TaxTMI 
TaxTMI 
2019 (12) TMI 225
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....nt Ramakantrao Katneshwarkar, AOR Mr. Anoop Kandari, Adv. Mr. P. Venkat Reddy, Adv. Mr. Prashant Tyagi, Adv. Mr. P. Srinivas Reddy, Adv. for M/s. Venkat Palwai Law Associates, AOR Mr. Shibashish Misra, AOR Mr. Merusagar Samantaray, AOR Mrs. Shally Bhasin, AOR JUDGMENT Arun Mishra, J. 1. The question involved in the appeal is whether it is open to the State of Karnataka to levy Sales Tax in view of the Time Charter Agreement dated 8.1.1998 and whether it amounts to transfer of the right to use goods within the meaning of section 5C of the Karnataka Sales Tax Act, 1957 (for short, "the KST Act") read with Article 366 (29A) (d) of the Constitution of India. 2. The appellant - The Great Eastern Shipping Co. Ltd. filed a writ petition questioning the competence of the State Government to impose a sales tax in respect of the goods which are used within the territorial waters of India. The appellant owns a tug (towing vessel, namely "Kumari Tarini"). The company entered into a Charter Party Agreement with New Mangalore Port Trust on 8.1.1998. It agreed to make available the services of tug, for the purposes provided in the agreement along with the master and other personnel of the....
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....ference between the 'right to use goods' and 'the transfer of the right to use goods.' In case of a lease, there is a transfer of an interest in the property, whereas, in a licence, there is a mere right to use the property. The Time Charter is recognised as an agreement in the nature of pure service. They are entirely distinct from Bareboat Charter Agreement or charter by demise. The charters are of three kinds viz. (a) Time Charter, (b) Bareboat Charter or Charter by Demise, and (c) Voyage Charter. Time charter and voyage charter are contracts of service, whereas bareboat charter amounts to transfer of right to use the ship itself. In a time charter, master and crew are in the employment of the owner, and complete control, ownership, and possession of the vessel remain only with the owner through the master and crew. The delivery to the Port Trust is only a symbolic one, and the legal and physical possession of Tug continues to be with the company. Thus, the arrangement is a service, not a lease. Learned senior counsel has made reference to Scrutton on charter parties, Halsbury's Laws of England, and have also relied upon various decisions. 6. Mr. Datar has further submitte....
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....hich indicates that time charters are contracts of service. If they involved a transfer of right to use, Parliament would never have subjected them to service tax. 9. Mr. Datar, learned senior counsel has also submitted that usually, only the Parliament can make laws relating to territorial waters. Under Article 246(4), read with Article 286, Parliament can make fiscal laws relating to imposition of tax on either supply of goods or services or both, where such supply takes place outside the State. Thus, even if the situs of agreement fell in the territory of State, it would be of no relevance as the vessel has to ply in territorial waters. An agreement cannot be signed in the high seas. 10. It was submitted that the High Court has erred in treating the territorial water as part of the territory of Karnataka, in contravention to Article 297 as well as the provisions of the Territorial Waters, Continental Shelf, Exclusive Economic Zone, and other Maritime Zones Act, 1976 (Act of 1976). None of the maritime States have been given the territorial waters as part of their territory. He has also referred to Dr. Ambedkar's speech in the Constituent Assembly to submit that the entire te....
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....ch State could levy sales tax, where signing of the contract, delivery of the goods or use of the rights were in different States. The majority held that the State where a contract is signed would have the power to levy a sales tax. Thus, the place where the goods were delivered or used could not be a ground for levy of sales tax. Merely signing of the contract in Mangalore conferred no jurisdiction to levy salestax on the State of Karnataka. The decision has no application to the transaction, the effect of which takes place in territorial waters or the high seas, even if the agreement is signed within a particular State. 12. Mr. Mohan Parasaran, learned senior counsel has taken us in detail to various clauses of the agreement. The agreement is in the nature of a time charter as approved by the New York Produce Exchange (NYPE), which is the standard form for time charters. It is neither a bareboat cum demise charter nor a voyage charter and is, therefore, only a time charter because of terms and conditions. He has relied upon BSNL v. Union of India, (2006) 3 SCC 1 wherein this Court has laid down essential attributes of a transaction to constitute a transfer of the right to use t....
