Taking of services of operating cranes not amounts to transfer of right to use

Sanghavi Movers Ltd. Vs. State of Maharashtra (Maharashtra Sales Tax Tribunal, Pune)

Maharashtra Sales Tax Tribunal held that taking services of operating cranes from appellant to carry out work does not amount to ‘transfer of right to use’ the cranes. it held as follows:-

i. VAT and CST levied by treating the transactions as transfer of right to use the goods i.e. cranes stands deleted.

ii. As a consequence of conclusion reached above penalty imposed under section 29(3) of the MVAT Act (under MVAT assessment) and section 9(2) of the CST Act read with section 29(3) of the MVAT Act (under CST assessment) stands deleted.

iii. Amount of interest levied under section 30(3) of the MVAT Act under MVAT) and under section 9(2A) of the CST Act read with section 30(3) of the MVAT Act (under CST) shall be re-calculated arid modified In accordance with this determination.

iv. The assessing authority shall, in view of this determination, re­calculate the tax liability after taking into consideration the ount of part-payment already deposited by the appellant.

FULL TEXT OF THE JUDGMENT OF MAHARASHTRA SALES TAX TRIBUNAL, PUNE

1. The present set of Second Appeals is filed by the appellant against the Appeal Orders passed by the Deputy Commissioner of Sales Tax (Appeals), Pune [ in short’ the Appellate Authority] on 31-01-2017 under the Maharashtra Value Added Tax Act, 2002 [ in short ‘MVAT Act’] and the Central Sales Tax Act, 1956 [ in short ‘CST Act’].

2. The appellant was assessed to tax under the MVAT Act and the CST Act for the period 01-04-2008 to 31-03-2009 by the Assistant Commissioner of Sales Tax (Investigation), PUN-INV-D-007, Pune by order dated 31-03­2015. Demand of Rs. 9,15,97,400/- (inclusive of interest & penalty) was raised under the MVAT Act and Rs. 111,10,47,070/-(inclusive of interest & penalty) under the CST Act. These Assessment Orders were confirmed by the Appellate Authority by order dated 31-01-2017.

3. The appellant has made Part-payment of Rs. 30,78,904/- & Rs. 3,73,34,019/-under the MVAT & the CST Act, respectively.

4. Brief facts of the case are as under:

The appellant owns a fleet of 370 cranes of varying capacity. The said cranes are used for erection of Industrial plants, Refineries, Petro-chemical Complexes, Wind Mills, etc. The appellant is registered under the Finance Act vide Registration No. AACCS3775KST001 w.e.f. 16-05-2008 as it is engaged in “supply of tangible goods Services” which is liable for Service Tax under Sec. 66 E (f) of the Finance Act. The appellant is also registered under the MVAT Act & the CST Act vide TIN 27800090300V/C as there are some sales transactions like sale of Scrap, Tyres & Tubes etc. The appellant is approached by the customers with the details of the work to be carried out at the site of the customer. The cranes are deployed at client’s location with the help of specially skilled employees (crane operators & riggers) of the appellant. The responsibility of repairs, maintenance and operation of these lies with the appellant. The expenses relating to the operation and ce of the cranes including salary, wages of operating crew, insurance,related expenses, accommodation expenses, local conveyance and other operating expenses such as spare parts, repairs, etc. of the cranes are borne by the appellant.

According to the Revenue, specific information was received that though the appellant was liable to pay tax on leasing of cranes, such tax was not paid. Therefore, the Investigation Officer visited the Place of Business of the appellant on 03-09-2013. After investigation, notice in F-603 was issued to the appellant to produce the record. In response the appellant produced sales statement, copy of F-704 (MVAT Audit Report), copy of Balance Sheet and photo copies of purchase orders. On verification of this record the Investigation Officer formed an opinion that business activity of leasing of cranes was covered by the definition of “sale” under the MVAT Act and therefore the appellant was liable to pay VAT. On being advised to file Revised Returns, the appellant did not do so. Hence notice in F-302 was issued and proceeding u/s. 23(5) of the MVAT Act was initiated. The appellant neither accepted tax liability nor did it file Revised Returns. Considering these facts the Investigation Officer issued notice in F-315 u/s. 23(6) of the MVAT Act stating therein

-The turnover of sale/ purchases has been incorrectly recorded; or

-Tax has been paid at a lesser rate, or

-The set-off has been wrongly claimed or deduction has been

wrongly made for the period 01-04-2008 to 31-03-2009.

The appellant was directed to attend before the Investigation Officer on 15-03-2015 and produce work orders/ agreements, lease tails of cranes and related books of accounts.

In response to notice in F-315, the appellant submitted reply with letter dated 23-02-2015. The appellant did not further prosecute the matter. Therefore, the Investigation Officer, on the basis of record produced by the appellant, proceeded to assess tax due to the best of his judgment u/s. 23(6) of the MVAT Act. Said order of assessment was passed within limitation prescribed under Sec. 23(6) of the MVAT Act. As mentioned above, the appellant filed first appeals which were dismissed by order dated 31-01-2017. Hence these Second Appeals.

5. It is the contention of the appellant that under the contracts only services were rendered and hence it was liable to pay only Service Tax. Contention of the Revenue, on the other hand, as reflected in the Assessment Order which is confirmed by the appellate authority, is that the contracts entered into between the appellant and his customers in fact resulted in transfer of the right to use in favour of the latter/ hirers and hence the amount received from hirers was exigible to VAT/CST levy.

6. The appellant has also impugned the orders on the grounds of tenability and limitation. According to the appellant, initiation of proceeding u/s. 23(6) of the MVAT Act was unwarranted and misconceived in the absence of cogent material. Further contention of the appellant is that, the Revenue could have at the most proceeded u/s. 23(2) of the MVAT Act but by the time the proceeding was initiated against the appellant limitation prescribed thereunder had expired.

7. Following provisions under the MVAT Act will have to be taken into account while deciding these appeals.

Sec. 2(8) of the MVAT Act defines “Dealer” as follows:

“Dealer” means any person who, for the purpose of or consequential to his engagement in or, in connection with or incidental to or in the course of, his business buys or sells, goods in the State whether for commission, remuneration or otherwise and includes, –

a to (d)  XXXXX

Explanation (i) to (x) XXXX

Exception I. XXXXX
Exception II XXXX

Exception III. – a transporter holding permit for transport of vehicles (including cranes) granted under the Motor Vehicles Act, 1988 (5 of 1988), which are used or adopted to be used for hire or reward shall not be deemed to be a dealer within the meaning of this clause in respect of sale or purchase of such transport of such vehicles or parts, components or accessories thereof.

Sec. 2(24) of the MVAT Act defines “sale” as under:

“sale” means a sale of goods made within the State for cash or deferred payment or other valuable consideration but does not include a mortgage, hypothecation, charge or pledge; and the words “sell”, “buy” and “purchase,” with all their grammatical variations and cognate expressions, shall be construed accordingly;

Explanation– For the purposes of this clause-

(a). XXXX

(b) (i) XXXX

(ii) XXXX

(iii) XXXX

(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) XXXX

(vi) XXXX

shall be deemed to be sale

8. Having regard to the rival contentions interpretation of the contract between the parties shall be of utmost importance. It is settled legal position that while finding out intention of the parties from the clauses incorporated in the contract, the clauses are required to be considered in their entirety.

9. The appellant, during the relevant year, entered into identical contracts with M/s. Suzlon Infrastructure Services Ltd. (in short “Suzlon”) and others. It is not in dispute that during this year major hiring receipts are from Suzlon and therefore consideration of clauses of the contract between the appellant and Suzlon shall suffice.

10. The contract between the appellant and Suzlon contains following contract riders (clauses)

Contract riders (clauses) To PO No.4500084567

1).  If the deployed set of cranes of SML fail to meet SUZLON requirements mentioned in Clause No.3 of Contract riders (clauses), then SUZLON is not liable to make any payments to SML and any advance/mobilization charges paid to SML shall be refunded to SUZLON.

2) The hiring period shall be applicable from the date on which they are put into operation in totality at our site and is certified by our site in-charge. We shall not certify the set of subject cranes with any shortfall either by means of cranes or accessories. In case of discontinuation/ renewal, SUZLON shall inform two months in advance to SML.

3) The cranes shall work for the period from 9 am to 7 pm with one hour lunch break (minimum 260 hours per month).However, shift timings shall be mutually agreed by site in-charge of SUZLON and SML. Any overtime shall be paid proportionately on pro-rata basis.

4). Regarding data of diesel consumption, filling up of the diesel into the crane etc. shall be done by SML representative/ members at site while SUZLON shall provide suitable space required for storing of diesel at site to SML.

5).SML shall submit the fitness certificate and load chart of all the cranes, which is certified by any government approved agency, and this is the prime requirement of this contract. The crane and its operating crew should comply with all statutory requirements like PUC, RTO licenses, etc. and a copy of all such documents should be maintained with the crane, at all times.

6),If SML, is using any Indian parts or carrying out any rectification on Boom etc. locally then, SML shall guarantee for its strength as per the load chart. SUZLON in no case shall be responsible for any liability arising because of failure of cranes / any Indian parts.

7) For inter-site movement of cranes, beyond 100 km., in a single stretch clause no.1 of contract riders (clauses) shall be applicable.

8). The site can be more than one and SUZLON to mobilize the complete set of cranes as per their requirement and charges shall be paid to SML accordingly as per clause 1 of contract rider (clauses). The mobilization period shall be considered as hiring period and in normal circumstances cranes movement shall be considered as 125 km. per day. In emergency situation, SML all ensure crane movement beyond 125 km. per day.

9), If any breakdown occurs while mobilization of cranes, SUZLON shall consider the same as hiring period up to the grace period agreed between SUZLON and SML i.e. if time consumed toward repairing of the cranes is extended beyond the grace period, the crane shall be considered as de-hired for that period.

10). Grace period will be applicable to account for problems like breakdown, border crossing etc., and would be :

1 grace day up to distance of 500 km.

2 grace day up to distance of 500-1000 km.

3 grace day up to distance more than 1000 km.

11).SUZLON shall pay over and above the hiring charges, entry taxes for Karnataka/ Andhra Pradesh/ Tamilnadu and RTO tax for Gujrat state. However, SML shall advise SUZLON the approx. cost towards this per month.

12).Regarding ownership of crane, same shall remain with SML. However, SML cannot use the subject set of cranes for any other party’s job during the contract period unless a written approval is given by SUZLON.

13).All required oil, maintenance, and arrangements like accommodation, lunch, local conveyance (four wheeler), site advance for SML personnel like crane operators, helpers, maintenance men, etc. shall be arranged and borne by SML.

14).All tools, spooners, spanners, slings, slippers and maintenance items required for smooth functioning of the crane shall be arranged by SML.

15).SML shall provide suitable manpower so as to enable SUZLON to take use of cranes for completing 8 to 10 towers per month if 100% material is available.

16).As per our standard terms, since contract duration is for more than one year, de-mobilization charges are not applicable.

17),Insurance of the crane operators/ helpers and crane team members of SML shall be arranged and borne by SML. SML shall provide all necessary safety gear like safety shoes, safety helmet etc., for their personnel. Any safety, health and environment requirements implemented by SUZLON from time to time shall be binding on SML.

18).SML shall make its own arrangements like watch and ward, etc. toward security of their equipment and SUZLON shall not accept any responsibility in this regard.

19).A log book is to be maintained on daily basis by crane operator for working hours of the cranes and it should be signed by site charge / authorized person of SUZLON. In no case SUZLON shall sign log book for more than one day together. This is a prime requirement and to be followed strictly to avoid any misunderstanding or dispute at a later date.

20).SML shall submit their invoice on calendar month basis with detailed certified log book to SUZLON, Pune for the attention of DGM – Purchase and SUZLON shall make the payment within the 15 days after necessary verification. However commitment is for 30 days.

21).The total holidays per month to the observed shall be no. of Sundays of particular month and not necessarily Sundays / national holidays/ festivals in view of uncertainty prevailing in the site work / schedule of materials. In short, crane shall be used for a minimum 26 days a month (10 hour a day) from the date of readiness of crane.

22).The crane shall be required to move from one tower to another as per requirement of SUZLON.

23).The complete set of cranes would be operated within the load chart limits and in case of any different jobs SUZLON and SML shall study the feasibilities and decided accordingly.

