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2010 DIGILAW 236 (GAU)

Ashok Kr. Jaiswal v. State of Assam

2010-03-31

ARUN CHANDRA UPADHYAY

body2010
JUDGMENT Arun Chandra Upadhyay, J. 1. The petitioner has challenged the deduction of sales taxes at source by the Indian Oil Corporation, in terms of provisions of Section 27 of the Assam General Sales Tax Act, 1993 read with Rule 15 of Assam General Sales Tax Rules, 1993. I have heard the arguments advanced by Mr. AM Bujar Baruah, learned counsel appearing on behalf of the petitioner and Mr. D. Saikia, learned Standing Counsel, Finance Department, Government of Assam. 2. The facts necessary for disposal of this writ petition may be extracted below: "The petitioner is a registered owner of a public carrier vehicle bearing registration No. AS-23 B-8539. The petitioner having been engaged in the business of operating public service vehicle, provides service of his vehicles to the public against payment." 3. The respondent/Indian Oil Company Ltd. (Assam Oil Division), (hereinafter referred as respondent company), sometime in the year 2001 invited quotation from the owners of public carrier vehicles, seeking service of a 407 Tata Mini Truck. The petitioner being owner of such a vehicle and being interested in providing service, submitted his quotation. By its letter dated 2.11.2001, the Senior Transport Officer of the respondent company, informed the petitioner about the acceptance of his quotation for a period of three years, on 16 hours daily duty basis. The letter so written by the officials of the respondent company indicated the rates, terms conditions etc., for providing the vehicle in question. The relevant extract of the letter so received by the petitioner is reproduced herein below, for the sake of easy reference. "2nd November 2001 Supply of a brand new Tata -407 Pick Up Van (Vanette) for Corporation Services with normal 16 hours duty daily for a period of 3 (three) years. Dear Sir, This is to advise you that your quotation for the above job has been accepted for a period of 3 (three) years on 16 hours duty daily as per the following rates, terms and conditions as mentioned in the Tender Notice No. TC/C-3/2001 dated 20.08.2001. Sl. No Item Unit Rate a) Monthly fixed charge for supply of 1 No. brandnew Tata-407 Pick Up Van with driver and helpers everyday with normal 16 hrs. Sl. No Item Unit Rate a) Monthly fixed charge for supply of 1 No. brandnew Tata-407 Pick Up Van with driver and helpers everyday with normal 16 hrs. duty daily from 7.00 am (Excluding half and Hour lunch break for driver and helpers Each Calendar Month Rs.17,250/- (Rupees seventeen thousand two hundred fifty only) B) Charge per KM Per KM Rs.2.19 (Rupees two and paise nineteen only) c) Overtime Charge Per Hour Rs.15/- (Rupees fifteen only) d) Outstation/food allowance per day if out of station, for more than 8 Hours Per day Rs.20/- (Rupees twenty only) You will require to deposit an amount of Rs. 77,369/- (Rupees seventy-seven thousand three hundred sixty-nine only) as security money. In the meantime, the earnest money of Rs. 23, 000/- (Rupees twenty three thousand only) deposited by you vide Demand Draft No. 703173 dated 11.09.2001 will be converted to security deposit. The balance amount of security money deposit will be recovered from your gross monthly bill @ 10% till the entire amount of the security money deposit (i.e. Rs. 77,369/- is fully recovered. You shall be required to place the vehicle at the Corporation services within 30(thirty) days from receipt of this awarding letter. The vehicle will only be accepted subject to production of Tinsukia and Dibrugarh Road Permit and other valid documents. The vehicle shall be equipped with Spark arrestor, Fire Extinguisher etc. In case of your vehicle remain absent/break down, on any day and in case you fail to provide relief vehicle within 2 (two) hours, the corporation will deduct monthly fixed charge from your bill till the vehicle is placed on duty. In addition to this, the contractor shall be liable to pay Rs. 500/- (Rupees five hundred only) for non supply of the vehicle for full day as penalty on pro rata basis in case of absence part of the day. But in case of relief vehicle, if provided by the Corporation, the entire cost of such relief vehicle will be recovered from the contractor's bill. Please sign the duplicate copy of this letter in token of acceptance of the job with above terms and conditions including those as laid down in the Tender Documents. Mrs. S. Baruah, Senior Transport Officer" 4. Please sign the duplicate copy of this letter in token of acceptance of the job with above terms and conditions including those as laid down in the Tender Documents. Mrs. S. Baruah, Senior Transport Officer" 4. On receipt of the aforesaid letter of acceptance the petitioner complied with the required terms and conditions and completed all necessary formalities and started providing services of a Tata 