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.... The territorial waters are within the exclusive jurisdiction of the Union of India. In view of Article 297 of the Constitution, the State of Karnataka has no jurisdiction to impose a sales tax. The territorial waters are deemed Union territory. The sovereignty of India extends and has always extended to the territorial waters and the seabed and subsoil underlying and air space over, such waters and it is the Central Government which has the power to alter the limits of the territorial waters. 14. Mr. Devadatt Kamat, learned senior counsel submitted on behalf of the State of Karnataka that the transfer of right to use occurs when the agreement has been entered into and not when the delivery of the goods takes place. He has referred to various clauses of the agreement to take home the aforesaid submission and has relied upon 20th Century Finance Corporation Ltd. v. State of Maharashtra (supra), a decision of the Constitution Bench of this Court which has been approved in BSNL (supra). He has further urged that a coastal State has jurisdiction to levy salestax in the territorial waters abutting the coast. He has also referred to Article 297. He has relied upon Dr. Ambedkar's speech....
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....rala, Tamil Nadu, Andhra Pradesh, and West Bengal, etc. In Re: Section 5C of KST Act: 18. The State of Karnataka has sought to levy tax under section 5C of the KST Act on charter-party on the ground that it is a transfer of right to use vessel. 19. Section 5C of the KST Act reads: "Section 5C - Levy of tax on the transfer of the right to use any goods- Notwithstanding anything contained in sub-section (1) or subsection (3) of section 5, but subject to sub-sections (4), (5) and (6) of the said section, every dealer shall pay for each year a tax under this Act on his taxable turnover in respect of the transfer of the right to use any goods mentioned in column (2) of the Seventh Schedule for any purpose (whether or not for a specified period) at the rates specified in the corresponding entries in column (3) of the said Schedule." 20. Section 2(t) of the KST Act defines "sale" and reads as under: "Section 2(t) "sale" with all its grammatical variations and cognate expressions means every transfer of the property in goods (other than by way of a mortgage, hypothecation, charge or pledge)] by one person to another in the course of trade or business for cash or for deferr....
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....ether or not for a specified period) for cash, deferred payment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (f) a tax on 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 for cash, deferred payment or other valuable consideration, 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;" (emphasis supplied) 22. A tax on the sale or purchase of goods includes a tax for transfer of right to use goods as that is deemed to be a sale. The question that arises for consideration is whether there is a transfer of the right to use the vessel. It has to be considered in view of the charter agreement entered into between the company and the Port Trust. The tender documents....
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....easonable and proper precautions may have been taken by the Contractor at all times during the currency of the agreement, the Contractor shall nevertheless be wholly responsible for all damages to the property of Charterers during the currency of the agreement." "13. NOTIFICATION OF AWARD: (a) x x x (b) The Letter of Acceptance will be issued in the name of the company which has purchased/submitted the tender. (c) The time to count for delivery of tug shall commence from the date of issue of the Letter of Acceptance." "15. PERFORMANCE GUARANTEE: The successful tenderer shall furnish a bank guarantee from a nationalized bank having its branch at Panambur/Mangalore, along with the Charter Party Agreement, for compliance with the contract terms and conditions, for an amount equivalent to 10% of average annual contract value. This guarantee shall be valid for a total period of 9 months from the date of commencement of service." 25. Clauses 1 and 3 to 15 of the Special Conditions which are relevant are extracted hereunder: Special Conditions of Contract : 1. All operational costs, including wages (Minimum Wages Act or any other Act, allowances, victualing, Insu....
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....h the contract to the satisfaction of the Deputy Conservator and shall comply with and adhere strictly to his instructions and direction on any matter (whether mentioned in the contract or not). 12. The tug shall be delivered within 30 days from the date of issue of the Letter of Acceptance, in seaworthy and efficient condition, and should be in possession of all necessary certificates. 13. If the contractor fails to deliver the tug in all respects within 30 days, from the date of issue of Letter of Acceptance, liquidated damages at the rate of Rs. 30,000/- per day will be levied on the Contractor, and if the Tug is not delivered for operation within 60 days from the date of issue of Letter of Acceptance, the contract shall be canceled and EMD forfeited. 14. The Contractor shall obtain necessary clearance, as required from D.G.Shipping, Ministry of Surface Transport, etc. for deploying the tug for service in the port before the tug is put into the service. 15. The steady/sustained Bollard pull of the Tug should not be less than 40 tonnes at the time of delivery. Bollard Pull test certificate should be from Classification society and should not be more than 6 months old ....
