TMI Blog2017 (5) TMI 769X X X X Extracts X X X X X X X X Extracts X X X X ..... anted by the Regional Transport Office, Pune. The hired buses will be registered with the RTO, Pune in the name of the PMT as lessees and will be operated as stage carriages within the operational area of the PMT. This is not a case of a sale of transport vehicle or purchase thereof nor a case of sale of parts, components or accessories of such transport vehicles or purchase thereof. This is a case where the legislature has made the transfer of the right to use any goods for any purpose a deemed sale. The question is whether there is a transfer of right to use any goods and within the meaning of subclause (iv) of the Explanation to clause (24) of section 2 of the MVAT Act. It is in these circumstances that we do not think that given the factual backdrop the appellant can take assistance of the third exception to clause (8) of section 2 of the MVAT Act, 2002. When the burden of the tax has to be borne actually by the PMT and the appellant can pass on the same by including it in the sale price, then, all the more we do not think that any relief should be granted based on this alternate plea. We have also noticed that the appellant has obtained a registration under the MVAT Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances of the case, is right in holding that the buses given on hire by the Appellant to PMT is a sale within the meaning of Section 2(24) of the MVAT Act read with its explanation (b)(iv) and subject to payment of the Value Added Tax ? 4 Hence admit. With consent of both sides and since detailed arguments have been canvassed, we proceed to dispose of these appeals finally by this judgment. 5 The appellant is carrying on business in the name and style of M/s. Buthello Sons as sole proprietor thereof and is, inter alia, engaged in providing buses on hire to the private corporations, schools for transporting students and to public transport corporation on contract basis. The respondent No.1 is a Commissioner of Value Added Tax and exercising powers and discharging duties conferred upon him under the provisions of Maharashtra Value Added Tax Act, 2002 (for short MVAT Act ). 6 Prior to 1st April, 2005, the system for levy of tax in Maharashtra was, in general, single point tax system. As a consequence of national consensus for introduction of VAT, the erstwhile Bombay Sales Tax Act, 1959, was replaced by Maharashtra Value Added Tax Act, 2002. The MVAT Act came into force wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment, the appellant submitted monthly details of bus hire receipts, special trips and accident claims received. 16 Thereafter, vide Order dated 31st March, 2015, the Deputy Commissioner, based on the reason in the earlier order dated 19th March, 2014, raised the demand of ₹ 3,58,91,589/- on account of tax and interest. The Deputy Commissioner, inter alia, held that the appellant is a Dealer as defined under Section 2(8) and the activity carried out by the appellant is taxable under MVAT Act, 2002. Further, the Deputy Commissioner also adjudicated the aforesaid show cause notice and imposed penalty of ₹ 1,07,13,907/- on the ground that the appellant is purposefully avoiding production of relevant documents and had failed to prove genuineness of the transaction. Also, it was alleged that the appellant had the knowledge of such sham transaction and has either concealed or knowingly mis-classified the transaction liable to tax, to defraud the Revenue. Accordingly, the demand notice dated 31th March, 2015, of ₹ 3,58,91,589/- on account of tax, interest and penalty was issued to the appellant. 17 Being aggrieved by the said assessment order dated 31st Marc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not amount to transfer of right to use goods, but amounts to provision of service. 23 Mr. Sridharan would attempt to equate the activities of the appellant with a Time Charter party arrangement. He seeks to draw support from a contract of charter party. In elaborating that concept and the type of charter party contracts, Mr. Sridharan would submit that a careful perusal of a charter party by demise and a charter party not by demise which is classified into Time Charter and Voyage Charter, it would be apparent that there is no transfer of possession accompanied by effective control over the business by the appellants / owners. This would not attract Article 366(29A)(d) of the Constitution of India. That is because a contract of service is not covered thereunder. 24 Mr. Sridharan then submits that, in any event, provision of driver and operating/running vehicle by using own fuel/spare parts cum maintenance is certainly not transfer of right to use goods but provision of service by appellant to PMPML. He invites our attention to the terms of the contract to submit that the appellant is required to provide the bus with driver possessing valid driving licence. Further, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is specifically excluded from the definition of a dealer. The Appellant submits that the demand has been raised on motor vehicles for which stage carriage permit has been duly obtained as per Motor Vehicles Act, 1988. Accordingly, the Appellant is a transporter holding permit. Further, it is an undisputed fact that the vehicles are used for transportation of passengers. Accordingly, the Appellant falls within the terminology transporter holding permit for transport vehicles (including cranes) granted under the Motor Vehicles Act, 1988 Further, as per the second limb of the exception, such transport vehicles are required to be used or adopted to be used for hire or reward. The Appellant submits that; it is undisputed fact that the Appellant has provided the transport vehicle to PMPML on a reward basis. Accordingly, the Appellant shall be excluded from the definition of Dealer to the extent such vehicles are provided on a reward basis. Suggestion of respondents that for the buses in question, permit has been obtained by the PMPML is irrelevant to the above matter. At this juncture, reference may be drawn to definition of sale price contained in MVAT Act, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal and with conclusive findings. 