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Adhishashi Abhiyanta Bhandar Aapoorti & Karyashala Prakhand v. State Of U.P. Thru' Commissioner Trade Tax, U.P. Lucknow - SALES/TRADE TAX REVISION No. 46 of 2007  RD-AH 6085 (4 April 2007)
TRADE TAX REVISION NO.46 of 2007.
TRADE TAX REVISION NO.47 of 2007.
Adhishashi Abhiyanta, Lalitpur. Applicant
The Commissioner, Trade Tax, U.P. Lucknow. Opp.Party.
Hon'ble Rajes Kumar, J.
Present two revisions under Section 11 of U.P. Trade Tax Act (hereinafter referred to as "Act") are directed against the order of Tribunal dated 12th October, 2006 relating to the assessment year, 1994-95 and 1995-96.
Applicant is a Board and instrumentality of the Government of India and engaged various contractors for the execution of its work. For the execution of work, the applicant provided certain machinery, equipment, plant etc in the nature of crane etc to the contractors on hire for the use in the execution of work against the hire charges. Assessing authority levied the tax on such hire charges under section 3-F of the Act on the ground that the applicant has transferred its right to use such machinery, equipment, plant etc., to the various contractors. The order of the assessing authority has been upheld by the first appellate authority and by the Tribunal.
Heard Sri K.C. Sinha, Assistant Solicitor General of India appearing on behalf of the applicant and Sri K.M. Sahai, learned Standing Counsel.
Learned counsel for the applicant submitted that under the terms and conditions, which is Annexure-1 to the supplementary affidavit, machinery, equipments etc., have only been provided to the contractor for use in the execution of work on hire at the desire of the contractor and after the completion of the work, the same has been taken back and, therefore, no element of sale is involved in the present case. He further submitted that at no stage there was any transfer of right to use such goods.
I do not find any substance in the argument of the learned counsel for the applicant. Relevant part of Section 2 (h) and Section 3-F of the Act reads as follows:
"(h) "sale", with its grammatical variations and cognate expressions, means any transfer of property in goods (otherwise than by way of a mortgage, hypothecation, charge or pledge) for cash or deferred payment or other valuable consideration, and include.-
(i) a transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration;
(ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;
(iii) the delivery of goods on hire purchase or any system of payment by instalment;
(iv) a transfer or 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 unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; and
(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 for cash or deferred payment or other valuable consideration;
Explanation-1.- A sale of purchase shall be deemed to have taken place in the State,-
(i) in a case falling under sub-clause (ii) if the goods are in the State at the time of transfer of property in such goods (whether as goods or in some other form) involved in for the execution of the works contract, notwithstanding that the agreement for the works contract has been wholly or in part entered into outside the State;
(ii) in a case falling under sub-clause (iv) if the goods are used by the lessee within the State during any period, notwithstanding that the agreement for the lease has been entered into outside the State or that the goods have been delivered to lessee outside the State.
Explanation II.- Notwithstanding anything contained in this Act, two independent sales or purchases shall for the purposes of this Act, be deemed to have taken place-
(a) when the goods are transferred from a principal to his selling agent and from the selling agent to his purchaser,
(b) when the goods are transferred from the seller to a buyer agent and from the buyer agent to his principal, if the agent is found, in either of the cases aforesaid,-
(i) to have sold the goods at one rate and passed on the sale proceeds to his principal at another rate; or
(ii) to have purchased the goods at one rate and passed them on to his principal at another rate; or
(iii) not to have accounted to his principal for the entire collection or deductions made by him, in the sales or purchases effected by him on behalf of his principal; or
(iv) to have acted for a fictitious or non-existent principal."
"Section 3-F. Tax on the right to use any goods or goods involved in the execution of a works contract.
(1)Notwithstanding anything contained in Section 3-A, or Section 3-AAA or Section 3-D but subject to the provisions of Sections 14 and 15 of the Central Sales Tax Act, 1956, every dealer shall, for each assessment year, pay a tax on the net turnover of-
(a)transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment of other valuable consideration; or
(b)transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract,
at such rate not exceeding twenty percentum as the State Government may, by notification, declare and different rates may be declared for different goods or different classes of dealers.
Relevant clauses of the terms and conditions are reproduced herein below:
"(B) PLANT/EQUIPMENT WHICH MAY BE MADE AVAILABLE TO THE CONTRACTOR ON HIRE.
The details of the Plant/ Equipment available with the Board are mentioned in the Annexure-VIII. These plant/equipment as well as any subsequent arrivals if and when spare, may also be hired to the contractor when requested by him in writing. The following terms shall apply to the plant/equipment given to the contractor on hire.
1.No claim shall lie for the plant/equipment being not made available when required by the contractor, and/or its being made available later, or the plant/equipment being re-entered inoperative in the course of its use.