24),If the subject crane hired under this contract breaks down during the hiring period, then SML will put the crane back into operation within 24 hours after doing all necessary repairing work. However, if cranes are not repaired within above period, SML shall arrange for alternative crane. The period consumed for repairing shall be considered as de-hiring period.

25).Because of breakdown of any equipment if total set of cranes remains idle then, the breakdown period shall be considered as de-hiring period for whole set that is SUZLON shall make payment to SML for only those equipment which are used by SUZLON during this period.

26).SML has assured to extend full co-operation of their crane crew members keeping in mind September and March end deadline of SUZLON. In short SML crane crew members shall put additional efforts to meet SUZLON requirements during this period.

27). TDS and other taxes shall be deducted from SML bills, as per government rules.

Annexure 1 to P.O. No. 4500084567

1) Sanghavi Movers Ltd. (SML) shall provide set of cranes and trailers (as specified in the table).

2) The subject set of cranes shall be deployed at Sinnar site.

3) The technical specifications of crane requirements are already explained and discussed with SML and SML has assured that the said cranes would be in a position to meet the requirements (as specified in the table) of SISL without any raised platform and without yawing/ rotating the nacelle.

4) The cycle time from Boom down to Boom up of main crane LR1400/ 2 shall be total 32 hours.

5) The cost towards Diesel consumption upto 1800 litres per month for the cranes shall be borne by SISL and in case Diesel consumption increases beyond this limit it shall be borne by SML.

6) The hiring period of subject set of cranes shall be from 01-04-2008 to 31-03-2010.

11. On the basis of aforequoted recitals/ clauses incorporated in the contract the appellant contended that there was no “transfer of the right to use the goods” in favour of the Hirer. On the other hand, it is the contention of the Revenue that from these clauses intention to transfer the right to use in favour of the Hirer would become manifest.

12. In Bharart Sanchar Nigam Ltd and another v/s. the Union of India and others (2006)3 SCC 1 parameters as to what constitutes a transaction for the transfer of the right to use the goods have been laid down in para 97 ( by Dr. A.R. Laxmanan J.) as follows:

“To constitute a transaction for the transfer of the right to use the goods, the transaction must have the following attributes: -there must be goods available for delivery;

-there must be a consensus ad-idem as to the identity of the goods; -the transferee should have a legal right to use the goods-consequently all legal consequences of such use including any permissions or licences required therefor should be available to the transferee;

-for the period during which transferee has such legal right, it has to be to the exclusion of 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;

-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.”

13. The appellant has relied on Rashtriya Ispat Nigam Ltd. v/s. Commercial Tax Officer, Company Circle, Vishakhapatnam (1989 SCC online AP 413). In this case the question which fell for consideration was the scope of exigibility of sales tax under Sec. 5-E of the Andhra Pradesh General sales Tax Act, 1957 on the hire charges collected by a person on supply of Machinery ( including cranes) for execution of its work to any contractor. In para 11 the A.P.High Court dealt with facts of the case as under:

“In the instant case, the petitioner – Rashtriya Ispat Nigam united owning Visakhapatnam Steel Project, for the purpose of the steel project allotted different works of the project to contractors. To facilitate the execution of work by the contractors with the use of sophisticated machinery, the petitioner has undertaken to supply the machinery to the contractors for the purpose of being used in the execution of the contracted works of the petitioner and received charges for the same. The respondents made provisional assessment levying tax on the hire charges under section 5-E of the Act. In this writ petition, the petitioner prays for a declaration that the tax levied by the 1st respondent in purported exercise of power under section 5­E of the Act on the hire charges collected during the period 1988-89, is illegal and unconstitutional.”

The Court observed in para 10

“Whether there is a transfer of the right to use or not is a  question of fact which has to be determined in each case having regard to the terms of the contract under which there is said to  be a transfer of the right to use.”

(Emphasis supplied)

In para 12 the Court referred to stand of the respondent thus:

“The respondents filed a counter-affidavit in support of the levy stating that the validity of A.P. Amendment Act (18 of 1985) which introduced section 5-E of the Act was upheld by the High Court of Andhra Pradesh in Padmaja Commercial Corporation v. Commercial Tax Officer [1987] 66 STC 26; (1987) 4 APSTJ 26. It is further stated that the provisional assessment under section 15 of the Act has been made every month on account of submission of incorrect monthly returns claiming wrong exemption. The petitioner, it is stated, is lending highly sophisticated and valuable imported machinery to the contractors engaged by the petitioner for the purpose of construction of steel project. The machinery like cranes, docers, dumfors, road rollers, compressors, etc., are lent by the petitioner to the contractors for the use in the execution of project wok for which hire charges at specified rate are being collected by it. The machinery is given in the possession of the contractor and he is responsible for any loss or damage to it. The contractor has got every right to use it in his work at his discretion. It is further stated that in view of these clear terms and conditions there is transfer of property in goods for use, for a specific purpose and for a specified period for money consideration. The amounts charged by the petitioner attracts tax liability under section 5-E of the A.P. General Sales Tax Act, 1957.”

In para 7 and 8 the Court referred to the Jurisprudence which covered the contingency which had arisen. It was observed –

para 7– “It is this category of bailment of goods that is the tax base under section 5-E of the Act. The taxable event under section 5-E is the transfer of the right to use any goods. What does this phrase connote?

This means that unless there is a transfer of the right to use the goods, no occasion for levying tax arises; providing a facility which involves the use of goods (n)or even a right to use the goods is not enough, there must be a transfer of that right. “The transfer of a right is an event which has a double aspect. It is  the acquisition of a right by the transferee, and loss of it by the  transferor. The vestitive fact, if considered with reference to the transferee is a derivative title, while from the point of view of the transferor it is an alienative fact.”

(Salmond on Jurisprudence – Twelfth Edition at pages 332 and 333.)                            

  (Emphasis supplied)

para 8. “In Corpus Juris Secundum “transfer” is defined :

“The common use of the word ‘transfer’ is to denote the passing of title in property, or an interest therein, from one person to another, and in this sense the term means that the owner of property delivers it to another person with the intent of passing the rights which he had to it to the latter.” (Emphasis supplied)

(Corpus Juris Secundum, Vol. 87, page 892.)

In para 9 the Court dealt with the attributes of “Transfer of Right to use the goods” as follows:

para 9– “The essence of transfer is passage of control over the economic benefits of property which results in  terminating rights and other relations in one entity and creating  them in another. While construing the word “transfer” due  regard must be had to the thing to be transferred. A transfer of the right to use the goods necessarily involves delivery of possession by the transferor to the transferee. Delivery of possession of a thing must be distinguished from its custody. It is not uncommon to find the transferee of goods in possession while transferor is having custody. When a taxi cab is hired under “rent-a-car” scheme, and a cab is provided, usually driver accompanies the cab; there the driver will have the custody of the car though the hirer will have the possession and effective control of the cab. This may be contrasted with the case when a taxi car is hired for going from one place to another. There the driver will have both the custody as well as possession; what is provided is service on hire. In the former case, there was effective control of the hirer (transferee) on the cab whereas in the latter case it is lacking. We may have many examples to indicate this difference.”

(Emphasis supplied)

In para 14 the Court further observed-

“In our view, whether the transaction amounts to transfer of right or not cannot be determined with reference to a  particular word or clause in the agreement. The agreement has  to be read as a whole, to determine the nature of the transaction. From a close reading of all the clauses in the agreement, it appears to us that the contractor is entitled to make use of the machinery for purposes of execution of the work of the  petitioner and there is no transfer of right to use as such in favour of the contractor. We have reached this conclusion because the effective control of the machinery even while the machinery is in the use of the contractor is that of the petitioner-company. The contractor is not free to make use of the same for other works or move it out during the period the machinery is in  his use. The condition that he will be responsible for the custody of the machinery while the machinery is on the site does not militate against the petitioners’ possession and control of the machinery. For these reasons, we are of the opinion that the transaction does not involve transfer of the right to use the machinery in favour of the contractor. As the fundamental requirement of section 5-E is absent, the hire charges collected by the petitioner from the contractor are not exigible to sales tax.”                                      (Emphasis supplied)

The Court, on the basis of aforesaid facts and legal principles came to the conclusion that providing machinery of whatever description to the contractor by the petitioner in connection with the execution of its work did not amount to transfer of the right to use the machinery and hence imposition of sales tax on hire charges was illegal.

14. It was argued by Adv. Shri. Patkar that on the basis of facts of the case and the law applicable to it the questions whether contracts in question speak of passage of control of the appellant over the economic benefits of cranes and whether the contracts have resulted in terminating the rights of the appellant to receive economic benefits and created the same in favour of the hirers, will have to be answered in the negative.

15. The appellant further relied on judgment in the case of State of A.P and another v/s. M/s. R.I.N.L. ( 2002 3 SCC 314).

In this judgment the Supreme Court considered the challenge by State of A.P. to the judgment of the High Court referred to in preceding paras.

In para 4 the Supreme Court held– “The High Court after scrutiny and close examination of the clauses contained in the agreement and looking to the agreement as a whole, in order to determine the nature of the transaction, concluded that the transactions between the respondent and contractors did not involve transfer of right to use the machinery in favour of the contractors and in the absence of satisfying the essential requirement of Section 5-E of the Act, i.e., transfer of right to use machinery, the hire charges collected by the respondent from the contractors were not exigible to sales tax. On a careful reading and analysis of the various clauses contained in the agreement and, in particular, looking to clauses 1, 5, 7, 13 and 14, it becomes clear that the transaction did not involve transfer of right to use the machinery in favour of contractors. The High Court was right in arriving at such a conclusion. In the impugned order, it is stated, and rightly so in our opinion, that the effective control of the machinery even while the machinery 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 was in his use; the condition that the contractor would be responsible for the custody of the machinery while it was on the site did not militate against respondent’s possession and control of the machinery”.

(Emphasis supplied)

16. It was argued by Adv. Shri. Patkar that in the light of ratio of the judgment of the Supreme Court in the case of R.I.N.L. it will have to be held that in the instant case the Hirers, Suzlon and others, were not free to make use of the cranes or move them out so as to use the same for other projects and obtain economic benefits therefrom.

17. According to the appellant, the Supreme Court, in the case if R.I.N.L. approved in totality what was held in the impugned judgment by A.P. High Court and hence the ratio of the judgment can be properly appreciated only if the jurisprudence applied by the High Court for coming to the decision is also considered. It was further argued that in the matter of R.I.N.L. the machinery (including cranes) was owned by R.I.N.L. and the same was being used by the contractor for the project of R.I.N.L. itself. Specifically for rpose the machinery was to be used by the contractor. However, on the terms of the contract, including the term that the contractor was not free to use the machinery for his other projects, the Court came to the conclusion that R.I.N.L. had not delivered the possession of the machinery with the intent of passing the rights which RINL had in the machinery, to the contractors. In this factual background the Apex Court held that possession of the contractor over machinery in fact amounted to custody.

18. The appellant has further relied on Bharat Sanchar Nigam Ltd (B.S.N.L.) and another v/s. Union of India and others [2006] 3 SCC 1.

In para 76 the Supreme Court considered case of RINL decided by it earlier. It was observed “In State of of Andhra Pradesh and Anr. Vs. Rashtriya Ispat Nigam Ltd. (2003) 3 SCC 214, it was claimed by the Sales Tax Authorities that the transaction by which the owner of certain machinery had made them available to the contractors was a sale. The Court rejected the submission saying that:-

“The transaction did not involve transfer of right to use the machinery in favour of contractors .The effective control of the machinery even while the machinery 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”.

In para 77 the Supreme Court discussed one more case as follows: “But in the case of Agrawal Brothers Vs. State of Haryana and Anr. (1999) 9 SCC 182 when the assessee had hired shuttering in favour of contractors to use it in the course of construction of buildings it was found that possession of the shuttering materials was transferred by the assessee to the customers for their use and therefore, there was a deemed sale within the meaning of sub-clause (d) of Clause 29-A of Article 366. What is noteworthy is that in both the cases there were goods in existence which were delivered to the contractors for their use. In one case there was no intention to  transfer the right to use while in the other there was.”

(Emphasis Supplied)

By relying on these observations it was urged by the appellant that the Supreme Court made a clear distinction between the grant of possession of a thing without any intention to transfer the right to use and grant of possession with the intention to transfer the right to use. It was further urged that in this case the Larger Bench of Supreme Court approved its earlier judgment in the case of R.I.N.L. It was also pointed out that attributes of transactions for the transfer of the right to use illustrated in this judgment by Justice Dr. A.R. Laxmanan still hold the field.