407 mini truck on and from the month of November 2001, for 16 hrs a day, as required by the respondent company. While doing so the petitioner had to engage his own driver and handyman, for operating the vehicle and also had to refuel and look after the maintenance of the vehicle. It is also contended by the petitioner that in terms of the agreed conditions, in case the given vehicle of the petitioner went out of order or break down, at any specified point of time, during the period of three years, the petitioner would have to provide a replacement vehicle. In the event of failure of the petitioner to provide alternative vehicle the respondent/company would deduct a monthly fixed charge on the vehicle till such vehicle is placed on duty. 5. Learned counsel for the petitioner contended that the petitioner is not liable to pay any sales tax as the transaction between the petitioner and respondent/company is not a sale within the meaning of the Act. However, the respondent company deducted sales tax at source from the petitioner against the whole of the bill amount paid to the petitioner by the respondent company. 6. It is contended by learned counsel for the petitioner that the service of Tata 407 pickup van provided by the petitioner in terms of the contract does not prohibit the petitioner from using the vehicle for any other purpose beyond the period of 16 hrs when the vehicle comes back to the petitioner's custody. Such arrangement clearly indicates that there is no transfer of the right of use of the vehicle, by the petitioner to the respondent/company. 7. Such arrangement clearly indicates that there is no transfer of the right of use of the vehicle, by the petitioner to the respondent/company. 7. The learned counsel for the petitioner further submitted that the letter of acceptance dated 2.11.2001 is a contract, for providing the service of a vehicle and the same cannot be treated to be an 'operating lease' and the nature of transaction between the petitioner and respondent/company is not a transfer of right to use the vehicle in question under any operating lease. Learned counsel further contended that the letter of acceptance dated 2.11.2001 do not indicate any transaction or sale within the meaning of Section 2(33)(iv) of the Assam General Sales Tax Act 1993. 8. In order to appreciate the arguments so advanced by learned counsel for the petitioner it will be appropriate at this stage to quote relevant provisions of the definition of 'Sale' in terms of Assam General Sales Tax Act, 1993, which reads as follows: "Sec. 2(33) "Sales" with all the grammatical variations and cognate expressions means any transfer of property in goods by any persons for cash, deferred payment or other valuable consideration, and includes- (i) Any transfer otherwise than in pursuance of a contract of property in any goods for cash, deferred payment or other valuable consideration; (ii) Any transfer of property in goods (whether as goods or in some other form) involved in the execution of a works-contract; (iii) Any delivery of goods on hire purchase or any system of payment by installments or under a financial lease; (iv) Any transfer of the use of any goods under an operating lease; (v) Any supply of goods by an unincorporated association or a body of persons to a member thereof for cash, deferred payment or other valuable consideration; (vi) Any 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 delivery, transfer or supply of any goods shall be deemed to be sale of those goods by the person making the delivery, transfer or supply and a purchase of those goods by the person to whom such delivery, transfer or supply is made, but does not include a mortgage, hypothecation, charge or pledge; ............. (15) "Goods" means all kinds of movable properties other than newspapers, actionable claims, stocks, or securities. ..................." 9. 'Operating lease' has been defined by Section 2(25) to mean a lease other than financial lease. The term 'lease' has been defined by Section 2(19) of the Act as follows: ""Lease" means any agreement or arrangement whereby the right to use any goods for any purpose is transferred by one person to another whether or not for a specified purpose for cash, deferred payment or other valuable consideration without the transfer of ownership and include a sub-lease but does not include any transfer or hire purchase or any system of payment by installment." Section 2(20) defines lessee to mean a person to whom the right to use any goods for any purpose is transferred under the lease and lessee has been defined by Section 2(21) to mean a person by whom any right to use any goods, for any purpose is transferred under a lease." 