2.The plant/equipment shall be operated/maintained and repaired by the Board, Watch and ward shall be the responsibility of the contractor unless the hired plant/equipment is brought for parking the Board Workshop premises.
3.The hourly use and idle rates shall be as may be notified by the Superintending Engineer from time to time. Such hourly rates of hire shall include depreciation, repair provision, crew charges, POL, miscellaneous supplies along with supervision and other charges calculated as per the "Report of the Construction Plant and Machinery Select Group" published by C.W.C. Ministry of Irrigation and Power, New Delhi.
4.In case the Plant/equipment is hired for less than a day i.e. It is returned on the same day on which it was taken on hire, the charge for actual hours of use shall be levied without any idle charges.
5.In case the plant/equipment as desired for more than a day, the minimum hours for which the charges shall be levied shall be as under:
(a) 7 hours for single shift working of 8 hours with a break of one hour. (b) 10 hours for 2 shift working.
6.The plant and equipment Fwill not be operated for more than 7 hours in a single shift or more than 14 hours in 2 shift working. If the machinery works for more than 10 hours in 2 shift working the hire charges for the actual hours of working shall be charged.
7. The plant/equipment when hired shall be delivered and taken back at the Boards shed at Rajghat. The contractor shall have to bear their carriage expenses from shed to work site and back. Time taken by a plant/equipment move out from the place of issue to the site of work as also vice-versa shall be intended in the period of hire at hourly use rates if the /equipment moves under its own propulsion.
8. For working out the hire charges more than 15 minutes shall be taken as half hour and less than 15 minutes shall be ignored.
9. The contractor shall release the plant and equipment for periodical servicing, wash out and repairs etc. whenever required. No charges what-so-ever shall be levied on the contractor on this account during such periods and the contractor shall also not be entitled to get any compensation or claim for such periods.
10. The plant/equipment shall be promptly returned if the equipment requires major repairs or when in the opinion of the Executive Engineer the work or a portion of the work for which the same was hired is completed.
11. The plant/equipment shall be used strictly for the purpose and work for which the same is hired.
12. The Superintending Engineer shall have full right to withdraw the plant/equipment hired to the contractor under any circumstances by a written notice of 7 days which shall not be questionable. The return of the plant/equipment from the site of work to the place of issue under these circumstances will also be borne by the contractor.
13. The authorised representative of the contractor at site shall sign the log-book of the plant/equipment daily.
14. The hire charges shall be recovered from the monthly running bills of the contractor.
15. In case of any accident or mishap to the equipment for reasons beyond the control of the Board and caused due to the negligence of or at the instance of the contractor, the cost of damages/replacement shall be recovered from the contractor. The loss of human life if any shall also in the said case be compensated by the contractor.
Food for Work:
The contractor shall give full assistance to the Board in implementation of the Government of India's scheme of Food for Work."
The above terms reveal that the plant, equipments etc., have been given on hire to the contractor for use in the execution of the work awarded by the Board to the contractor. The possession of the equipments,machinery etc., have been delivered by the Board to the contractor for use and, therefore, there was transfer of right to use such equipments, plant and machinery by the Board to the contractor and is a deemed sale under section 2 (h) of the Act. Thus, on the hire charges the applicant is liable to tax under section 3-F of the Act.
In the case of Bharat Sanchar Nigam Ltd. & anr. Versus Union of India & ors reported in 2006 NTN (Vol.29), 307 the decision of the Apex Court in the case of 20th Century Finance Corporation Ltd and another Versus State of Maharashtra (supra) came up for consideration. The quarrel was with regard to the following observation of the Apex Court. "In our view, therefore, on a plain reading of sub-section (d) of Clause (29-A) the taxable event is transfer of right to use the goods regardless to say whether the goods are delivered for use, what is required is that should be in existence so that they may be used." In view of the aforesaid observation, the State was of the view that for the transfer of right to use the goods possession/delivery of the goods was not necessary. This aspect of the matter has been examined by the Apex Court in the case of Bharat Sanchar Nigam Ltd. & another. Versus Union of India & others Reported in 2006 NTN (Vol. 29)-307.
Apex Court explained the above observation in the case of 20th Century Finance Corporation Ltd Versus State of Maharashtra reported in 2000 UPTC 593 and held as follows:
"In our opinion, the essence of the right under Article 366 (29A) (d) is that it relates to user of goods. It may be that the actual delivery of the goods is not necessary for effecting the transfer of the right to use the goods but the goods must be available at the time of transfer must be deliverable and delivered at some stage. It is assumed, at the time of execution of any 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."
In the case of Bharat Sanchar Nigam Ltd & Anr. Versus Union of India & Ors (supra), The Apex Court held that "to constitute a transaction for the transfer of the right to use the goods the goods should be deliverable and should be delivered at some stage.
On the facts and circumstances of the case, the order of the Tribunal is upheld.
In the result, both the revisions fail and are, accordingly, dismissed.
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