19. According to the appellant, if parameters laid down in the case of B.S.N.L. are applied to the facts of the case the only conclusion which one may logically reach is that there was no discernible sale.

20. The appellant also relied on “The Commissioner of Sales Tax, Maharashtra State v/s. M/s. General Cranes” judgment delivered by Division Bench of Bombay High Court on 21-04-2015 in Sales tax Ref. no. 5 of 2009 in Ref. application no. 72 of 2005. in this case the Tribunal referred following two questions for adjudication of Bombay High Court.

i). Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the respondent is not a “dealer” within the meaning of the term as defined under Sec. 2(4) of the ” Maharashtra Sales on Transfer of Right to Use Any Goods for Any Purpose Act, 1985″ (the ease Act)?

ii). Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in holding the transaction indicated by Bill No. 0-1-1/90 dated 27-07-1990 for an amount of Rs. 1,62,500/- is not a “sale” as defined under Sec. 2(10) of the “the Lease Act” and thereby, inter-alia, holding that it is not liable to tax?

In this case the respondent gave a quotation to Offshore Hook­up and Construction Services (I) Pvt. Ltd. The said company reciprocated by giving terms of acceptance. This correspondence is as follows:

“To,
M/s. Offshore Hook-up and
Constructions Services (I) Pvt. Ltd.
3065, Vasant Vihar,
Dr. C.G. Road, Chembur,
Mumbai-400074.

Attn: Mr. Rakesh Silaichla

Sub : Quotation for hire of mobile cranes with 140

feet Boom

Dear Sir,

As per our discussion with you at your office on 20- 06-90 regarding the above crane for the job at ONGC, Uran, we hereby give you the rates. The crane will be supplied with 140 feet Boom.

Rate:

1). For 10 days of hire Rs. 2,00,000

2) For 15 days of hire 2,50,000

3) For 30 days of hire 3,00,000

The above were the rates which we had given to you at your office. Then as per your request on telephone today, we agreed to hire out the crane to you for 20 days at the rate of 15 days i.e. for 20 days Rs. 2,50,000.

Terms:

(i) You will supply one small crane for extension of Boom and dismantle of Boom when required.

(ii) The working hours of the Crane will be one shift of 12 hours.

(iii) Driver, cleaner diesel and oil will be ours.

(iv) Transportation of accessories will be ours.

(v) The period of hire will start from the time of crane reaches your site (Boom extension and dismantling will be taken at working day.

(vi) Overtime will be calculated on pro-rata basis.

(vii) Working of crane in excess of 20 days will be calculated on pro-rata.

(viii) You will give us, 2 days notice to mobilize our

crane from Bombay.

Payment:

1. 1,00,000 will be paid as advance with work order.

2. Balance amount will be paid on the date of release of crane (on 21st day from the date of reaching site). Awaiting a favourable reply soon.

Thanking you,

Yours faithfully

For General Cranes.

And Acceptance letter dated 22.06.1990 by M/s.
Offshore Hook-Up & Construction Services (India)
Pvt. Ltd,

“Ref: OHCS/GNB/30346/90/695 dated June 22, 1990

M/s. General Cranes,
Near Pitroda Automobile works,
T.J. Road, Sewree,
Bombay-400 015.

ATTN. MR. D.J. PITRADO

Sub: Hire of 75 Tonnes Capacity Mobile Crane with 140 ft.

Boom
Gentleman,

With reference to your quotation dated 21.06.1990 0.H.C.S. is pleased to hire your crane on the following terms and conditions:

1. Shift timing will be from 7.00 am to 7.00 p.m.

2. Diesel will be supplied by you.

3. Overtime working of crane after 7.00 p.m. will be charged on pro-rata basis.

4. Breakdown of equipment will be deducted on pro-rata basis.

5. To & fro travelling charges will be to your account.

6. Minimum period of contract will be 20 days at a stretch. Any extension to be calculated on pro-rata basis.

7. Advance payment of Rs.1,00,000/-(Rupees One Lakh only) will be made after crane reaches the worksite at Uran LPG plant.

8. Roads for working condition of crane will be adequate.

9. Hire charges will commence only from when the Boom is assembled and crane is ready for operation and will cease on written 10. demobilization orders or 20 (twenty) days of operation which is latter.

10. Hire charges shall be Rs.2,50,000/- (Rupees Two Lakhs fifty thousand only) for 20 (twenty) days 12 (twelve) hours shift/day on a lump-sum basis for crane, crane operators and riggers.

You are required to carry the following valid documents in original to the work site and submit copies of the same immediately at our office.

1. Fitness Certificate.

2. Insurance papers.

3. Tax Certificate.

4. Loading Certificate.

5. Tax and Registration book.

In addition, your crane Is to have the following:

1. Spark arrestor for both engines.

2. Radiation Caps.

3. Fuse box covers.

4. Starter Cover.

5. Lockable Diesel Tank Caps.

6. Battery Cover.

7. All lights i.e. Dim/Full headlights, back lights, boom lights in working conditions.

You are requested to mobilize your crane immediately to have it operational at our Uran LPG Plant site by or before 25th June, 1990.

Thanking you,

Yours faithfully,

For OHCS (I) Pvt. Ltd.

sd/-

RAKESH SILAICHIA

ADMN. MANAGER

In this case reliance was placed by the Bombay High Court on the judgments of Supreme Court in R.I.N.L. and B.S.N.L. It was observed- “What would amount to transfer of a right to use any goods for any purpose has been construed by the Apex Court in the case of State of Andhra Pradesh vs. Rashtriya Ispat Nigam Ltd. (supra). The facts in the present case are almost similar with the facts in the case that fell for consideration before their Lordships of the Apex Court. In the said case, the respondent was lending highly sophisticated and Valuable imported machinery to the contractors engaged in the of the project work on specified hire charges. The machinery in the possession of the contractor and he was responsible

for any loss or damage to it, The High Court held that the said transaction would not fall within the meaning of ‘Transfer of right to use any goods’. Upholding the reasoning given by the High Court, the Apex Court observed thus:

“The High Court after scrutiny and close examination of the clauses contained in the agreement and looking to the agreement as a whole, in order to determine the nature of the transaction, concluded that the transactions between the respondent and contractors did not involve transfer of right to use the machinery in favour of the contractors and in the absence of satisfying the essential requirement of section 5-E of the Act, i.e., transfer of right to use machinery, the hire charges collected by the respondent from the contractors were not exigible to sales tax. On a careful reading and analysis of the various clauses contained in the agreement and, in particular, looking to clauses 1, 5, 7, 13 and 14, it becomes clear that the transaction did not involve transfer of right to use the machinery in favour of contractors. The High Court was right in arriving at such a conclusion. In the impugned order, it is stated and rightly so in our opinion, that the effective control of the machinery even while the machinery 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 was in his use; the condition that the contractor would be responsible for the custody of the machinery while it was on the site did not militate against respondent’s possession and control of the machinery. It may also be noticed that even the Appellate Deputy Commissioner, Kakinada, in the order dated November 15,1999 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 favour 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.”

The said judgment of the Apex Court fell for consideration before the Larger Bench of the Apex Court in the case of Bharat Sanchar Nigam Ltd. & Anr. vs. Union of India & Ors., reported in (2006) 145 STC 91(SC). The Apex Court considered the said judgment in paragraph 76, which reads thus:

“76. In State of Andhra Pradesh vs. Rashtriya Ispat Nigam Ltd. (2002) 3 SCC 314, it was claimed by the sales tax authorities that the transaction by which the owner of certain machinery had made them available to the contractors was a sale. The Court rejected the submission saying that :

“…. the transaction did not involve transfer of right to use the machinery in favour of contractors …. The effective control of the machinery even while the machinery 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..”

The High Court then referred to the attributes of “transfer of right to use the goods” as illustrated in para 97 of the judgment in the case of B.S.N.L

In paragrphs 12 and 16 the High Court held thus:

12. “In the judgment, it has been held that to constitute a transaction for the transfer of the right to use the goods, it is necessary that there must be a consensus ad idem as to the identity of the goods. It is further necessary that the transferee should have a legal right to use the goods, all legal consequences of such use including any permissions or licences required therefor should be available to the transferee and for the_period during which the transferee has such legal right, it has to be and to the exclusion of the transferor. The Apex Court held that this is concomitant to the licence to use the goods. The another condition that has been laid down is that 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. It would thus be seen that unless all the requirements are transferred, the  transaction will not come within the meaning of “Transfer of the rights to use any goods”.

(Emphasis supplied)

16. “As already discussed hereinabove, the learned Tribunal has extensively reproduced the terms of contract which are also been reproduced by us hereinabove. Perusal of the terms of contract would reveal that as per the contract, the driver, cleaner, diesel and oil was to be provided by the respondent. So also, transportation of accessories was to be done by the respondent. It can further be seen that there is no provision in the contract that the legal consequences such as permissions or licences were to be transferred to the transferee. The ultimate control over the crane retained with the respondent. We find that the learned Tribunal, applying the judgment of Apex Court, has rightly construed that the transaction which were entered into by the respondent with Offshore Hook Up & Construction Services (I) Pvt. Ltd. would not fall within the meaning of Lease Act and the respondent was not a dealer within the meaning of definition of Section 2(4) of the Lease Act.” 

(Emphasis supplied)

21. It was argued by Adv. Shri. Patkar that in the facts and circumstances of the case ratio laid down in the case of General Cranes shall squarely apply and this Tribunal would be bound by the same. It was further argued that in view of this binding precendent, judgments of other High Courts having persuasive value will not help the Revenue.

22. It was also argued by Adv. Shri. Patkar that though the decision in General Cranes was given by considering provisions of the Lease Act, it would apply to the case in hand with equal rigour since the relevant provisions of the Lease Act and the MVAT Act are in “pari material”.

23. Attention of the Tribunal was further invited to the terms of the contract which were discussed by the High Court para 16 of the judgment which we have already quoted.

24. According to Adv. Shri. Patkar, the contracts entered into by the appellant with various hirers including Suzlon were conspicuously silent about legal consequences such as permissions or licences having been transferred thereby in favour of Hirers and this circumstance would unmistakably lead to the conclusion that there was no transfer of right to use the goods by the appellant in favour of Hirers.

25. Shri. Patkar further argued that it would be incorrect to distinguish the judgment in the case of General Cranes (supra) on the sole ground of cost towards consumption of Diesel which was agreed to be borne by the Hirer i.e. Suzlon upto a certain extent.

26. The appellant further relied on the Commissioner of sales Tax, Maharashtra State v/s. M/s. Rolta Computers & Industries Pvt. Ltd. (Sales Tax Ref. No. 8 of 2000 in Ref. Application No. 56 of 1991 decided on 19-06­2009). The High Court, on facts of the case, concluded that the Tribunal was justified in holding that the impugned transaction did not amount to sale since even after consideration that constructive possession of Computers was given to contractee effective control over the same was retained by the contractor and consequently transfer of right to use computers by the contractor to the contractee could not be held to have taken place so as to bring about discernible sale.

After discussing the attributes of transfer of right to use the goods as laid down by the Supreme Court in the case of B.S.N.L. and the ratio laid down by the Supreme Court in the case of R.I.N.L. the High Court observed while considering question of delivery as contemplated in transactions involving a transfer of right to use the goods, as follows:

“It is clear that though the actual delivery of the goods is not necessary for effecting transfer of 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 was further observed

“Merely because a person agrees to provide service to a particular customer during a particular period of time of day to the exclusion of all other customers for the purpose of convenience, it does not mean that goods have been actually delivered to that partiCular customer to the exclusion of not only other customers but also to the exclusion of owner himself.”

27. It was argued by Adv. Shri. Patkar that in this case, i.e. Rolta, the High Court relied on R.I.N.L. and B.S.N.L. judgments and found that the ratio of these judgments was applicable to the facts of the case. It was pointed out that the High Court concluded that the goods, i.e. Computers and Terminals were always in the possession of the respondents and they were never delivered or handed over to O.N.G.C. With regard to use of these goods during fixed time of the day, the High Court observed that this circumstance was not sufficient to hold that the goods were actually delivered to that particular customer to the exclusion of not only other customers but also to the exclusion of owner himself.