10. Learned counsel for the petitioner further pointed out that the total bill amount paid to the petitioner by the respondent/company, for providing service of the vehicle in question include maintenance, servicing, providing food and allowance to the driver and handyman etc., therefore, even if the transaction between the petitioner and respondent/company for providing services of the vehicle is considered to be sale within the meaning of Section 2 (33) of the General Sales Tax Act, 1993, the respondent authorities could deduct sales tax only on the taxable turnover component of the bill amount paid to the petitioner and not on the labour and other components as stated hereinabove. 11. 11. It would not be out of place to point out herein that power to levy sales tax in respect of transfer of right to use and sale or purchase of goods was conferred under State legislature by the 46th amendment of the Constitution of India. The power of the State legislature to impose sales tax on sale or purchase of goods arose from entry 54 of list II of the 7th Schedule of the Constitution of India. By the 46th amendment of Constitution of India, Clause (29 A) was inserted in Article 366 of the Constitution, whereby the scope and ambit of tax on sales and purchase of goods, was widened and tax on the transfer of right to use goods, was included within the purview of the meaning of sales and purchase of goods. 12. In view of the amendment of Article " 366 of the Constitution of India by the 46th amendment of the Constitution, the State legislature could legislate taxing statute to impose tax on the transfer of the rights to use goods, in terms of the Constitutional amendment, as aforesaid. All the State Governments amended their respective definition of sales, by interpreting the language used in the Constitution of India. Accordingly, in the Assam General Sales Tax Act, 1993, also by inserting Section 8(1)(f)provision was made to impose tax in respect of any operating lease at the rates as specified in schedule-7. 13. On careful reading of the aforesaid provisions of law it is abundantly clear that any transfer of use of any goods under the operating lease is a sale. A transfer of goods even for a temporary period is a sale within the meaning of Section 2(33) of the General Sales Tax Act, 1993. 14. Learned counsel for the petitioner emphasized on the fact that no element of transfer is present in the transaction in question to bring it within the purview of definition of sale, as because the service of machinery is alone provided, since the possession of the vehicle in question remained with the petitioner. Learned counsel further contended that although during 16 hrs period, the vehicle was utilized by the respondent/company, however, during such period there was no delivery of possession of the goods by the lessor to the lessee and there was no delivery of petitioner's possession of the vehicle to the respondent/company. Learned counsel further contended that although during 16 hrs period, the vehicle was utilized by the respondent/company, however, during such period there was no delivery of possession of the goods by the lessor to the lessee and there was no delivery of petitioner's possession of the vehicle to the respondent/company. Nevertheless, in fact, undeniable the vehicle in question was delivered to enable the respondent/company to use it during the period of agreement. 15. Learned counsel for the petitioner contended that since the petitioner is required to provide service of the vehicle in question for only 16 hrs in a day, the petitioner would be at liberty to use the vehicle in any manner it liked for the rest of the period beyond 16 hours when the vehicle is not in the service of the respondent/company. Learned counsel contends that this by itself shows that the petitioner has not transferred the right of use of the vehicle to the respondent/company beyond the duty hours. 16. Learned counsel for the petitioner by stretching his analogy regarding duration of use of the vehicle, submitted that since the petitioner would be required to replace the vehicle, in case the vehicle provided by him breaks down or the writ petitioner is unable to provide such vehicle for any reason whatsoever, by itself implies that the petitioner is required to provide service of the vehicle and there is no transfer of right to use of the vehicle. 17. Although, apparently the vehicle in question is provided for the service of the respondent company for a limited duration of time, however, the fact remains that during the time the vehicle is in use by the respondent company the petitioner transfers his right to use the vehicle in question to the respondent/company. Further, providing vehicle for use for a definite period of time everyday for three long years continuously against payment of dues would also fall within the purview of the definition of 'sale'. Therefore, the analogy expanded by the learned counsel for the petitioner cannot be stretched to give a different meaning of the word 'sale' which is defined in Section 2(33) of the Assam Sales Tax Act. 18. Therefore, the analogy expanded by the learned counsel for the petitioner cannot be stretched to give a different meaning of the word 'sale' which is defined in Section 2(33) of the Assam Sales Tax Act. 18. A bare reading of the agreement entered between the petitioner and the respondent/company and various other provisions of the Assam General Sales Tax Act, 1993 and the Rules made thereunder, reveal that transaction entered into by the petitioner with the respondent/company is a lease and thereby tax is payable on the same. Since the aforesaid transaction is not outside the purview of definition of lease, the provisions of Section 27 of the Assam General Sales Tax Act, 1993 would be applicable. 