 1983. The .....

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Nigam Ltd. : (2002) 3 SCC 314. 5. On the other hand, Mr. J.B. Pradhan, learned Additional Advocate General appearing on behalf of State, has opposed these arguments and supported the two orders passed by the statutory authorities. He mainly contended that it was a case of transfer of goods on the fixed price under the particular agreements with the transfer of the right to use them and thus was sale within the meaning of Section 2(m) (b) and (d) of the Act, 1983. He relied on the decisions of Ag .....

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one person to another person in any of the following ways, namely: - (a) the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (b) the transfer for property in goods (whether as goods or in some other form) involved in the execution of a works contract; (c) the delivery of goods on hire-purchase or any system of payment by instalments; (d) the transfer of the right to use any goods for any purpose (whether o .....

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t or other valuable consideration, does not include a mortgage or hypothecation of or a pledge on goods. 8. The above definition of sale is inclusive and it appears that various sub-clauses of clause (m) of Section 2 are designed on clause (29-A) of Article 366 of the Constitution, which empowered the State Legislature to enact law imposing sales tax on the transfer of the right to use goods. Various sub-clauses of Section 2(m) of the Act, 1983 are reproduction of clause (29-A) of Article 366, w .....

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f transfer, delivery or supply of goods by one person to other person in any one of the above ways under sub-clauses (a) to (f) would be a sale . 10. In 20th Century Finance Corpn. (supra), relied by the Additional Advocate General, it was held that Article 366 (29-A) (d) shows that levy of tax is not on use of goods but on the transfer of the right to use goods. The right to use goods accrues only on account of the transfer of right. In other words, right to use arises only on the transfer of s .....

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tween the parties, the taxable event on such deemed sale would be the execution of the contract for the transfer of right to use goods. The Supreme Court held in paragraph 35, vide clause (e) that the transaction of transfer of right to use goods cannot be termed as contract of bailment as it is deemed sale within the meaning of the legal fiction engrafted in clause (29-A) (d) of Article 366 of the Constitution. 11. In the instant case various clauses of agreement(s) between the Petitioner and t .....

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in numbers and consumed by weight, an allowance of 3% (three percent) of the quantity of cement issued will be allowed to account for the difference between the quantity issued and that consumed. Alternatively, if cement is issued by the Corporation by weight and also consumed by weight, an allowance of 1% (one percent) of the quantity issued will be allowed to account for difference between the quantity issued and that consumed. c) The allowance as mentioned in (b) above shall be considered as .....

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indicated in Annex- 1 by the Engineer from the amount due to the contractor. 12. Similar are the clauses in relation to other goods. Perusal of the above clauses of the agreement(s) would show that the said goods were supplied to the contractors on a fixed rate, as per Annex-1 to the agreement(s), and were to be consumed in the work as per approval and then the deductions of their sale price were to be made. Thus, it is clear that the above event of supply of specified goods were clearly covere .....

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e charges and assessment orders were then so made. When the matter came up before Supreme Court it was held that such transfer of a right to use goods for consideration was deemed to be a sale, which was defined under the said Act in similar terms. It was held that the provisions expressly speak of transfer of right to use goods and not of transfer of goods . There was, therefore, no merit in the submission that to be deemed sale within the meaning of the above provision of the said Act there mu .....

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