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....egoing (1) all taxes, duties, and levies including but not limited to the taxes, duties, and levies imposed on the income of the contractor, its employees or any levies, etc. on any purchase made by the contractors and/or any penalties imposed by any authorities from time to time. 5. Charterers to provide whilst the vessel is on hire fuel, lubricants, water, electricity, port charges, and anti-pollutants. In case of actual fire fighting as ordered by Charterer, the cost of foam/chemicals consumed for the fire fighting will be reimbursed by the Charterer at actuals. 6. The Charterers at port of delivery and the Contractors at port of redelivery to take over and pay for all fuel and lubricants remaining in the vessel at Mangalore. 7. MAINTENANCE AND OPERATION: (a) The vessel shall, during the charter period, be for all purposes at the disposal of the Charterers and under the control in every respect. The Contractor shall maintain Vessel, machinery, appurtenances and spare parts in a good state of repair, inefficient operating condition and in accordance with good commercial maintenance practice and they, shall keep the vessel with unexpired classification of the class/MMD....
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....hen of the vessel, including lawful deck capacity to be at the Charterers' disposal, reserving proper and sufficient space for the vessel's master, Officers, Crew, tackles, apparel, furniture, provisions and stores. 13. The vessel should have a set of competent and qualified Tug Master and Crew, as required by statutory regulation. 14. (a) The Master to execute the Charterer's instructions with the utmost dispatch and to render customary assistance with the vessel's crew. The Master to be under the order of the Charterers as regards employment, agency, or other arrangements. The Contractors to indemnify the Charterers against all consequences or liabilities arising from the Master, Officers, or Agents for their unlawful actions as well as from any irregularity in the vessel's papers. (b) If the Charterers have the reason to be dissatisfied with the conduct or efficiency of the Master, Officer of the crew, the Contractors on receiving particulars of the complaint, promptly investigate the matter and, if necessary, shall make a change in the appointment. However, the Charterers shall have the right to demand the changes of any Master or other crew, which ....
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....s irrevocable Bank Guarantee shall be valid for a total period of 30 months from the date of commencement of service. In the event of the Contractors failing to honor any of the commitments entered 'into under this agreement, the Charterers shall have an unconditional option under guarantee to invoke the said Bank Guarantee and to claim the amount from the Bank. The Bank shall be obliged to make payment to the Charterer upon demand." 27. As per the Charter Party Agreement, Annexure I, the vessel has been taken by the Port Trust for various lawful services required by the chartered Port Trust, including towing, docking, and undocking at the Port round the clock for the contract period of 6 months. The contractor that is the company has to provide the cost or expenses related to the vessel, her master and crew, whereas the charterer to provide fuel, lubricants, water, electricity, port charges, and for antipollutants. The provisions for maintenance and operation are also contained in the agreement. As per clause 7, the vessel shall during the charter period be for all purposes at the disposal of the charterers and under their control in every respect, whereas the maintenance pa....
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....s round the clock throughout the contract period as per condition No.8. The contractor has to comply with the provisions of the Indian Merchant Shipping Act and the law as to licenses/permissions to operate tug. It is the liability of the contractor to pay revised minimum wages to its staff. The contractor shall carry out the work strictly to the satisfaction of the Deputy Conservator, and the tug shall be delivered within 30 days from the date of issue of the letter of acceptance. 32. The charter agreement also provides round the clock services throughout the contract period in clause 3 at the disposal of the port. The contractor has to pay the expenses for the master and crew. As per clause 5, the charterer has to provide whilst the vessel is on hire, fuel, lubricants, water, electricity, port charges, and antipollutants. As per clause 7(a), the vessel shall be for all purposes at the disposal of the charterer and under the control of the contractor, and as provided in clause 7(b) of the charter agreement, the charterer shall have the use of all outfits, equipment, and appliances. No doubt about it that insurance is the liability of the contractor. The indemnification also is t....
