India Switch Company Pvt. Ltd. Vs Deputy Commercial Tax Officer (Madras High Court)
It is stated that the ATM’s facilities are outsourced by the banks and that the petitioner was providing a technology solution to Bank of India and United Bank of India and the terms of the agreement clearly bring the transaction within the meaning of the taxable service of a transaction of ‘transfer of right to use’ within the meaning of the respective enactments and therefore the petitioner was liable to pay TNGST/CST to the commercial tax departments.
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 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.
In the facts and circumstances of the present case, the above test enunciated for “transfer of right to use” is not satisfied. Therefore, the petitioner cannot be subjected to tax under the provisions of the Tamil Nadu General Sales Tax Act, 1959 and/or under the provisions of the Central Sales Tax Act, 1956. In the transactions entered between the petitioner and the banks, the effective control over to ATM’s continued to vest with the petitioner. Since the issue stands fully covered in favour of the petitioner in the above cited decision of the Hon’ble Supreme Court in Bharat Sanchar Nigan Ltd. and another Vs. Union of India and Other (2006) 3 SCC 1 ; 2006 (2) STR 2, these writ petitions deserve to be allowed by quashing the impugned orders.
As a matter of fact, the subject transaction may have been liable to tax under Section 65(105)(zzzzj) of the Finance Act, 1994 with effect from 2008 after service tax was levied on “Supply of Tangible Goods” as about test for “transfer of right to use” is conspicuously absent.
Therefore, the impugned orders seeking to tax the petitioner under the provision of the Tamil Nadu General Sales Tax Act, 1959 and under the provisions of the Central Sales Tax Act, 1956 are quashed with consequential relief to the petitioner.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
By this common order, all the seven writ petitions are being disposed.
2. In these writ petitions, the petitioner has challenged the assessment orders, all dated 15.10.2005, passed by the respondent No.1 for the assessment years 2002-03 to 2004-05 under the provisions of the Tamil Nadu General Sales Tax Act, 1959 and for the assessment years 2001-02 to 2004-05 under the provisions of the Central Sales Tax Act, 1956.
3. The petitioner was issued with the following notices under the provisions of the Tamil Nadu General Sales Tax Act, 1959 and Central Sales Tax Act, 1956 which have culminated in the following impugned orders of the first respondent as detailed below:-.