29 Be that as it may, according to Mr. Sonpal, the conclusion of the Tribunal is the only one that a judicial authority can reach on the present facts and circumstances. Mr. Sonpal has, during the course of his arguments, submitted that the assessment order correctly records that the factual aspects are already decided and discussed in the order of the Commissioner of Sales Tax on the application seeking determination of the disputed question (DDQ) Nos.29 and 30 of 2011, dated 11th April, 2011, in the case of M/s. Wings Travels and another similar order DBQ-11-2008-3/30 dated 11th April, 2011, in the case of M/s. Sai Anant Travels Private Limited. Therefore, it is erroneous to state that the appellant before us is not a dealer. The dealer was aware that the activity is taxable under the MVAT Act. There is no merit in the contentions now raised. It is then argued by Mr. Sonpal that the agreement between the appellant and the Pune Municipal Transport is clear. There was an advertisement inserted by the said corporation and inviting bids from interested contractors. PMT is a public transport undertaking established as per the provisions of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Tribunal and submitted that the definition of the term 'sale' includes such a deal. On the analysis of the terms and conditions of the agreement, according to Mr. Sonpal, the Tribunal has correctly concluded that the buses have been given for a specified period, the period during which the contract is subsisting, the buses may either be idle or free or not under use by PMT, but the appellant is prohibited from using them for his personal use or gain. Even the drivers are at the complete disposal and under the command and control of the PMT. It is in these circumstances the test of effective control and possession is satisfied. The transaction before this Court is not identical to that referred by this Court in the case of Commissioner of Sales Tax, Maharashtra State, Mumbai vs. General Cranes (2015) 82 VST 560. The nature of the transaction in the present case is different. Even if the agreement is with the contractor, it is clear that the colour scheme of the buses, the entire specifications laid down have to be as determined by the PMT. Therefore, overall custody and control is with the PMT. It is in such circumstances that the decision of this Court was rightly dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash, or for deferred payment, or for any other valuable consideration shall, notwithstanding anything contained in clause (4) or any other provision of this Act, be deemed to be a dealer, namely:- (i) Customs Department of the Government of India administering the Customs Act, 1962 (52 of 1962); (ii) Departments of Union Government and any Department of any State Government; (iii) Local authorities; (iv) Port Trusts; (iv-a) Public Charitable Trust; (v) Railway Administration as defined under the Indian Railways Act, 1989 (24 of 1989) and Konkan Railway Corporation Limited; (vi) Incorporated or unincorporated societies, clubs or other associations of persons; (vii) Insurance and Financial Corporations, institutions or companies and Banks included in the Second Schedule to the Reserve Bank of India Act 1934 (II of 1934); (viii) Maharashtra State Road Transport Corporation constituted under the Road Transport Corporation Act, 1950 (LXIV of 1950); (ix) Shipping and construction companies, Air Transport Companies, Airlines and Advertising Agencies; (x) any other corporation, company, body or authority owned or constitute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-purchase or any system of payment by instalments; (iv) 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 consideration; (v) the supply of goods by any association or body of persons incorporated or not, to a member thereof for cash, deferred payment or other valuable consideration; (vi) the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service is made or given for cash, deferred payment or other valuable consideration; [(vii) * * *] shall be deemed to be a sale; 33 We are concerned in this case with sub-clause (iv) of clause (b) of section 2(24). What we have is the definition of the term 'sale' and which unless the context otherwise requires means a sale of goods made within the State for cash or deferred payment or other valuable consideration but does not include what is specified in the main clause 24. 