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....conditions subject to which it has been made, is not a transfer of right to use the goods, during the period of six months, the contractor has no right to give the vessel for use to anyone else. Thus in view of the provisions inserted in Article 366(29A) (d), section 5C, and definition of 'sale' in section 2 of the KST Act, there is no room for doubt that there is a transfer of right to use the vessel. 35. What constitutes the transfer of right to use tangible property has been dealt with in various decisions. In Bharat Sanchar Nigam Ltd. & Anr. v. Union of India & Ors., (2006) 3 SCC 1, this Court has observed thus: "42. All the sub-clauses of Article 366(29-A) serve to bring transactions where one or more of the essential ingredients of a sale, as defined in the Sale of Goods Act, 1930 are absent within the ambit of purchase and sales for levy of sales tax. To this extent, only is the principle enunciated in State of Madras v. Gannon Dunkerley Ltd. & Co. (Madras) Ltd., AIR 1958 SC 560 (sic modified). The amendment especially allows specific composite contracts viz. works contracts [sub-clause (b)]; hire-purchase contracts [sub-clause (c)], catering contracts [sub-clause (e)] ....
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....re test." 50. What are the "goods" in a sales transaction, therefore, remains primarily a matter of contract and intention. The seller and such purchaser would have to be ad idem as to the subject-matter of sale or purchase. The court would have to arrive at a conclusion as to what the parties had intended when they entered into a particular transaction of sale, as being the subject-matter of sale or purchase. In arriving at a conclusion, the court would have to approach the matter from the point of view of a reasonable person of average intelligence. 73. With respect, the decision in 20th Century Finance Corpn. Ltd. v. State of Maharashtra, (2000) 6 SCC 12, cannot be cited as authority for the proposition that delivery of possession of the goods is not a necessary concomitant for completing a transaction of sale for the purposes of Article 366(29-A)(d) of the Constitution. In that decision, the Court had to determine where the taxable event for the purposes of sales tax took place in the context of sub-clause (d) of Article 366(29- A). Some States had levied a tax on the transfer of the right to use goods on the location of goods at the time of their use irrespective of the ....
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....agreement to transfer the right to use, that the goods are available and deliverable. If the goods, or what is claimed to be goods by the respondents, are not deliverable at all by the service providers to the subscribers, the question of the right to use those goods, would not arise." 36. In a concurring opinion, Dr. A R Lakshmanan, J. in BSNL (supra) observed: "97. To constitute a transaction for the transfer of the right 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 licenses required therefor 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 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 license to use the goods; (e) having transferred the right to use the goods during the period for which it is to be ....
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.... joint intent of the parties is to be discovered from the entirety of the contract and the circumstances surrounding its formation. 14. As is stated in Anson's Law of Contract: "a basic principle of the common law of contract is that the parties are free to determine for themselves what primary obligations they will accept.... Today, the position is seen in a different light. Freedom of contract is generally regarded as a reasonable, social, ideal only to the extent that equality of bargaining power between the contracting parties can be assumed, and no injury is done to the interests of the community at large." There is no dispute with the proposition that the terms and conditions have to be seen as intended by parties, and it has to be based on the objectives, values, and policies that contract is designed to actualize. 39. Reliance has also been placed on the State of A.P. & Anr. v. Rashtriya Ispat Nigam Ltd., (2002) 3 SCC 314 thus: "3. The respondent is owning Visakhapatnam Steel Project. For the purpose of the steel project, it allotted different works to contractors. The respondent undertook to supply sophisticated machinery to the contractors for the purpose of ....
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....e site did not militate against the respondent's possession and control of the machinery. It may also be noticed that even the Appellate Deputy Commissioner, Kakinada, in the order dated 15-11-1999 in regard to Assessment Years 1986-87 and 1987-88, held that under the terms and conditions of the agreement, there was no transfer of right to use the machinery in favor of the contractor. Although it cannot be said that the appellant was estopped from contending otherwise in regard to Assessment Year 1988-89, it is an additional factor and circumstance, which supports the stand of the respondent." It was a case of transfer of right to use the machinery. The High Court held that there was no transfer of right to use the machinery. In the absence of satisfying the essential requirement of section 5-E of the Andhra Pradesh General Sales Tax Act, 1957. What distinguishes the aforesaid case on facts is that the effective control of the machinery even while it 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....
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....stipulations, unless he repudiates them on the grounds that, as he did not know, and could not reasonably be expected to know, of their existence, his assent to them is not to be inferred from his acceptance of the bill of lading without objection. Where there is a charter-party, the bill of lading is prima facie, as between the shipowner and an endorsee, the contract on which the goods are carried. This is so when the endorsee is ignorant of the terms of the charter-party, and maybe so even if he knows of them. As between the shipowner and the charterer, the bill of lading may, in some cases, have the effect of modifying the contract as contained in the charter-party, although, in general, the charter-party will prevail and the bill of lading will operate solely as an acknowledgment of receipt. 50. There is nothing to show that the charter-party was by way of demise. Pacta dant legem contractui - the stipulations of parties constitute the law of the contract. Agreements give the law to the contract. Clause 4, having been a stipulation in the contract evidenced by the bills of lading the parties, could not resile therefrom. It is not clear whether the English Carriage of Goods b....