28. The appellant then referred to the case of Walter Buthello of Mumbai and others v/s. Commissioner of Sales Tax, Maharashtra State (Maharashtra VAT Appeal No.s 33 & 37 of 2016 decided on 07­02-2017 by the Bombay High Court). It was submitted by Adv. Shri. Patkar that the appellant is relying on the case of General Cranes which was held to be distinguishable on facts, in this case. It was further pointed out that in this case the High Court, inter-alia, referred to the cases of R.I.N.L. & B.S.N.L. The High Court discussed the facts of the case before it, dealt with these cases and distinguished the case of General Cranes in following paras:

36. “The Pune Municipal Transport has admittedly invited tenders / bids vide its tender notice published on 28th April, 2003. The tender notice was inviting offers and bids to supply medium sized buses for use by the PMT. The terms and conditions on which the buses were being hired are enumerated at Exhibit-8,page 42 of the paper-book. hired for a period of three years at the first instance, which can be extended further for two years at the discretion of the General Manager of the Undertaking. Then it is stated that the tenderer will offer minimum ten buses on hire basis to the Undertaking with specifications, more particularly described in Annexure A to the said document. However, the General Manager reserves the right to accept lesser number of buses. These buses were to operate as stage carriages within the operation area of the Undertaking. The kilometers operated per month will be 6000 minimum, subject to the reasonable daily operation. The tenderer having ready vehicles shall submit details of the vehicles in the format Annexure-B and those who do not have vehicles shall submit details of the proposed vehicles and to be supplied as and when communicated by the Undertaking. The tenderer having their own garage and workshop with parking space will be given preference. The Undertaking 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 ,SALES 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 roadworthy in terms of Chapter VII of the Motor Vehicles Act 1988 and Rules made thereunder from time to time.

(vi) The Tenderer shall supply Fuel, Lubricants, Oil, Tyres and Tubes, Spare parts etc. required for running of the bus at his own cost.

(vii) The Tenderer shall be responsible for damage or loss caused to the hired bus during the period of agitation, accident, etc. Under no circumstance Undertaking be made responsible to any compensation to be awarded by Motor Accidents Clams Tribunal, Tribunals or Courts.

(viii) It is obligatory on the Tenderer to perform related duties in case of the accidents and to inform the Undertaking the event of the accident fatal or otherwise.

(ix) The Tenderer shall be duty bound for payment of Motor Vehicle Taxes and other Taxes and Levies payable on the consequences of the operation of the hired bus to the all concerned.

(x) The Tenderer shall abide by all statutory provisions including those made under various Labour enactments and defend the driver in Criminal and/or Civil Court in any Criminal / Civil liability arising out of any action of court on the part of the driver.

(xi) The Tenderer shall ensure the insurance of all buses covering third party risk, passengers and other property damage including bus. The insurance should be renewed in time.

(xii) The Tenderer shall produce the vehicle for inspection at the time of deployment and also subsequently whenever required by the Undertaking.

(xiii) The Tenderer will have to enter into contract of lease of buses for three years in favour of PMT.”

37 “Then, what is important for our purpose is that there is a calculation of kilometers of hired buses. The Undertaking shall pay hire charges for the actual effective kilometers at the rate to be determined. How the distance would be reckoned is then set out. The calculation is on the basis that the tender shall make available the hired buses for minimum 14 hours a day and in case a bus is not available minimum for 14 hours a day, it will not be counted as a day for the purpose of reckoning the number of days operated in a month. Then, how the cancellation of kilometers, trips for any reason shall be made for actual kilometers operated and that would be reckoned for payment of hire charges. Reliance is strongly placed on term and condition No.13 which says that the tenderer shall have no claim or right whatsoever on stage carriage 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 derive any benefit. In  fact, he has no right thereto. All the specifications,  including the colour would be determined by the PMT. It is in pursuance of this tender notice that the bid was submitted and, as stated above, it was accepted. What has been executed between parties is a lease agreement for hire of buses by the PMT. A copy of this lease agreement is to be found at page 50 of the paperbook. The recitals to these agreements and consistent with the tender state that the PMT intends to expand and augment its existing fleet of passenger buses. That is why it decided to hire passenger buses. That is how it published the tender notice. In response to that and for assisting the PMT, which is a Public Transport Undertaking catering to the needs of commuters in and around Pune City, that the appellants in these appeals forwarded a bid. That was accepted by the General Body of the Municipal Corporation.

39 “The main recitals and covenants in this agreement are that it would come into force only after the buses are handed over by the contractor to PMT as per Schedule B duly registered with the RTO, Pune and permitted by the RTO, Pune to ply on the strength of the stage carriage permits held by PMT. There would be no liability on the PMT till this agreement comes into force. The buses must comply with the specifications enumerated in Annexure A and the number and size of buses to be provided shall be as per Annexure B. The tenure will be for a period of five years from the date of permission to ply the buses of the contractor on PMT permit granted by the RTO, Pune. The hired buses would be registered with the  RTO, Pune in the name of PMT as a lessee and would be  operated as above in terms of and consistent with the  tender conditions, every stipulation incorporated in the form of recitals and covenants of the lessee. This is thus a broad agreement, under which everything enabling the appellant to ply the bus as a stage carrier and to pick up passengers from designated places and to drop them as per the route charted by PMT, abiding by the other covenants, which is envisaged. Thus, the bus and driver may be provided by the appellant, but the conductor is provided by PMT. The driving of the bus would be on the specified / designated routes. Even the halts or stops are decided in advance by the PMT. A complete chart / table / schedule is prepared for plying these buses 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.”

51 “In contrast, in the case before us, we have found and from the contract itself that the hiring of the medium sized buses on kilometer basis by PMT is on the terms and conditions which are appended to the tender notice. The tenderer was to offer minimum ten buses on hire bases to the Undertaking with the specification, particularly described in Annexure-A to the tender conditions. The buses would be hired for a period of three years, which can be extended further for two years at the discretion of the General Manager of the Undertaking. The buses will be operated as stage carriages within the operation area. The tenderer having ready vehicles shall submit details of the vehicles in Annexure-B. The Undertaking will provide conductors with tickets, waybill and other conductor’s equipment. The Undertaking shall have the right to collect fare and charges. The tenderer shall not have any such right or claim over them for any reason whatsoever. Then, the General Manager of the PMT has the sole discretion to identify the routes on which the hired buses shall be deployed. The tenderer must provide the bus with driver possessing valid driving licence with PSV Badge who shall follow the instructions of the authorities of the Undertaking. The tenderer shall provide uniform to the driver as prescribed by the Undertaking. The tenderer shall bear the cost of the driver, including his wages, daily allowance and meet all statutory obligations, but he shall not employ a person as a driver for operating any bus or hire people who have been removed or dismissed / retired on superannuation from the service of the Undertaking. The tenderer shall be duty bound for payment of motor vehicle tax and other taxes and levies on the operation of the hired buses to all concerned. It is the tenderer who shall ensure the insurance of all buses covering third party risk to passenger and to property damage, including buses which had been renewed from time to time. The tenderer should produce the vehicle for inspection at the time of deployment and also subsequently whenever required by the Undertaking. The specification of the buses to be hired would be as per Annexure A. The buses shall be painted as per PMT colour code and shall 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.”

57 “In the case of the Division Bench judgment of our Court, namely, Commissioner of Sales Tax,  Maharashtra State vs. General Cranes (supra), the Division Bench was not dealing with the MVAT Act, but Maharashtra  Sales Tax on Transfer of Right to use any goods for any purpose Act, 1985 (for short “Lease Act”). The question was whether the respondent M/s. General Cranes is a dealer within the meaning of that term as defined in section 2(4) of the Lease Act. The respondent before the Division Bench was in the business of hiring cranes. It filed an application under section 8 of the Lease Act for determination of the 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 pre­requisite, the Division Bench naturally reproduced the terms and conditions of the contract between M/s. General Cranes and M/s. Offshore Hookup & Construction Services (India) Private Limited. In paragraph 8 it reproduced the entire deal and after referring to the settled test, namely, whether the effective control of the machinery even when it was in use of the contractor, remained with the company or not and secondly, whether the contractor was free to make use of the machinery for the works other than the project work of the company or move it out during the period the machinery was in his use. Thus, all the tests as emerging from Bharat Sanchar Limited vs. UOI and from the earlier judgment in the case of State of A.P. vs. Rashtriya Ispat Nigam Limited reported in (2002) 3 SCC 314, were considered. The Division Bench held that there should be a legal right to use the goods and all legal consequences of such use, including any permissions or licences required,therefore, should not be available to the transferor and for the period during which the transferee has such legal right, it has to be and to the exclusion of the transferor. The Division Bench held that unless all the requirements are satisfied, the transaction will not come within the purview of the transfer of right to use any goods. The Division Bench, therefore, held that the contract has been extensively referred in the Tribunal’s order. A perusal of these terms would reveal that the driver, cleaner, diesel and oil was to be provided by M/s. General Cranes. The transportation of accessories was to be done by M/s. General Cranes. There is no provision in the contract that legal consequences such as permissions or licences were to be transferred to the transferee. The ultimate control over the cranes was retained by M/s. General Cranes. It is in these circumstances that the Division Bench came to the conclusion that the Tribunal’s order was proper.”

58 “Our case is clearly distinguishable on facts. It is not on par with M/s. General Cranes. Our extensive reference to the terms and conditions of the contract yes us in no manner of doubt that it is the PMT alone which can use the hired buses. They cannot be put to use by the appellant privately nor he can divert the user in contravention of the directions of the PMT. The exclusive possession is with the PMT. All the licences, permissions  and the benefit thereof is transferred to the PMT. Nothing  insofar as the hired bus is concerned remains within 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.”

The High Court while dealing with an argument of the appellant that he was not a dealer within the meaning of Sec. 2(8) [ Exception No. III] of the MVAT Act held as follows:

64 “These clear stipulations in the agreement, therefore, would denote that it is not the appellant and who is supplying buses to the PMT who can be said to be independently operating them. He is not holding a permit for transport vehicles, including cranes, granted under the Motor Vehicles Act, 1988, though the vehicles may be used or adopted to be used for hire or reward by the PMT. Moreover, given the clear understanding that the registration with the RTO will be in the name of the Pune Municipal Transport and it is the PMT which is termed as the permanent holder, then, the first part of the exception in this case is not satisfied. The Department / Revenue proceeded against the appellant because it•vvas not a case of sale of the buses or parts, components or accessories thereof. Thus, even the second part of 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 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 sub clause (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 (Maharashtra Act No.IX of 2005).

(Emphasis supplied)

29. It was argued by Adv. Shri. Patkar that in the case of Walter Buthello exclusive possession of the buses was with the PMT, all the permissions qua the economic benefits flowing therefrom stood transferred in favour of PMT, the appellant stood totally excluded from the use , possession and control of the buses and in view of all these proven facts the High Court held that it was a case of transfer of right to use the goods.

30. According to Adv. Shri. Patkar facts of the case in hand are almost identical with the facts in the case of General Cranes and , therefore, judgment in this case would be governed by what is held in the case of General Cranes.

31. Shri. Patkar reiterated that the jurisprudence applicable to the concept of transfer of right to use goods as discussed in the case of R.I.N.L. by the A.P. High Court and which was approved by the Supreme Court in appeal will squarely apply to the facts of the case in hand. It was further reiterated that settled legal position is that the essence of transfer of right to use the goods is passage of control over the economic benefits of property which results in terminating rights and other relations in one entity and creating them in another. It was also reiterated that while construing the word “transfer” due regard must be had to the thing to be transferred, a transfer of the right to use the goods necessarily involves delivery of possession by the transferor to the transferee but delivery of possession of a thing must be distinguished from its custody since it is not uncommon to find the tranferee of goods in possession while the transferor is having custody.

32. The appellant further referred to the case of The Great Eastern Shipping Co. Ltd. v/s. State of Karnataka and others (judgment dated 04-12-2019 delivered by the Larger Bench of the Supreme t in Civil Appeal No. 3383 of 2004). In this case, in para 39, the ourt reproduced paras 3 & 4 of the judgment delivered in the case of R.I.N.L. by Supreme Court. The Court, with regard to what was held in the case of R.I.N.L. observed-

39. “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 5E 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 was in his use; the condition that the contractor was responsible for the custody of the machinery, did not militate against the company’s possession and control. It was a case of hiring of the machinery for a specific purpose on specified hire charges. The Charter Party Agreement is different in the present case.”