34 There is an explanation which appears below clause 24 and which says that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taking will provide conductors with tickets, waybill and other conductor's equipment. The right of the Undertaking to collect fare and charges is clearly spelt out. The tenderer does not possess any such right. Then, the General Manager of the PMT has sole discretion to identify the routes on which the hired buses shall be deployed. The tenderer shall have no right to claim any particular route for operation. The responsibilities of the tenderer are set out in condition No.10 and they read as under : (i) To provide the bus with driver possessing valid driving licenses with P.S.V. Badge, who shall follow the instructions of the authorities of the Undertaking. (ii) The Tenderer shall not employ a person as a driver for operating a bus on hire basis who has been removed or dismissed retired on superannuation from the service of the Undertaking. (iii) The Tenderer shall provide uniform to the driver as prescribed by the Undertaking. (iv) The Tenderer shall bear the cost of the driver, including his wages, daily allowance and meet all other statutory obligations. (v) The Tenderer shall keep the buses road worthy in terms of Chapter VII of the Motor Vehic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iage permit which would be obtained by the Undertaking. Pertinently, no private bus under the Undertaking's operation will be allowed to be sold / ownership changed during the tenure of the contract. In case that is established, the payment for the period along with security deposit would stand forfeited. Then, under no circumstance a hired bus will be diverted by the tenderer for the personal use or a gain of any other business during its operation under the Undertaking. Condition No.16 stipulates the hire charges fixed will be valid for the period of three years. That can be reviewed on the basis of hike and reduction in diesel prices in proportion to the increase and decrease in the diesel price only. It is obligatory on the tenderer to quote purchase rate of diesel on which his kilometer rates are based. 38 It is in the light of these terms and conditions and with full knowledge thereof that the dealer before us forwarded his bid. He was aware that this is a bus which has to be supplied and which would be taken on hire by the PMT for being operated as a stage carriage and the permit would be obtained by the PMT for itself. From such a permit the appellant would not deriv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s within the operational area. The fare to be collected from the passengers is determined by PMT. The bus would have a conductor who shall collect it. He alone can carry out this function and duty and neither the private bus contractor, namely, the appellant or the driver can lay any claim on the fare and luggage charges or any amount so collected. 40 The sole discretion of the General Manager, as referred above, is also incorporated at recital No.6. The responsibilities of the contractor are set out in recital No.7. The contractor is responsible and obliged to provide the bus with driver possessing valid driving licence with the PSV Badge and complying PMT norms and certificate of medical fitness from the competent authority. The driver is obliged to follow instructions of the authorities of the PMT. He will have to undergo training and test of driving. Only drivers successful in all this would be approved and appointed. The expenditure of training of the driver by PMT will have to be borne by the contractor. The driver must fulfill the norms prescribed by PMT. He should have knowledge of roads of Pune city. The contractor will be permitted to employ other surplus drivers emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this agreement. The contractor is obliged to provide the bus within sixty days from the date of signing of the agreement. 41 The assessment and the demand proceeds on the footing that this contract between the appellant and the PMT can safely be brought to tax. That is how the order of assessment was passed and the demand raised. Then, the matter was carried to the First Appellate Authority. The First Appellate Authority initially granted an interim stay and passed an order to that effect on 15th September, 2015. 42 While imposing this condition of part-payment and an interim stay, the First Appellate Authority referred to a recent judgment of the Tribunal in the case of M/s. Aurobindo Highway Services vs. State of Maharashtra, VAT Appeal Nos.164 to 167 of 2013 decided on 9th February, 2015. 43 As already stated, the aggrieved appellant approached the Tribunal. On such an issue falling for determination and consideration of the Tribunal, the Tribunal essentially found that the criteria as set out in the judgment of the Hon'ble Supreme Court in the case of BSNL Anr. vs. Union of India Ors. (supra) is satisfied. Therefore, this is nothing but a sale and within the me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... citals so also the covenants of the agreement. A harmonious reading of all these has led the Tribunal to conclude that this is a case of a deemed sale. There is a transfer of right to use the goods. We do not find any substance in the complaint of the appellant that the right to use the goods / business is not exclusive. In other words, though it is a transfer of the right to use the buses, that is not exclusive. This submission overlooks the fact that PMT may be rendering a service to the residents of Pune. It may provide Municipal transport service and which is a public transport service. It may provide a bus service which is nothing but a public transport service. It may discharge any of its discretionary functions within the framework of the constitutional provisions and the Maharashtra Provincial Municipal Corporation Act, 1949. However, that is not decisive and conclusive for our purpose. It is during the course of providing such service that the PMT has hired the buses of the appellant. He is not only obliged to, and in terms of the contract, provide these