19. In the context of the above discussion similar issue based on almost similar factual matrix was decided by a learned single Judge of this Court in WP(C) No. 178 of 1999 : Peerless Shipping and Oil Field v. State of Assam and series of other cases relating to levy of sales tax at source from the bills of respective petitioners raised for providing transport service through their vehicles such as Ambassador Car/Tata India etc. were disposed of which are relevant in the present context. 20. In the case of M/s. Peerless Shipping & Oil Fields (supra), which is akin to the case in hand, the learned single Judge decided by holding that the petitioners were liable for payment of sales taxes under the relevant financial statutes of the State, with a rider that rate of tax or extent of liability would depend on the facts of each case as per the provisions contained in schedule of the respective Acts. The learned Single Judge elaborately discussing on the question of transfer of right to use any goods observed as follows: "18. The contract in question have been made in respect of specific movable property at the deliverable stage and in terms of such contract those goods/articles have been delivered to the Oil or ONGC. In the agreement relating to the hiring of crane also it is specifically provided that in the event of failure of the contractors to provide the required services quantitatively or qualitatively, in time and efficiently which will otherwise result to substantial losses to the ONGC, liquidated damages as have been quantified shall be charged. In the agreement relating to the hiring of crane also it is specifically provided that in the event of failure of the contractors to provide the required services quantitatively or qualitatively, in time and efficiently which will otherwise result to substantial losses to the ONGC, liquidated damages as have been quantified shall be charged. In case of hiring of service of oil tankers, the petitioners are not to produce other tankers whether they failing or not to deliver the same at the destination point as per the specific instruction as may be provided by the ONGC and the goods should be carried in a sealed state. Any breach of the seal or other damages would necessarily entail liability upon the owner in accordance with the different clauses of the agreement and the terms offered. It is clear, that once this machinery/vehicles are placed at the disposal of the' oil/ONGC which is the subject-matter of the contract, the owner loses the effective control of use over them. 19. Similar matters also came up for consideration before the Apex Court in (1) State of Andhra Pradesh v. Rashtriya Ispat Nigam Ltd., (supra), (ii) Agarwal Brothers v. State of Haryana (Supra) and lastly in Bharat Sanchar Nigam Ltd., (supra). The findings of the apex Court having relevance to the issue are quoted below - (para 84) & Para 97: "As we have said Article 266(29-A) has no doubt served to extend the meaning of the word "sale" to the extent stated but no further. We cannot presume that the constitutional amendment was loosely drawn and must proceed on the basis that the parameters of "sale" were carefully defined. But having said that, it is sufficient for the purposes of this judgment to find, as we do, that a telephone service is nothing but a service. There is no sales element apart from the obvious one relating to the handset, if any. That and any other accessory supplied by the service provider in our opinion remain to be taxed under the State Sales tax laws. We have given the reasons earlier why we have reached this conclusion." "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. We have given the reasons earlier why we have reached this conclusion." "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 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. " 20. Such a question has also cropped up for consideration before a learned single Bench of this Court in the case of HLS, Asian Ltd., v. State of Assam and others and the learned single Judge repelling the contention of the petitioners held in that case that the hiring of Air Line logging and purporting the activities by the petitioners/contractors falls under the Assam General Sale Tax Act, 1993. The aforesaid decision of the learned Single Judge having assailed in Writ Appeal No. 314/2003 the Division Bench, affirming the same dismissed the appeal, vide judgment and order dated 10.11.2006, holding that transfer right to use equipments, plants/machineries are the lease within the meaning of Section 2(33)(4) of the AGST Act. 21. The Apex Court again in the case of Bharat Sanchar Nigam Ltd.