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....rt has observed thus: "10. The weakness of the argument advanced by the appellant's Counsel consists in its assumption that the charter-party has to be an agreement for the carriage of something like goods, passengers, livestock, or mail. A contract by charter-party, says B.C. Mitra in his Law of Carriage by Sea, Tagore Law Lectures 1972, "is a contract by which an entire ship or some principal part thereof is let to a merchant who is called the charterer, for the conveyance of goods on a determined voyage to one or more places, or until the expiration of a specified period; in the former case it is called a 'voyage charter-party' and in the latter a 'time charter-party'. A time charter, according to the author, is "one in which the ownership and also possession of the ship remains with the original owner and whose remuneration of hire is generally calculated at a monthly rate on the tonnage of the ship. While a voyage charter is a contract to carry specified goods on a defined voyage on remuneration or freight usually calculated according to the quantity of cargo carried,". In Carver's Carriage by Sea, Eleventh Ed., 1963, p. 263, it is stated that "all c....
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....arty or charter by demise or not, depends upon the intention of the parties. It has been observed that certain words in the charter-party are used in the standard forms of the time charter, such as 'let,' 'hire,' 'delivery,' and 'redelivery,' there is no hiring in the real sense. The High Court observed: "55. In the light of the various clauses evidencing the nature of transaction as one of rendering of service only, we have no hesitation in accepting the plea of the assessee that the use of the terms 'let', 'hire', 'delivery' and 'redelivery' are not to be understood in the literal sense of giving effective control and possession to the charterer. On the other hand, the same are referable to the time when the charter begins and ends. Even if the charterers have the right to direct the course that the Vessel will take so long as the Master and the crew remain the servants of the owner and the parties have understood that there is no demise of the ship in favour of the charterer, we do not find any legal ground to sustain the assessment. 59. We have no hesitation in accepting the plea of the assessee that the Tribunal committed a serious error in it....
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....shed and well-understood characteristic features on time charter, in the decision reported in 99 L.W. 517 Transworld Shipping Services (I) (P) Ltd. Vs. Owners & Other, this Court held that in respect of an interim prayer made for arrest of the ship, for the alleged amount due and payable by the charterer to his agent, neither the legal ownership nor the beneficial ownership or equitable ownership was in the hands of the charterer in the case of time charter agreement. Thus this Court viewed that for the amount due and payable by the charterer, unless the relationship of agency had been established between the owner and the charterer, the question of arrest of the ship did not arise. Time charter-party not being the demise of the ship but a contract for hire of services, thus viewed as not resulting in giving possession to the charterer to result in delivery or redelivery as is normally understood or to be literally construed as though on the delivery of the Vessel, the owner lost control to resume the same on the expiry of the period of time charter. Courts have also viewed that 'delivery' and 'redelivery' are not apt words to express the obligations of either party....
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....d William Dickinson & Co. Ltd. The Alresford, (1942) 2 KB 65, has been relied upon in which the question arose of certain cesser of hire for the period occupied in fitting the degaussing apparatus. Since the employment of the ship did not come within the terms of clause 12 of the charter-party, nor did it constitute a breach of contract by the owners. The fact that the owners had the degaussing apparatus fitted while it was waiting to load her cargo did not result in her being withdrawn. It has been observed at the outset that the respective rights and obligations of the two parties to the time charter party must depend upon its written terms, for there is no special law applicable to the particular form of contract. The concept of demise charter parties is becoming an obsolete form of time charter party. The modern form of time charter party is one under which shipowner agrees with the time charterer that during a certain named period, the shipowner will render service as a carrier by his servants and crew to carry the goods which are put on board his ship by the time charterer. The words like, delivery, letting, or hiring are not determinative of the nature of the contract, there....