Relying on aforequoted observations Adv. Shri. Patkar submitted that this case (the Great Eastern Shipping) is clearly distinguishable on facts as enumerated in para 33 & 34 of the judgment.

33. “When we peruse the various terms and conditions of the Charter Party Agreement (Annexure I), clause 1 provides that the contractors “let” and the charterer “hire” the goods vessel for six months. The expression ‘let’ has been used, and the vessel most nificantly during the charter period has been placed at the “disposal” of the charterers and under their control in  every respect. The charterers have been given the right to use all outfits, equipment, and appliances on board the vessel at the time of the delivery, including the whole reach, burthen, and deck capacity. Thus, in our considered opinion, merely by providing the staff, insurance, indemnity, and other responsibilities of bearing officials costs, effective control for the entire period of six months has been given to the charterers. It is a case of transfer of right to use the vessel for which certain expenses and staff are to be provided by the contractor, which is not sufficient to make out that the control and possession of the vehicle are with the contractor. The possession and control are clearly with the charterer. As in essence, it has to be seen from a conjoint reading of various conditions whether there is a transfer of right to use the vessel. In our considered opinion there is not even an iota of doubt that under the charter agreement coupled with the instructions to tenderers, general conditions and special conditions for the contract as specified in the tender documents and charter party clauses, there is a transfer of right to use the vessel for the purposes specified in the agreement.”

34. “To constitute a transaction for the transfer of right to use of goods, essential is, goods must be available for delivery. In the instant case, the vessel was available for delivery and in fact, had been delivered. There is no dispute as to the vessel and the charterer has a legal right to use the goods, and the permission/licence^,has-been made available to the charterer to the exclusion of the contractor. Thus, there is complete transfer of the right to use. It cannot be said that the agreement and the 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.”

33. According to Adv. Shri. Patkar, though in the case of the Great Eastern Shipping the Apex Court did not make specific observations about the passage of economic benefits from the Great Eastern Shipping to the New Mangalore Port Trust qua the Hire of Tug, still, from the text and tenor of the contract it could be inferred that the control over the economic benefits of the impugned Tug, Kumari Tarini, got passed on to the New Mangalore Port Trust.

34. On behalf of the appellant, with regard to various clauses/ riders incorporated in the contracts, following submissions were made.

i). Clause No. 1 stipulates that if the deployed set of cranes of Sanghavi Movers Ltd. (for short SML) fail to meet requirements of Suzlon Infrastructure Services Ltd. (for short SISL) mentioned in clause no. 3 of contract riders (clauses) then SISL is not liable to make any payments to SML and any advance/ mobilization charges paid to SML shall be refunded to SISL. Clause No. 3 prescribes the time for which the cranes should work. This clause stipulates that SISL is not liable to make any payment if the deployed set of cranes of SML fail to meet the requirements of SISL as regards things.

ii). Clause 2 speaks about the starting point of hiring period and that the payment hire charges would start only after the cranes are put in operation. Therefore, on the day on which the cranes/accessories reach the site and are made operative, the site-in-charge of SISL was to certify this fact.

iii). Mere placement of cranes and accessories by SML on the site of SISL, contrary to what has been submitted by Revenue, shall not amount to delivery in the eye of law. Mere mention of Delivery Address and reaching of the goods on the said address cannot be equated with delivery in the eye of law. Even in the case of “General Cranes” the cranes were to be reached on the given address. Such deployment was not held to be delivery. Submission of Revenue that reaching the cranes on the given address of SISL would      amount to delivery and certification made by SISL to this effect would amount to acceptance cannot be sustained in the eye of law in view of ratio laid down in General Cranes . The distinction made in the case of R.I.N.L. (A.P. High Court) between possession of a thing and custody will have to be kept in mind. It needs to be stressed that ruling of A.R. High Court in the case of R.I.N.L. was approved by the Supreme Court. While distinguishing the case of R.I.N.L. with the case of Agarwal Brothers, the Supreme Court observed that in one case there was no intention to transfer the right to use while in the other it was. Stand of the appellant that it had not given legal possession of the cranes to SISL stands established on the basis of facts of the case and law applicable thereto. Operation of cranes is a skilled job. Crane can be operated only by a trained operator. The appellant has been imparting training to operators by running a school. Considering the t that the cranes in question are being operated by persons in the employ of, and trained by, the appellant clearly goes to show that possession in the eye of law was never given to SISL (or other Hirers)

iv). Clause 4 is regarding data of Diesel consumption, filling of Diesel in cranes etc. The filling of Diesel in cranes was to be done by representative/ employee of the appellant present on the site while suitable space for storing Diesel at site of SISL was to be provided by SISL. This clause only shows that space for storing of Diesel was to be provided by SISL only as a facility. This will not lead to the conclusion that there was a transfer of right to use the goods in favour of SISL.

v) Clause 5 lays down that SML shall submit the fitness certificate and load chart of all the cranes which are certified by any Government approved agency. This clause specifies that this will be the prime requirement of the contract. This clause further lays down that the cranes and their operating crew shall comply with all statutory requirements like PUC, RTO licences etc. and a copy of all such documents shall be maintained with the cranes at all times. The purpose behind incorporating this clause was to make all necessary documents relating to the cranes instantly available to the concerned authorities for inspection. It needs to be noted that this clause does not talk about transfer of any such licences in favour of SISL nor does it talk about use of any of these licences by SISL. In view of these factual aspects two important attributes of transfer of right to use as stipulated in the case of S.N.L. are absent in the instant case. These attributes are as follows:

c. ” the transferee should have a legal right- consequently all legal consequences of such use including any permissions or licences required therfor should be available to the transferee;

d. ” for the period during which the transferee has such legal right, it has to be to the exclusion of 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………. “

This clause (clause No. 5) nowhere suggests that permissions and licences required for using the cranes were available to SISL during the contract period, and that too, to the exclusion of SML. Similar clause was there in the case of General Cranes which stipulated as follows:

” you are required to carry the following valid documents in original to the work site and submit copies of the same immediately to our office.

1. Fitness Certificate

2. Insurance papers

3. Tax Certificate

4. Loading Certificate

5. Tax and Registration Book.

After considering this particular clause and the entire agreement the High Court (in the case of General Cranes) observed­”

It can be further seen that there is no provision in the contract that the legal consequences of such permissions or licences were to be transferred to the transferee. The ultimate control over the crane remained with the respondent.”

vi). Clause 6 stipulates that if SML is using any Indian parts or carrying out any rectification on Boom etc. locally, then, SML shall guarantee for its strength as per the load chart and, SISL in no case shall be responsible for any liability arising due to failure of cranes/ any Indian parts. Had the parties intended to transfer right to use the cranes, liability arising out of the contingency mentioned in this clause, would have been fastened on SISL.

vii)According to the Revenue conjoint consideration of clauses 7,8 and 22 shall unmistakably lead to the conclusion that SML had transferred the right to use the cranes in favour of SISL. As per clause 7 for inter-site movement of cranes beyond 100 km. in a single stretch clause No. 1 of contract riders was to apply. As per clause No. 8 the sites could be more than one and SISL was to mobilize the complete set of cranes as per their requirement and charges of mobilization were to be paid to SML as per clause 1. The mobilization period was to be considered as hiring period and under normal circumstances crane movement was to be considered as 125 km. per day. In emergency situations SML was to ensure movement of cranes beyond 125 km. per day. As per clause 22 the cranes were to be moved from one tower to another as per requirement of SISL.

According lo We appellant, clause 7,8 & 22, when read together conclusively establish that no right to use the cranes was transferred by SML to SISL. Though the cranes were to be moved from one site to another as per requirement of SISL, charges of mobilization were to be paid by SISL to SML. There were number of locations for erecting windmill towers and hence mobilization as per requirement of SISL from one location to another was necessary.

viii). As per clause 9 period of breakdown occurring during mobilization of cranes from one location to another was to be onsidered as hiring period upto the grace period agreed between the parties. However, if time consumed for repairs extended beyond the grace period the same was to be treated as de-hired period. This clause supports the contentions that the cranes were always in possession and control of SML. Similar clause was also construed accordingly in the case of General Cranes.

ix). Clause 10 provides for grace period in case problems like breakdown, border crossing etc. arise. As per this clause upto the distance of 500 km. there was to be 1 grace day, upto the distance of 500-1000 km. there were to be 2 grace days and for distance of more than 1000 km. there were to be 3 grace days. This clause, read with clause No. 9, reinforces contention of the appellant (SML).

x) As per clause 11 Entry Taxes for three States and RTO Tax for Gujrat were to be paid by SML(in the first place) and SML was to advise SISL about the approximate monthly cost of the same. Under the Entry Tax laws of the respective States the incidence of tax is always on the person who brings the goods into the territories of those States for sale, consumption or use. Though the Entry Taxes were to be paid in the first place by SML the same were to be then reimbursed to it by SISL.

xi). As per clause 12 ownership of the cranes was to remain with SML. However, SML could not use said set of cranes for any other party’s job during the contract period unless written approval was given by SISL. The latter part of this clause shows that SML was not totally precluded from using this set of cranes for the job of other party though only with written approval from SISL. This clause needs to be construed, inter-alia, in the light of following observations made by the Bombay High Court in the case of ‘ Rolta Computers’.

“Merely because a person agrees to provide service to a particular customer during particular period of time of day to the exclusion of all other customers for the purpose of convenience, it does not mean that goods have been actually delivered to that particular customer to the exclusion of not only other customers but also to the exclusion of owner himself”.

xii). Clause 13 stipulates that all required Oil, Maintenance and arrangements like Accommodation, Lunch, Local Conveyance (Four wheelers), site advance for SML personnel like crane operators, helpers and maintenance men, etc. shall be arranged and borne by SML. This clause, also supports contention of the appellant that the cranes were in their possession at all times. Similar clause was construed accordingly in the case of General Cranes (supra). In the case of General Cranes the provision of oil, driver, cleaner (crane operators and helpers) in addition to Diesel, was also made a basis of the judgment.

xiii). As per clause 14 all tools, spanners, slings, slippers and maintenance items required for smooth functioning of the crane were to be arranged by SML. There was identical clause in the case of General Cranes. In the case of General Cranes the maintenance items were –

1. Spark Arresters for both Engines

2. Radiation caps

3. Fuse Box Covers

4. Starter Covers

5. Lockable Diesel Tank Caps

6. Battery Cover

7. All lights i.e. dim/ full head lights, back lights, Boom

Lights in working condition.

Considering this clause, along with other clauses, the High Court in the case of General Cranes held that there was no transfer of right to use goods.

xiv). As per clause, 15 SML was to provide suitable manpower so as to enable SISL to take use of cranes for completing 8-10 towers provided 100% material was available. This clause again supports the contention of the appellant that possession and control of the cranes was with them. In the case of General Cranes similar clause was construed accordingly.

xv). Clause 16, which refers to de-mobilization charges, will have no bearing on the point in issue i.e. whether or not SML had transferred the right to use the goods in favour of SISL.

xvi). As per clause 17 insurance of the crane operators/ helpers and crane team members of SML was to be arranged and borne by SML. In addition, SML was to provide safety gears for their personnel. Any safety, health and environment requirements implemented by SISL from time to time were binding on SML. Similar clause was there in the case of General Cranes and the High Court found that it, considered along with other clauses, led to the conclusion that there was no transfer of right to use the goods since possession and control over the goods was retained by General Cranes.

xvii). As per clause 18, SML was to make its own arrangements like watch & ward, etc. towards security of their equipment and SISL was to have no responsibility in that behalf. This clause is also consistent with the contention of the appellant that the appellant had control over the cranes and the same were in the possession of the appellant.

xviii). As per clause 19, crane operator of SML was to maintain daily log book stating therein working hours of cranes and the same was to be signed by site in-charge/ authorized person of SISL. In no case SISL person was to sign the log book for more than one day together. This was a prime requirement and it was to be followed strictly to avoid any misunderstanding/ dispute at a later date. This clause shows that the appellant was rendering services to SISL by deploying cranes. Consequently, it was only logical that log book was maintained by SML to claim remuneration for services rendered by them.

xix). As per clause 20, SML was to submit their invoice on calendar month basis with detailed certified log book to SISL, Pune for the attention of D.G.M.- Purchases and SISL was to make payment within 15 days of making verification. However, the commitment was for 30 days. This clause will have no bearing on the point in issue.

xx). Clause 21 is in respect of holidays and daily working hours. This clause, too, will have no bearing on the point in issue.

xxi). Submission is made together on clauses 7,8 & 22.

xxii). As per clause 23 the complete set of cranes was to be operated within the load chart limits and in case of different jobs SML & SISL were to study feasibility and take a decision.

xxiii). As per clause 24, the subject cranes, in the event of breakdown during hiring period, were to be repaired and put back into operation within 24 hours. In the event of failure to carry out necessary repairs SML was to arrange for alternative crane. The period consumed for repairing was to be considered as de-hiring period. This clause will also show that the cranes were in the possession and control of the appellant.

xxiv). As per clause 25, the period during which equipment/ total set of cranes remained idle due to breakdown, was to be considered as de-hiring period for whole set i.e. SISL was to make payment to SML for only those equipments which were used by SISL during this period. This clause also strengthens contention of the appellant regarding its possession and control over the crane. While construing this clause it will have to be kept in mind that SISL never used these cranes by themselves. The cranes were being used by SML to carry out job of SISL.

xxv). As per clause 26, SML had assured to extend full co­operation of their crane crew keeping in mind September and March End deadline of SISL. In short, SML crane crew were to make additional efforts so that SISL could meet these deadlines. This clause was incorporated because SISL was erecting towers at different sites.

xxvi). Clause 27 refers to deduction of TDS and other taxes from SML bills, as per Government rules. SISL has, as per this clause, deducted at source the Income Tax payable by SML.