(supra) has held down the necessary criteria for determining a transaction to be the transfer of the right to use the goods within meaning of the Act as follows (Para 97). 21. The Apex Court again in the case of Bharat Sanchar Nigam Ltd.(supra) has held down the necessary criteria for determining a transaction to be the transfer of the right to use the goods within meaning of the Act as follows (Para 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 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 licence to sue 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. " 22. From a survey of the various decisions of the Apex Court and of this Court including those of the Division Bench, the legal position relating to the connotation of 'transfer of right to use any goods' has almost been crystalised. In interpreting the clauses of a contract, the real intention of the parties are required to be looked into and mere isolated references to some of the definition of the causes of the contract would not depict the correct legal picture. The petitioners agreed to the terms of the contract incorporated in the relevant clauses with their eyes open and it becomes binding on the parties (Ref. 1990 (1) SCC 731 - Bihar State Electricity Board v Green Rubber Industries). The jural relationship that existed by virtue of entertaining the said contracts between the parties incurs certain statutory liabilities upon the parties. In this batch of writ petitions the terms of the contract on their proper construction, disclose that the transaction in question amounts to transfer of right to use equipments/machineries/vehicles to the Oil/ONGC. The jural relationship that existed by virtue of entertaining the said contracts between the parties incurs certain statutory liabilities upon the parties. In this batch of writ petitions the terms of the contract on their proper construction, disclose that the transaction in question amounts to transfer of right to use equipments/machineries/vehicles to the Oil/ONGC. Accordingly the definition of 'dealer' is attracted in respect of the transaction/agreement arrived by the petitioners and that being a position, the liability for payment of taxes under the relevant financial statutes of the State under references, cannot be denied. However what should be the rate of taxes or extent of the liability, that would depend on the facts of each case as per the provision contained in the Schedule of the respective Acts." 21. In yet another decision of this Court in HLS Asia Ltd. v. State of Assam: 2007 (2) GLT 719 rendered by Division Bench of this Court, the transfer of transaction involving right to use of goods came to be discussed, wherein it was held as follows: "(25) The judicially evolved principles to identify a transaction involving the transfer of right to use goods to be a sale under the Act clearly exclude the indispensability of delivery of physical possession thereof as an essential pre-condition. The other ordained features of such a transaction are, in our considered opinion, present, in the instant case. The equipments, plants and machineries were available and identified by the parties. Under the contract, OIL derived the legal right to use the goods having hired the same on payment of charges. Customs duty had also been paid by it on the equipments imported by the Contractor for executing the works. Under the stringent contractual terms, the Contractor was bound to keep the equipments engaged exclusively for the works. The fact that the same had been operated by its technically qualified personnel does not militate against the element of exclusiveness in the use thereof for the services and benefit of OIL. During the subsistence of the contract, the appellant Company was neither authorized nor permitted to transfer the equipments or detail the same for others. The parties consciously limited the tax liability to the rental component only. (26) The provisions of the Contract understandably have to be construed in the context of the service accorded to be rendered. During the subsistence of the contract, the appellant Company was neither authorized nor permitted to transfer the equipments or detail the same for others. The parties consciously limited the tax liability to the rental component only. (26) The provisions of the Contract understandably have to be construed in the context of the service accorded to be rendered. The transfer of right to use the equipments has to be perceived in the context of the nature, manner and extent of engagement thereof. The retention of physical possession thereof by the appellant Company cannot be decisive. The parties