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....ey would render services by their servants and crew to carry the goods which were put on the vessel by the plaintiffs." Again, the decision is based on the terms and conditions. Merely by employing the crew to render the service by the owner, is not decisive of the nature of charter. 47. In Torvald Klaveness A/S v. Arni Maritime Corporation (The Gregos"), 1993 (2) LLR 335, following observations have been made: "A time charter is a contract under which the owner agrees with the charterer that during a certain specified period he will render services by his servants and crew to carry goods which are put on board his ship by the time charterer. The charterer is free to decide, within the terms of the charter party, what use he will make of the vessel for its duration, e.g., by carrying goods himself or by sub-chartering. The vessel never leaves the possession of the owner, so that references to delivery and redelivery are not strictly accurate, but those expressions are regularly used to identify the time when the charter begins and ends." Merely rendering service by the servants and crew to carry the goods will not make it a service contract. It depends upon the nature of e....
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....The decision lends no support in view of the terms and conditions of the charter-party in question and the general discussion. Otherwise, also, it does not espouse cause concerning whether there is a right to transfer the use of the vessel. 50. In Scrutton on Charter-parties and Bills of Lading, 20th Edn., Section IV dealing with the charter parties, following is the relevant discussion: "Article 28 - Charter-parties by Demise - Classification CHARTER-PARTIES may be categorized according to whether or not they amount to a demise or lease of the ship. A charter by demise operates as a lease of the ship itself, to which the services of the master and crew may or may not be superadded. The charterer becomes for the time the owner of the vessel; the master and crew become to all intents his servants, and through them the possession of the ship is in him Under a charter not by demise, on the other hand, the shipowner agrees with the charterer to render services by his master and crew to carry the goods which are put on board his ship by or on behalf of the charterer. In this case, notwithstanding the temporary right of the charterer to have his goods loaded and conveyed in....
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....ew, or "bareboat charter", where the hull is the subject matter of the charter-party, and (2) charter with master and crew, under which the ship passes to the charterer in a state fit for the purposes of mercantile adventure. In both cases the charterer becomes for the time being the owner of the ship; the master and crew are, or become to all intents and purposes, his employees, and through them, the possession of the ship is in him. The owner, on the other hand, has divested himself of all control either over the ship or over the master and crew, his sole right being to receive the stipulated hire and to take back the ship when the charter-party comes to an end. During the currency of the charter-party, therefore, the owner is under no liability to third persons whose goods may have been conveyed upon the demised ship or who may have done work or supplied stores for her, and those persons must look only to the charterer who has taken his place. 404. Charter-party which is not a demise. Although a charter-party which does not operate as a demoise confers on the charterer the temporary right to have his goods loaded and conveyed in the ship, the ownership remains in the original....
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....cle 366(29A)(d), we find that there is transfer of right to use tangible goods, which is determinative of deemed sale as per the Constitution of India and provisions of section 5C reflecting the said intendment. We are of the considered opinion that there is transfer of right to use exclusively given to charterer for six months, and the vessel has been kept under the exclusive control. The charterer qualifies the test laid down by this court in BSNL (supra). 55. Mr. Mohan Parasaran, learned senior counsel has also referred to New Mangalore Port Harbour Craft Rules, 1976. He has drawn our attention to Rule 4 relating to licensing of Harbour Craft according to which an application has to be filed by the owner, furnishing the required information concerning the vessel/harbor craft. A license has to be produced by Tindal, as per Rule 6, whenever called upon by Deputy Conservator. He has also referred to Rule 8 which provides that in case of change of ownership of licensed harbor craft, the license shall cease to be valid on expiry of six days. Changes in crew or carrying capacity of licensed harbor craft has to be reported to the Deputy Conservator. In case of any alteration in the c....
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....us of sale would be where the goods are delivered for consumption. The second view is, the situs of sale would be the place where the contract is concluded. The third view is that the place where the goods are sold or delivered would be the situs of sale. The fourth view is that where the essential ingredients, which complete a sale, are found in the majority would be the situs of sale. There would be no difficulty in finding out a situs of sale where it has been provided by legal fiction by the appropriate legislature. In the present case, we do not find that Parliament has, by creating any fiction, fixed the location of sale in case of the transfer of right to use goods. We, therefore, have to look into the decisional law. 24. The aforesaid decisions unambiguously laid down that where situs of sale has not been fixed or covered by any legal fiction created by the appropriate legislature, the location of sale would be the place where the property in goods passes. The Constitution Bench held that it was the passing of the property within the State that was intended to be fastened on for the purpose of determining whether the sale was "inside" or "outside" the State. 25. It wa....