So far as additional clauses contained in Annexure 1 are concerned, we have already reproduced the same hereinabove.

Clause 5 is important. Regarding this clause contention of the appellant is that SISL had agreed to bear the cost of Diesel upto 1800 litres per month and cost of consumption of Diesel in excess of this limit was to be borne by SML. SISL wanted to restrict Diesel consumption and estimated that the consumption would not exceed 1800 litres per month. Keeping in view this aspect rate of services to be rendered by SML was negotiated. This was only a commercial bargain. In every case the Hirer does not bear cost of Diesel and in those cases the appellant is required to bear the cost. Rate is fixed accordingly. The appellant entered into contract during the relevant period with another company- Enercon. As per the contract with Enercon, Diesel was to be supplied by the appellant and the rate for crane hire was fixed accordingly.

The appellant has placed on record following documents.

1. Documents of crane repairs and maintenance

2. Diesel Expenditure Ledger

3. Oil for cranes Expenditure Ledger

4. Freight Ledger

5. Safety Material and Insurance Ledgers (Insurance of cranes and workmen)

36. On the basis of above discussed facts (including contract riders/ clauses) and law cited on behalf of the appellant, Adv. Shri. Patkar contended that the only conclusion that can be drawn would be that there was no transfer of right to use the goods by the appellant in favour of SISL and other Hirers.

37. In reply, it was submitted by Special Counsel for the Revenue Shri. Dawane that as per clause 2 the hiring period started from the date on SISL and the appellant had put entire set of cranes in operation at the site of he equipment was duly certified by site in-charge/ authorized person. Thus, there was delivery of cranes by SML and acceptance thereof by SISL.

38. It was further argued by Shri. Dawane that from conjoint consideration of clauses 7, 8 & 22 it can be clearly gathered that after delivery of goods by SML, SISL was free to move goods i.e. cranes from one site to another as per their requirement. This circumstance clearly shows that SISL had full control over the cranes.

39. According to Shri. Dawane as per clause 12 though the ownership of SML over the cranes was recognized, it was further stipulated in the said clause that the appellant could not use the subject set of cranes for any other party’s job during the contract period unless a written approval was given by SISL. Thus, this clause will bolster contention of the Revenue that full possession and control over the set of cranes was that of SISL.

40. It was further argued by Shri. Dawane that perusal of the contract will show that it was an agreement for hiring or leasing of cranes. The contract period was 2 years. The cranes were to be put to actual use by SISL for 10 hours a day. Considering all these circumstances it was obvious that the cranes were leased and since then control over the cranes was exclusively that of SISL during the contract period.

41. Dawane then invited attention of the Tribunal to clause 5 of the contract. As per said clause, the cost towards Diesel consumption upto 1800 litres per month was to be borne by SISL and additional cost i.e. cost for consumption of Diesel in excess of 1800 litres per month was to be borne by SML. Thus, primarily the Diesel cost was to be borne by SISL, cranes were installed and commissioned at the site of SISL and the work was to be carried out as per their requirements. All these circumstances taken together will lead to the conclusion that there was transfer of right to use the cranes in favour of SISL by SML.

42. It was further argued by Shri. Dawane that crane operators were to be provided by SML, repairs to the cranes were to he carried out by SML, SML crew was to follow the directions, orders and instructions issued by authorized person/s of SISL in respect of operation timings, movement of cranes etc. and the only conclusion which can be reached from these terms is that effective and general control over the cranes had passed on to SISL and possession of SISL over these cranes could never be equated with mere custody.

43. While summing up its various contentions with regard to clauses of the contract, Revenue has made a written submission in Paper Book 3(para 13, 14 & 15) as follows:

13. “In short, the cranes are specifically identified by both the parties. The make and capacity of set of cranes and trailers is also specified in the contract. As per the directions of M/s. SUZLON, the cranes are delivered at the sites of M/s. SUZLON. The cranes are operated as per instructions and guidance of M/s. SUZLON and up to satisfaction of M/s.SUZLON only. During the contract period, the appellant was neither authorised nor permitted to transfer the cranes to others. Thus, it is clear that, the Appellant cannot remove the crane from the site of M/s. SUZLON as it is exclusively used by M/s. SUZLON. At the same time, as per the contract M/s. SUZLON will be free to move cranes from one place to other place. The lease rentals are paid even though crane is used or not during contract lease period. All these terms suggest that the effective possession and control of the cranes is transferred to M/s. SUZLON during the period of lease contract period. The right to use of cranes is transferred in favour of M/s. SUZLON during the period of lease.”

14. ” In view of above it is seen that there is transfer of right to use in favor of M/s. SUZLON and the appellant-owner of crane has lost the ye control over the cranes for the period of contract. M/s. SUZLON was the sole controlling entity who had exclusive and effective control over the cranes. M/s. SUZLON enjoyed the exclusive right over the use of the crane.”

15.”The contract did not contemplate rendering of the service as the cranes of particular make and capacity were the focal point of the agreement between the parties. No mention of service or work was found in the agreement. Had the intention been to render service then the parties would not have been required to deliberate and and describe in minute detail the terms and conditions regarding various cranes, make and capacity, lease per crane, etc. and its exclusive possession would not have been the subject matter of the agreement. Both parties would not have bothered to pen down minutely the various aspects governing the cranes, its maintenance, its operations, its control, its possession, its movement, its worthiness, the skilled manpower to run and operate the crane, its inspection, its repair and maintenance, its operational efficiencies, substitution clause in case of crane being non-operational due to any reason, and so on and so forth. Had it been the service contract then the parties would have only mentioned about the work to be done or service to be provided. It would have been the sole responsibility of the appellant to provide service in that case. M/s. SUZLON would not have bothered about the minute details of the crane, its capacity and make to be supplied by the contractor. Had it been the contract of rendering of service then it would not have been the responsibility of M/s. SUZLON to use Diesel in the crane. Thus, it is very clear that, this contract is of right to use goods.”

44. In support of its case the Revenue has relied on following observations made in the rulings as follows.

1. Rajasthan State Road Transport Corporation v/s. Kailasnath Kothari and others (1997) 7 SCC 481:

“16. The admitted facts unmistakably show that the vehicle in question was in possession and under the actual control of RSRTC for the purpose of running on the specified route and was being used for carrying on hire, passengers by the RSRTC. The driver, was to carry out instructions, orders and directions of the conductor and other officers of the RSRTC for operation of the bus on the route specified by the RSRTC.”

2. Krushna Chandra Behera(1991) 83 STC 325 (Ori)

“The assesse had given its bus on hire to Orissa State Road Transport Corporation. The assesse provided the driver and was also responsible for carrying out the repairs to the bus. The assesse was also bound by orders and directions of the corporation in regard to journey, operation timings, routes, haltage etc. The driver provided by the assesse had to follow the directions, orders and instructions of the authorised officials of the corporation. The Orissa High Court held that as the effective and general control of the bus had passed on to the customer (Orissa State Road Transport Corporation) and the customer was in possession, as distinguished from mere custody, the transaction was a transfer of the right to use the goods and therefore a deemed sale.”

3. Tripura Bus Syndicate(122 STC 175)(Gau):

ballot boxes etc. from the office of the returning officer to the respective polling booths, the right to use the vehicles stood transferred from their owner/operators to the election authority. The facts of the case in hand are similar- in the present case vehicles are plied as per the direction of the hirer and are under the effective control and custody of the hirer.”

4. 20th Century Finance Ltd.[2000] (119 STC 182) (SC):

“The constitutional Bench of the Apex Court in this case, while dwelling on the controversy as regards the competence of the State Legislature to levy sales tax under clause (29A) (d) of Article 366 of the constitution of India on the transfer of right to use any goods held that on a plain construction of sub-clause (d) of clause (29A), the taxable event is the transfer of right to use the goods regardless of when or whether the same are delivered for use. It held that the existence of the goods was essential so that they may be used and that a contract in respect thereof is executed. The locus of deemed sale is the place where the right to use them is transferred and that the situs of goods is of no relevance. It ruled that Article 366(29A) (d) envisages levy of tax on the transfer of the right to use goods and not on the use thereof.”

5. Antrix Corporation Ltd. [2010] 29 VST 308 (Kar):

“In this case it is held that the transaction of hiring of ace segment capacity on transponders attached to the atellites to private customers is a transaction involving transfer of right to use goods and exigible to tax. The Court concluded that there was a transfer of the right to use the “leased capacity” under the contract of agreement executed by the Department of Space with the customers and the leased space segment capacity in a transponder of a satellite was “goods” within the meaning of article 366(12) of the Constitution. The transferee had effective control over the goods, i.e., “space segment capacity” in the transponder of satellite, though it’s technical operation was handled by the Department of Space. It could not be said that there was no delivery of possession of the “leased capacity” to the customer. The transaction was a “deemed sale” within the definition of “sale” under section 2(29) (d) of the 2003 Act.”

6. State Of Andhra Pradesh & Another vs Rashtriya Ispat Nigam Ltd (2002) 3 SCC 314

Hon’ble Apex Court in this case, on facts, observed –

“The effective control of the machinery even while the machinery 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 was in his use; the condition that the contractor would be responsible for the custody of the machinery while it was on the site did not militate against respondent’s possession and control of the machinery.”

7. AIi Singhania Bulk Carriers (2012 NTN (Vol. 50)) (Kar):

In this case it is observed

“15. It is clear from the above said clause in the agreement that in the present case where the subject-matter of transfer is the vehicle transfer to effective use of such vehicles, the possession of 12 vehicles to transport the produce of the first party has been handed-over to the first party by the assesse. The first party is in possession of the said vehicles and the said vehicles will be available to the first party on 24 x 7 basis, i.e., 24 hours on all the seven days of week, except for two days for maintenance and consideration paid is Rs. 3,718 per day per vehicle inclusive of all taxes which would clearly indicate that the possession of the vehicle is with M/s. Grasim Industries. So far as the effective control of the vehicles is concerned, having regard to the above said clause, it cannot be denied that the effective control of the vehicles which are in the possession of the first party is also with the first party M/s. Grasim Industries and not the assesse as the assesse cannot use it at any time of the day except on the days when it is withdrawn for maintenance and payment would be made per day per vehicle and therefore, effective control of the vehicle is also with the first party, M/s. Grasim Industries. Though the driver is the employee of the assesse and he is also placed with the vehicle for use of the vehicle by the first party, the driver has to obey the instructions of the first party and he is authorised to obtain receipts for having completed the transportation as is shown in the agreement.”

The Court concluded with the finding that the agreement entered into between the assesse and M/s Grasim industries wanted to transfer right to use of the goods and held that the said transactions were taxable.”

7. M/S. G S Lamba& Sons (012-TioI-49) (AP):

In this^,case Andhra Pradesh High Court has dealt with an issue of leasing of vehicles and held that the transaction amounted to transfer of right to use goods and exigible to tax. The relevant part is reproduced below.