entered into the contract understanding the implications of each and every provision thereof, which according to us, demonstrate an obvious dominion, and control of OIL, over the equipments used by the appellant for the execution of the works during the period of the contract. We, thus, have no hesitation to hold that the transaction in question involved transfer of right to use the equipments, plants and machineries under the lease within the meaning of Section 2(33)(iv) of the Act." 22. A Division Bench of this Court in a series of writ appeals decided on 25.11.2009 together with W.A. No. 138 of 2007 in Dipak Nath v. ONGC (supra) held that transfer of right to use a vehicle taken on lease held to be exigible. In the above referred appeals the Division Bench of this Court after due discussion on the issue observed that it is the features of the contract which will make it abundantly clear that it is the hirer and not the contractor, who has exclusive control and dominion over the vehicle in question during the subsistence of the contract, though, during the aforesaid period, at times, physical possession of the vehicle may come back to the contractor. But if the terms of contract also do not visualize any operation of the vehicle by the contractor thereof, at any point of time during the period of contract, there would no reason to hold that there was no transfer of right to use the vehicle in question by the hirer. 23. Besides, such temporary possession of the vehicle by the contractor does not militate against the transfer of the right to use the vehicle, as already indicated in the decision of the Apex Court in 20th Century Finance Corpn. 23. Besides, such temporary possession of the vehicle by the contractor does not militate against the transfer of the right to use the vehicle, as already indicated in the decision of the Apex Court in 20th Century Finance Corpn. Ltd. v. State of Maharashtra, reported in (2000) 6 SCC 12 , constitutes the taxable event under Article 366(29-A)(d) of the Constitution. In 20th Century Finance Corporation (supra) it has been held that the taxable event occurs on the transfer of the right to use the goods regardless of when or where the goods are delivered and the levy of tax is not on use of goods but on the transfer of right to use the goods. 24. When we notice the terms of contracts pertaining to TATA-407 pick up van, i.e., the vehicle of the petitioner, it appears that vehicle in question remained at the disposal of the respondent No. 4 for 16 hours a day, from 7 A.M. in the morning to 11 P.M. in the evening, for a period of 3 years. The vehicle in question was used exclusively for the purposes of the respondent No. 4. The terms of such contracts also required the TATA-407 to be deployed without any break or disruption. Though the normal working hours were from 7 A.M. to 11 P.M. (16 hours) a day, the above timings however, was subject to change. The vehicle in question also could be put to work beyond the specified hours at the sole discretion of the respondent No. 4 and could also be taken to any out station localities. The terms of payments were stipulated in the contract agreements on monthly basis. However, the rates were subject to revision for any extra-deployment that may be made at any time on any working day at the discretion of the respondent. The terms of the contract also did not visualize any operation of the TATA-407 by the owner thereof at any point of time, during the period of the contract. In fact, the non availability of the vehicle in question on any given day, for deployment in connection with the requirements of the respondents, would have entailed payment of penalty and liability for damages. The above recitals are sufficient to indicate that the terms of the contract are essentially vital for determination of the question of control of the vehicles after the same is hired. The above recitals are sufficient to indicate that the terms of the contract are essentially vital for determination of the question of control of the vehicles after the same is hired. Therefore, by virtue of the contract agreement in question a transfer of the right to use the goods covered by the contract have been contemplated in the absence of any contrary material. 25. However, in view of the above discussion it is abundantly clear that once the vehicle is placed at the disposal of the respondent company, the petitioner thereby surrenders his effective control over the vehicle. When the vehicle is delivered in the custody of the respondent company in terms of the agreement, for use by the company against payment, it will have to be deemed to be transfer of goods, thereby attracting the provisions of the Assam General Sales Tax Act, 1993 for the purpose of deduction of sales tax. In view of what has been discussed above, I do not find any merit in this writ petition and accordingly, the writ petition stands dismissed. However, I pass no order as to costs.