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....t given these two postulates, the transaction would fall squarely within the explanation, and yet it would not come within clause (2), for there is no movement of the goods across the border of any State and both the seller and the buyer are in the same place. Surely, the explanation will, 'in praesenti,' govern such cases irrespective of whether Parliament has lifted the ban under clause (2). If these postulates are accepted then by virtue of clause (1) (a) read with the explanation the State of Delhi alone will be entitled to impose a tax on such a sale or purchase and the State of Punjab will be precluded from doing so by reason of the fictional 'situs' assigned to such a sale or purchase by the explanation, although the contract was made, price was paid, and symbolical or constructive delivery of the goods by the handing over of the delivery order took place in Gurgaon in the State of Punjab." We, therefore, find that 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 ....
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....ure to enact a law imposing sales tax on the transfer of the right to use goods. The various subclauses of clause (29-A) of Article 366 permit the imposition of tax thus: sub-clause (a) on transfer of property in goods; sub-clause (b) on transfer of property in goods; sub-clause (c) on delivery of goods; subclause (d) on transfer of the right to use goods; sub-clause (e) on supply of goods; and sub-clause (f) on supply of services. The words "and such transfer, delivery or supply ..." in the latter portion of clause (29-A), therefore, refer to the words transfer, delivery, and supply, as applicable, used in the various sub-clauses. Thus, the transfer of goods will be a deemed sale in the cases of sub-clauses (a) and (b), the delivery of goods will be a deemed sale in case of subclause (c), the supply of goods and services respectively will be deemed sales in the cases of sub-clauses (e) and (f) and the transfer of the right to use any goods will be a deemed sale in the case of subclause (d). Clause (29-A) cannot, in our view, be read as implying that the tax under sub-clause (d) is to be imposed not on the transfer of the right to use goods but on the delivery of the goods for use.....
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.... use goods. But in case of an oral or implied transfer of the right to use goods, it may be affected by the delivery of the goods. 28. No authority of this Court has been shown on behalf of the respondents that there would be no completed transfer of right to use goods unless the goods are delivered. Thus, the delivery of goods cannot constitute a basis for the levy of tax on the transfer of right to use any goods. We are, therefore, of the view that 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 would be the place where the contract in respect thereof is executed. Thus, where goods to be transferred are available, and a written contract is executed between the parties, it is at that point situs of a taxable event on the transfer of right to use goods would occur, and situs of sale of such a transaction would be the place where the contract is executed." 40. A perusal of Explanation 3(d) to Section 2(t) shows that the transfer of right to use any goods would be deemed to have taken place in the State of Karnataka if the go....
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....nsel for the assessees goes thus: Entry 54 of Part II of Schedule VII of the Constitution enables the State to levy "taxes on the sale or purchase of goods other than newspapers ...". Article 366 sets down definitions for the purposes of the Constitution. Clause (29-A) thereof refers to "tax on the sale or purchase of goods," and it includes "(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 consideration". In the submission of learned counsel, having regard to Entry 54 of Part II of Schedule VII, the transfer contemplated by sub-clause (d) of clause (29-A) of Article 366 is a legal transfer of the right in the goods. It has to be a transfer of goods. It has to be permanent. It has to be something like a lease. The giving of goods on hire is not such a transfer and, therefore, falls outside the ambit of sub-clause (d) of clause (29-A) of Article 366. Learned counsel referred to para 40 of the judgment of this Court in Builders' Assn. of India v. Union of India, (1989) 2 SCC 645 which says: (SCC p. 675) "As the Constitution exists today the power of the States to levy ....
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....e Haryana General Sales Tax Act, 1973 [which was similar to Section 2(g)(iv) of this Act] expressly spoke of "transfer of the right to use goods" and not "transfer of goods". In that matter, it was argued on behalf of the assessee that in the case of a deemed sale within the meaning of Section 2(l)(iv), there must be a legal transfer of goods. This argument was rejected by this Court, stating that the levy of tax was not on transfer of the goods itself, but the levy was on the transfer of the right to use such goods for consideration. In our view, the judgment of this Court in Aggarwal case would squarely apply to the present case. In the present case, as stated above, the cylinders filled with medical oxygen/industrial gas were loaned to the customers. The loan was free from the payment of charges for 14 days. The over retention charges were levied after 14 days. In the circumstances, the levy was on the transfer of the right to use the goods for consideration." 62. It was submitted on behalf of appellant that the amendment to Finance Act had been made and a clarification dated 10.5.2008 has been issued that service tax is to be levied on the Charter Party Agreement. Hence it wa....