buses but during the subsistence of such contract, these buses exclusively ply for PMT. The buses at their command and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments and then equated the present transactions with them. We are unable to see how we can and in the teeth of the constitutional provision and the definition of the term 'sale', rely upon the charter party agreements in relation to sea going vessels. It is true that charter by demise is something by which the ship owner surrenders the possession and control of the vessel to the charterer, whereas in a charter, which is not a charter by demise, the arrangement could be as noted in paragraph 16 of the written submissions tendered by the appellant (page 6). Mr. Sridharan has laid great emphasis before us on the decision in the case of Sea Land Securities Limited vs. William Dickinson Co. Ltd. (1942) 2 K.B. 65. There, the King's Bench was dealing with a time charter for six calendar months from the time the steamer is delivered and placed at the disposal of the charterers ready to load. Relying upon the charter party the issue was decided. It was during the currency of a time charter by the direction of the charterers the ship arrived in the port to load cargo. It would have to wait for some days before she could be loaded. At the charterers suggestion, the ship-owners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the term 'sale' as appearing in the MVAT Act. Therefore, proprietary interest is not a matter which should detain or bother us. Hence, this passage in Anson's Law of Contract and equally the reliance placed on Chitty on Contracts at page 34 and 39 of Volume II fails to impress us. 48 True it is that the principle in Chitty is also based upon a possessory interest. The passage relied upon by Mr. Sridharan is that the contracts affecting chattels may require the use of some particular chattel for the performance and without creating any proprietary or possessory interest in the chattel; for example, in the case of a contract to carry cargo in a particular ship. Or they may provide for the hire of a chattel, or confer an option to purchase it or to do both things as in the case of hire purchase agreements. Nonetheless, what these works deal with are peculiar or particular contracts and their interpretations. It is concerning interpretation of such contracts that the principles evolved by these learned authors have been relied upon. We are not concerned with the interpretation of contracts in order to decide any case of breach of mutual obligations. We have befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract in question is taxed as service under the Finance Act, 1994. It is a composite contract of sale of goods and service. Therefore, the splitting up and bifurcation is not permissible by applying the Delhi Value Added Tax Act, 2004. Pertinently, the Delhi High Court also dealt with the second question. That was whether the Article 366(29A)(d) would be attracted and whether the contract in question is at all a contract of sale of goods. The Court then discussed this aspect from paragraph 8 onwards to arrive at a conclusion that the permissions and licences with respect to cabs are not available to the transferee and remained in control and possession of the respondents. It relied upon the legal consequences of the legal right to use the goods, namely, the permissions and licences with respect to the goods. The Delhi High Court concluded that it is the driver of the vehicle who keeps in his custody and control, the permissions and licences with respect to the Maruti Omni cabs or the said permissions and licences remained in possession of the respondents. They were never transferred to M/s. NDPL. Therefore, on facts it held that there is no sale of goods nor transfer of right to us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll have to comply with all the stipulations in Annexure A read with term and condition No.3. The stipulations in the lease / hire agreement would indicate that the agreement will come into force only after the buses are handed over by the contractor to PMT as per Schedule B, duly registered with the Regional Transport Office, Pune and permitted by the RTO, Pune to ply the buses on stage carriage permits held by the PMT and no liability will be incurred on the PMT till the agreement comes into force. Thus, it is apparent from all these clauses that the case is not similar to that dealt with by the Delhi High Court. The hired buses would be registered with the Regional Transport Office, Pune in the name of the PMT as lessee and will be operated as stage carriage permits within the operational area of the PMT. Such stipulations were absent in the case dealt with by the Delhi High Court. Therefore, to our mind, that decision is clearly distinguishable. 52 Mr. Sridharan also relied upon the judgment of the Gauhati High Court in the case of Indian Oil Corporation Limited vs. Commissioner of Taxes, Assam and Ors. He then relied upon the judgment of the Orissa High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer on consideration of certain clauses of the agreement entered into between the parties, arrived at the conclusion that it was a transfer of the right to use the dredgers. That is how the return filed by the Corporation was accepted and tax was levied on the consideration money / hire charges received on account of the transaction noted above. 