“45. Reading the recitals and various clauses, indeed there is a transfer of the right to use Transit Mixers. All the tests as indicated hereinabove exist in the contract between the petitioners and Grasim. The vehicles are maintained by the petitioners. They appoint the drivers and fix their roster. The licences, permits and insurances are taken in their names by the petitioners, which they themselves renew. The Transit Mixers go to Grasim’s batching plants in Miyapur and Nacharam, where they are loaded with RMC and then proceed to the construction sites of customers. The product carried is manufactured by Grasim, which is delivered to the customers and the customers pay the cost of the RMC to Grasim and the petitioners nowhere figure in the process of putting the property in Transit Mixers to economic use. The entire use in the property in goods is to be exclusively utilised for a period of 42 months by Grasim. The existence of goods is identified and the Transit Mixers operate and are used for the business of Grasim. Therefore, conclusively it leads to the only conclusion that the petitioners had transferred the right to use goods to Grasim.”

9. Jasper Aqua Exports Private Limited (ST1)-GJX -0651 – AP)

In this case it is held –

“Reading the relevant statutory provisions, it becomes clear that the moment the petitioner sends its trucks to others for transporting the latter’s goods to destinations of the latter’s choice, the same amounts to transfer of right to use the trucks, and would be sufficient to infer a taxable event under section 5E of the Act notwithstanding other incidental minor aspects of the contracts. The mere fact that the petitioner retains control over the driver, or that they pay insurance charges for the trucks, is of no consequence. In that view of the matter, we do not find any error in the orders of the learned Tribunal, because the Tribunal correctly relied on way-bills and other relevant documents produced by the petitioner and came to the correct conclusion.

10. Peerless Shipping And Oil Field … (2007) 8 VST 330 (Gauhati) In this case it is held-

“24. In interpreting the clauses of a contract, the real intentions of the parties are required to be looked into and mere isolated references to some of the definitions or the clauses 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. 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 equipment/machinery/vehicles to 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, would depend on the facts of each case as per the provision contained in the Schedule of the respective Acts.”

11. The Great Eastern Shipping Company (2004) (136 STC 519) Kar.

In this case it is held-

“It was the contention of the dealer that the effective control over the tug remained with the appellant; and the appellant had made available only the service of the tug to NMPT by employing its own personnel to man the tug; and the appellant had to maintain the tug, machinery, spare parts, etc., in good stage of repair. The Court held thus:

“16. Therefore, as noticed by us earlier, the reading of several clauses in the agreement would, in our view, in unmistakable terms show that there has been a transfer of right to use the tug by the appellant to the NMPT. Therefore, we are of the view that there is no merit in the submission of the learned counsel for the appellant that there has not been transfer of right to use the tug by the appellant to the NMPT. Accordingly, third question is answered.”

12. This Tribunal, in the case of Aurobindo Highway services Solapur v/s State of Maharashtra (VAT SA-164,165,166,167 f 2013 decided on 9/02/2015), held that- “though the driver and the crew were employed by the lessor, who were under the control of oil company and tank trucks were available to the lessee all the times, it did not create any impediment in transferring the right to use of goods in favour of the lessee and the said transaction was taxable under MVAT Act as it was deemed sale.”

13. The Gauhati High Court in the case of Mahesh Travels (P) Ltd. v/s Oil & Natural Gas Commission and Others reported in 2009 NTN (Vol. 40) held-

“22. Thus, in Bharat Sanchar Nigam Ltd. [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 3 SCC 1, the Court held that delivery of goods, at some stage, is necessary in order to complete the transfer of the right to use the goods. To put it a little different, though “situs” of a “deemed sale” does not depend on the place of delivery of goods, the taxable event is not complete, in the light of decision in Bharat Sanchar Nigam Ltd. [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 3 SCC 1, until the time the delivery of the goods takes place, for, it is upon delivery of the goods that the transfer of the right to use the goods is completed. This delivery may, however, be actual or constructive. In other words, a “deemed sale” cannot be treated as complete until the time the contract is executed by delivery of the goods inasmuch as the transfer of the right to use goods does not take place until the time the transferor delivers the goods, which is the subject of contract, though, for the purpose of determining the “situs” of such a “deemed sale”, it is the place, where the agreement is executed, which will be treated as the place of the “deemed sale” provided that the agreement is in writing; but in a case of oral agreement, it may be effected by the delivery of the goods.

31. From the above discussion, what also clearly emerges is that the question as to whether, in a given case, there is or there is no transfer of the right to use goods becomes a question of fact and this fact can be determined on the basis of the terms of the contract, which may govern a given transaction. In fact, in North East Gases Pvt. Ltd. vs. State of Assam reported in [2004] 134 STC 249, this Court has held that the question relating to transfer of the right to use any goods is essentially a question of fact, which has to be determined, in each case, having regard to the terms of the contract, wherein the transfer is made.”

14. Gauhati High Court in the case of Dipak Nath v. Oil and Natural Gas Corporation Ltd. [2010] 031 VST 0337 (GAU) referred to the decision of Supreme Court in the case of 20th Century Finance Corpn. Ltd. [2000] 119 STC 182 (SC) and held –

“The above analysis of the relevant provisions of the contract agreement between the parties indicates the clear dominion and control of ONGC over the crane during the entire period of operation of the contract once a crane is placed at the disposal of the ONGC under the contract. The crane is to be deployed at worksites as per the discretion of the ONGC and though the normal period of deployment is 10 hours in a day, such deployment at the discretion of the ONGC may be for any period beyond the normally contemplated 10 hours. The deployment of the crane in oil field operations as well as other azardous situations is at the sole discretion of the ONGC. ough the cranes are operated by the crew provided by the contractor such crew while operating a crane is under the effective control of the ONGC and its authorities. Therefore, under the contract though the normal operational time is 10 hours in a day, the ONGC is entitled to deploy the cranes, if required, for the entire period of 24 hours to perform duties, the kind of which and the locations whereof is to he decided by the ONGC. The mere fact that after the operation of the crane is over on any given day the crane may come back to the owner/contractor will hardly be material to decide as to who has dominion over the crane inasmuch as the crane can be recalled for duty by the ONGC at any time. Under the contract the crane is to be operated for 26 days in a month and the remaining four days are to be treated as maintenance off days. Though the crane is not operational on the maintenance off days, yet, 50 per cent of the operational charges is paid by the ONGC for the maintenance off days and the terms of the contract make it clear that even on the off days the crane can be called for operation by the ONGC at its sole discretion”.

“The above features of the contract, in our considered view, make it abundantly clear that it is the ONGC and not the contractor who has exclusive control and dominion over the crane during the subsistence of the contract, though, during the aforesaid period, at times, physical possession of the crane may come back to the contractor. Such temporary physical possession of the contractor, according to us, would hardly be relevant as under the contract the ONGC is vested with the authority to requisition the crane for operational purposes at any time. Besides, such temporary possession of the crane by the contractor does not militate against the transfer of the right to use the crane which event, as already indicated on the authority of the decision of the apex court in 20th Century Finance Corpn. Ltd. [2000] 119 STC 182 (SC), constitutes the taxable event under article 366(29A) (d) of the Constitution.”

15. M/s. Brahmaputra Valley Construction [2012] 53 VST401 (Gau) : In this case it is held-

“The heading and the recital of the agreement clearly showed that the agreement in question was for hiring of the cranes. The hire charges were per day for all days except the off days, though the bill was to be raised monthly. The provisions for maintenance, providing staff for maintenance and operation and taking responsibility for claim of third parties did not affect the nature of the transaction. The work was not to be executed by the contractor but by the ONGC itself. The cranes were at the disposal of the ONGC and per day hire charges were paid for all days, except maintenance days. The services of staff and maintenance were incidental to the hiring of the cranes. Liability to the third party was on account of the fact that in spite of hiring of the cranes by the ONGC, the employees operating the cranes were provided by the dealers. It was the ONGC alone which was entitled to exclusively use the cranes and not the assesse. The transaction clearly involved transaction of right to use and was exigible to tax.”

16. Onaway Engineering Private Ltd. (2006)(146 STC 634 AP): In this case the High Court referred to the judgments in case of 20th Century Finance Corpn. Ltd. v. State of Maharashtra 2000] 119 STC 182, State Bank of India v. State of Andhra radesh [1988] 70 STC 215 and Rashtriyalspat Nigam Ltd. v. Commercial Tax Officer, Company Circle, Visakhapatnam [1990] 77 STC 182. The Issues and the facts involved in the said case were as under:

“2. The petitioner operated a crane in the years 1985-86 for rendering services to Hindustan Shipyard Limited (HSL). He entered into an agreement with HSL on September 11, 1985. He was to be paid Rs. 4, 35,000 per month which was inclusive of fuel, lubricants, operation and maintenance of cranes at the HSL. During the year 1985-86 the petitioner received Rs. 47, 85,000 towards charges for operating the crane. Of this amount, Rs. 39, 15,000 represents the receipts after July 1, 1985. The C.T.O., Gajuwaka, assessed the petitioner on the basis of the said receipts Under Section 5-E of the Andhra Pradesh General Sales Tax Act, 1957 which provides for levy of tax on the amounts received in respect of transfer of right to use goods which is a deemed sale. Aggrieved by this assessment order, the petitioner filed an appeal before the Appellate Deputy Commissioner (C.T.), Kakinada, contending that there was no transfer of right to use the crane as the petitioner had only undertaken to operate the crane with men and material provided by it. The Appellate Deputy Commissioner agreed with the petitioner’s contention that the crane was in possession of the petitioner and operated by it, but he held that these features could not alter the transaction that the right to use goods was transferred to HSL, therefore the transaction was exigible to tax under Section 5-E of the APGST Act. He, however, held that the expenses incurred for the operations could not be taxed as taxable rentals for oods. He remanded the matter to the assessing authority fof antifying the relief. Aggrieved by the order of Appellate Deputy Commissioner, the petitioner filed T.A.No. 135 of 1991 before the Sales Tax Appellate Tribunal contending that there was no transfer of right to use goods.”

“9. In 20th Century Finance Corpn. Ltd. v. State of Maharashtra [2000] 119 STC 182, though the Supreme Court was mainly dealing with fixing situs of deemed sale if goods are located within the State at the time of use, but while drawing conclusions, it also held that the transaction of transfer of right to use goods cannot be termed as contract of bailment as it was deemed sale within the legal fiction and engrafted under Clause (29A) of article 366 of the Constitution of India, Therefore, this Court will not have to see whether the contract entered between the parties was in effect of bailment or not, but whether the goods had been transferred for any purpose mentioned in clause (29A) of article 366 of the Constitution of India. Going by the provisions of the agreement, we find that the crane was in effect transferred for the purposes of rendering service to HSL. The period of hire was given as twelve months. The rent was fixed at Rs. 4.35 lakhs per month and it was termed as hire charges. The provisions of the agreement, if read together, leave no room for doubt that the crane was given on hire and the possession was transferred for its utilisation by the HSL and therefore, in our view, the order of the Tribunal would not need any interference.”

17. Honourable Gauhati High Court in the case of Sri Jay Kumar Bardia v/s State Of Assam (2007) (5 VST ) (Gauhati) referred to the decision of Supreme Court in the case of Agarwal and Brothers and held-

“24. The apex court in Aggarwal Brothers [1999] 113 STC 17 (SC); [1999] 9 SCC 182, has affirmed the decision of the Punjab and Haryana High Court in Harhans Lal [1993] 88 STC 357. It has been held that mere transfer of the right to use goods for consideration is sufficient so as to come within the purview of the Act in question and that the transfer of the goods itself is not necessary. It has been held that hiring of shuttering by the owner thereof to builders and contractors for use in construction of buildings constituted deemed sale…”

18. The Rajasthan High Court in the case of Additional Commissioner (Legal), CT, v. Taluka Tent Decorators [2015] (081 VST 0258) relied upon the decision of Honourable SC in the case of Aggarwal Brothers [1999] 113 STC 317 (SC) ; (AIR 1999 SC 2868) and arrived at the conclusion thus :

“The provision expressly speaks of ‘transfer of the right to use goods’ and not of transfer of goods. There is, therefore, no merit in the submission that to be a deemed sale within the meaning of the abovementioned provision of the said Act there must be a legal transfer of goods or that the transaction must be like a lease. Where there is a transfer of a right to use goods for consideration, the requirement of the above-mentioned provision of the said Act is satisfied and there is deemed to be a sale. In the instant case, the assesses owned shuttering. They transferred the shuttering for consideration to builders and building contractors for use in the construction of buildings. There can, therefore, be no doubt that the requirements of a deemed sale within the meaning of the abovementioned provision of the said Act are satisfied.”