54 Then the assessment orders came to be challenged by the Dredging Corporation successfully. It is in these circumstances that the analysis of the terms and conditions of the contract enabled the Orissa High Court to hold that the findings of the Tribunal are not perverse. The finding that there was no effective control of the Port Trust over the unit of the dredger and men taken together. Several aspects of the contract would denote that it is simplicitor works contract without transfer of the property of goods in execution of a contract. There was also no transfer of right to use the dredger. Once again, for the reasons assigned by us to distinguish the judgment of the Delhi High Court, even this case cannot be of any assistance to the petitioners before us. 55 We must also refer to the case before the Allahabad High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question as to whether he would fall under the term 'dealer'. The Additional Commissioner, while dealing with that application, held that the respondent would fall within the definition of the term 'dealer'. The transaction entered into by the dealer with M/s. Offshore Hookup Construction Services (India) Private Limited would be governed by the provisions of the Act and, as such, taxable. Being aggrieved by this finding, the respondent General Cranes preferred an appeal to the Tribunal and the Tribunal reversed that finding. It held that the transaction cannot be said to be a sale as defined under section 2(10) of the Lease Act. The Revenue, aggrieved by this conclusion of the Tribunal, approached this Court. The Division Bench noted that there has to be a transfer of the right to use the goods for any purpose. The right to use any goods for any purpose is essential so as to bring the person within the ambit of 'dealer' as defined in the Act. Once there is a transfer of the right to use any goods for any purpose and that is the essential pre-requisite, the Division Bench naturally reproduced the terms and conditions of the contract between M/s. General C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the control of the appellant. Thus, the PMT has effective and complete control of the vehicles and the earmarked buses are in exclusive possession of the PMT. The appellant stands totally excluded from the use, possession and control thereof. 59 It is in these circumstances that we are of the view that the conclusion by the Tribunal in the present case cannot be faulted. This is not a case of any perversity or an error of law apparent on the face of the record. This is a clear case and which, to our mind, stands covered by application of all the legal principles to the subject contract, in favour of the Revenue. 60 It is in these circumstances that we do not think that reference to any judgments to support the Revenue's stand would be necessary. For the reasons that have pursuaded us to distinguish the judgment of the Delhi High Court and the Division Bench judgment of this Court would be enough to distinguish the other judgments relied upon by Mr. Sridharan. 61 Once we have found that there is, on facts, no case made out to come to or arrive at a different conclusion, then, we cannot, as suggested by Mr. Sridharan, rely upon a few clauses of the agreement and term th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Vehicles Act, 1988, and which vehicles are used or adopted to be used for hire or reward. Therefore, he shall not be deemed to be a dealer within the meaning of this clause in respect of sale or purchase of such transport vehicles or parts, components or accessories thereof. 63 Mr. Sridharan's arguments overlook the fact that we are not dealing with the first part of the definition of the term 'sale' appearing in clause (24) of section 2. We are dealing with the Explanation to clause 24 and where 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 consideration shall be deemed to be a sale. Thus, this is a case of a deemed sale. The appellant being aware of this legal position subjected himself to the assessment. The assessment order, copy of which is at page 71 of the paper-book in MVAT Appeal No.33 of 2016, denotes that the appellant's advocate submitted that the appellant is not a dealer under the MVAT Act and not liable to pay tax. It was also argued that there is no transfer of right to use the goods. The contention, as above, and in the alternative, does not appear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he permanent holder, then, the first part of the exception in this case is not satisfied. The Department / Revenue proceeded against the appellant because it was not a case of sale of the buses or parts, components or accessories thereof. Thus, even the second part this exception, namely of a transporter holding a permit for transport vehicles granted under the Motor Vehicles Act, 1988, and which are used or adopted to be used for hire or reward, shall not be deemed to be a dealer within the meaning of clause 2(8) of the MVAT Act in respect of sale or purchase of such transport vehicles or parts, components or accessories thereof is not satisfied. We are not concerned with any abstract or wide question. In the facts and circumstances of the present case, the appellant is a dealer and assessed on that basis in view of the lease agreement with PMT. We are only dealing with a limited controversy arising in the backdrop of this agreement. This is not a case of a sale of transport vehicle or purchase thereof nor a case of sale of parts, components or accessories of such transport vehicles or purchase thereof. This is a case where the legislature has made the transfer of the right to use ..... X X X X Extracts X X X X X X X X Extracts X X X X
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