19. The Madras High Court in the case of M/s. Anand Cine ervices (2013)(001 VST -0L- 483) held –

“15. In the present case, the assesse(s) hired different cinematographic equipments mounted on vehicles to the customers, who were film producers and Directors along with their staff. The equipment are extensively used in film shooting. Even though the petitioners contend that the assesse(s) had effective control of leased equipments, the authorities have recorded factual finding that shooting of the film taken by the Cameraman employed by the Producers freely without any disturbance from the assesse(s’) side to shoot better films and the equipments are leased out are mainly sophisticated cameras. To ensure high quality and good performance, the cameras have to be used in proper angle with proper light effect. Actual taking of photo shoots can only be done by a cameraman employed by the producer. Factually, in the film industry, cameraman, staff, producers or Directors are free to handle the instruments so as to arrive perfection in their ventures. Considering the nature of the purpose for which the equipments were hired, the Appellate Authority and the Tribunal rightly rejected the contention of the assesse(s) that the control of the leased equipments was not handed over to the customers/producers/Directors.”

20. The Honourable Supreme Court decision in the case of State of Orissa V/s Asiatic Gases Ltd (2007)(007 VST 531) held

“In the case of Agqarwal Brothers v. State of Haryana and another (1999) 9 SCC 182 a Division Bench of this Court has held that the provision under Section 2(l) (iv) of Harayna General Sales Tax Act, 1973 (which was similar to Section 2(g) ) 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 assesse 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 arguments 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 (supra) would squarely apply to the present case.”

45. In addition to the above referred cases the Revenue relied on para 97 in the judgment of S.N.L. which we have already quoted.

46. The Revenue also referred to the case of General Cranes and sought to distinguish it with the case in hand on the basis of the contract clauses. We will deal with this aspect later on.

47. The Revenue also relied on the case of Walter Buthello. The Revenue specifically pointed out that in the case of Walter Buthello the High Court distinguished the case of General Cranes. We have extensively reproduced portions of this judgment hereinabove.

48. The Revenue then relied on the case of M/s. The Great Eastern Shipping Company Ltd. v/s. State of Karnataka and others (Civil Appeal No. 3382 of 2004 decided by the Larger Bench of Supreme Court on 04-12-2019). Reliance was placed on paras 27, 30, 31, 32, 33 & 34 of this judgment. Since we have already reproduce paras 33 & 34 herinabove , the remaining paras only need be quoted which read as under:

27. As per the Charter Party Agreement, Annexure I, the vessel has been taken by the Port Trust for various lawful services required 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 anti-pollutants. 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 part is with the contractor company. The charterer shall have the use of all outfits, equipment, and appliances on board the vessel at the time of delivery. Insurance charges have to be borne by the contractor. The vessel shall be kept insured by the contractors at their expense against protection and indemnity risks. The whole reach and burthen of the vessel, including the lawful capacity to be kept at the charterer’s disposal.

30. Condition 1 of the special conditions states that all operational costs, including wages to be borne by the contractor. To keep the tug operational has to be on the contractor’s account. As per condition 3 of the special conditions, the tug shall have completed all the necessary surveys and be in possession of all valid certificates. A joint survey to be carried out at the Port Trust before the tug is accepted for service in the Port to assess the condition. Capability and performance of the vessel and the quantity of fuel, lubricants, etc. On hire and off hire survey charges shall be borne equally by the charterer and the contractors as provided in condition 5. The charterer will not be responsible for any damage suffered by the tug is provided in dition 6.

31. The contract would be for six months and extendable for one year at the discretion and option of the Port Trust. The tug shall be made available for port operations 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 anti-pollutants. 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 the liability of the contractor under the agreement. The whole reach and burthen of a vessel, including lawful deck capacity, is at the disposal of the charterer, reserving proper and sufficient space for the vessel’s masters, officers, etc. A performance guarantee has also to be submitted.

The Revenue also relied on paras 37,43 & 62 of this judgment which d as under:

“37. The Charter Party Agreement qualifies the test laid down by this Court. Applying the substance of the contract and the nominal nature test, the vessel was available when the agreement for the right to use the goods has taken place. The vessel was available at the time of transfer, deliverable, and delivered and was at the exclusive disposal for six months round the clock with the charterer port trust. The use of license and permission was at the disposal of the charterer and to the exclusion of the contractor/transferor. It was not open to the contractor to permit the use of the vessel by any other person for any other purpose.”

“43. We are not turning our decision upon the terms used like ‘let, ‘hire’, ‘delivery’ and ‘redelivery’ but on the other essential terms of the Charter Party Agreement entered in the instant case which clearly makes out that there is a transfer of exclusive right to use the vessel which is a deemed sale and is liable to tax under the KST Act. In the instant case, full control of the vessel had been given to the charterer to use exclusively for six months, and delivery had also been made. The use by charterer exclusively for six months makes it out that It Is definitely a contract of transfer of right to use the vessel with which we are concerned in the instant matter, and that is a deemed sale as specified in Article 366(29A)(d). On the basis of the abovementioned decision, it was urged that all Charter Party Agreements are service agreements. The submission cannot be accepted, as there is no general/invariable rule/law in this regard. It depends upon the terms and conditions of the charter party when it is to be treated as only for service and when it is the transfer of right to use.”

been issued that service tax is to be levied on the Charter Party Agreement. Hence it was urged that it cannot be trcatcd as that of deemed sale. The said clarification as to service tax does not advance any cause as the levy of service tax is permissible or not is not the question to be examined by this Court. The question germane to the instant matter is not whether service tax can be levied. The question involved in the case is only to the extent whether the Statc of Karnataka can realize the sales tax on deemed sale under section 5C of the KST Act in view of the provisions contained in Article 366(29A) (d) of the Constitution. Thus, we refrain from going into the effect of the aforesaid notification/clarification as to service tax. That is not the question involved in the matter.”

49. According to the Revenue the ratio laid down in the above referred cases will apply to the case in hand considering following factual aspects.

i). Though the appellant had provided operator, helper etc. and though the appellant was to carry out repairs to cranes in the event of their breakdown, the appellant was bound to follow directions and instructions of authorized person/s of SISL.

ii). Thus, the general and effective control over the cranes was that of SISL.

iii). Actual possession of cranes was with SISL. Thus, the appellant had not merely given custody of the cranes to SISL.

iv). The cranes were specifically identified by both the parties. Thus, attribute No. 2 given in para 97 of the judgment in the case of S.N.L. was fully satisfied.

v). During the contract period the appellant was neither authorized nor permitted to transfer the cranes to others. From this it Id follow that the appellant could not move the cranes from the SISL except in accordance with requirement of SISL. This would show that the cranes were exclusively in the possession of SISL. The lease rentals were paid for the contract period whether or not crane/s was/ were put to use.

vi). The cranes were delivered by the appellant on the address furnished by SISL. Thus the cranes were available for deployment at the site of SISL. From this it can be gathered that there was not only actual delivery to SISL but it was also followed by acceptance.

vii). From reading of various clauses of contract it becomes apparent that except carrying out repairs to cranes by way of maintenance the appellant had no effective control over the cranes during the contract period.

viii). The licences, permits and insurance papers were in the name of the appellant. It was responsibility of the appellant to get them renewed.

ix). Delivery of cranes by the appellant at the site of SISL as per requirement of the latter followed by acceptance by SISL would amount to transfer of right to use the cranes and it would further give rise to a taxable event under the MVAT Act notwithstanding incidental, ancillary and minor aspects of the contract.

x). Had the intention of the appellant been only to render services to SISL the contract would not have been preceded by elaborate deliberations. In that eventuality minute details about make and capacity of cranes would not have been incorporated in the work order. Had it been only a service contract the parties would have concentrated only on the nature of services to be rendered/ work to be done.

xi). Had it been only a service contract cost of Diesel would have been borne by the appellant and not by the Hirer.

xii). From the clauses of the contract it can be clearly gathered that SISL had dominion and control over the cranes during the contract period once they were placed by the appellant at their disposal.

xiii). Though in the contract normal operation time for the day was fixed at 10 hours, SISL was entitled to use the cranes for extra hours as per their requirement.

xiv). During the period of maintenance of cranes also SISL was required to pay hire charges to the appellant. This would show that exclusive control over the cranes was that of SISL.

xv). The fact that the cranes were being operated by the employees of the appellant will not militate against the conclusion of exclusive control of SISL over them.

xvi). The provision for maintenance, providing staff for maintenance, actual operation of crane, responsibility for claims of third parties fastened on the appellant would not affect the essential nature of the contract i.e. it involved the transaction of transfer of right to use the cranes in favour of SISL and such transaction was clearly exigible to tax.

xvii). From clauses of the contract it can be deduced that all the attributes of transaction of transfer of the right to use the goods were present in the contracts entered into between the appellant and Hirers including SISL.

xviii). It was a case where the appellant had leased his equipment for valuable consideration and thus there was a deemed sale.

xix). Under the contract submission of fitness certificate, load chart certified by any Government approved agency by the appellant ISL was the prime requirement of the contract. Copies of PUC, RTO licences etc. were to be kept with the cranes at all times during the contract period. Thus, under the contract right to use the cranes was transferred in favour of SISL. This would explain why SISL had to pay Entry Taxes to the States of Karnataka, Andhra Pradesh and Tamilnadu, and RTO taxes in the State of Gujrat over and above the leasing charges which were payable to the appellant.

xx). Government permissions or licences are not necessary simply for putting the cranes to use. Hence, the contract is silent on this point.

xxi). Clause in the contract that the Diesel cost upto 1800 litres per month was to be borne by SISL also reinforces the conclusion that SISL had effective control over the cranes. Such would not have been the case but for transfer of the right to use the cranes in their favour.

xxii) The appellant agreed to make services of crane operators at all times available to SISL. However the operators were to operate the cranes as per directions and requirement of SISL. This is the gist of the transaction which the contract manifests.

xxiii). Harmonious construction of clauses of the contract would show that the factual matrix in this case and the case of Walter Buthello is substantially similar.

xxiv). The cranes were leased for 24 months. If this circumstance is appreciated in the light of contract clauses it would become clear that under the contract right to use the goods of the appellant stood transferred in favour of SISL.

xxv). In the case of the Great Eastern Shipping Company the Apex Court came to the conclusion that the use by charterer exclusively for six months, coupled with essential terms of the charter arty agreement, satisfactorily established that the contract was one nsfer of right to use the vessel.

50. On behalf of the Revenue reliance was also placed on U.P. State Electricity Board v/s. Puranchandra Pande and others (judgment delivered by the Supreme Court on 09-10-2007). In this case the Supreme Court, by referring to various judgments, reiterated following legal position:

i). A decision is only an authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein nor what logically follows from various observations made in it.

ii). The ratio of any decision must be understood in the background of the facts of that case. A little difference in facts or additional facts may make a lot of difference in the precedential value of a decision.

iii). Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation on which reliance is placed.

Undoubtedly, these guiding principles in respect of precedents cited by both the parties will have to be kept in mind.

51. Rulings submitted by the Revenue were sought to be distinguished by the appellant by raising following contentions.

i). In the case of Rajsthan State Road Transport Corporation the vehicle involved was bus and the ruling dealt with vicarious liability of the owner for tortious act of driver. While considering the question as to whether a particular transaction amounts to tranfer of the right to use the goods regard must be had to the goods involved as per jurisprudence applicable to such cases.

ii). Judgment in the case of Krishnachandra Behera was given prior to the Apex Court judgment in the case of B.S.N.L. On facts the Orissa High Court held that actual possession, as distinguished from mere custody, was given to the Hirer.

iii) The issues involved in the case of Antrix Corporation Ltd. were whether allotment of space segment capacity in the transponders and band width of a communication satellite having different frequency would amount to sale or purchase of goods, and whether State of Karnataka was competent to levy tax on the sale. This judgment is on the sale of intangibles and the location thereof. Hence, on facts, it is not applicable.

iv). In the case of Ali Singhania Bulk Carriers transferee had effective control over the buses. In the instant case goods involved are cranes. Hence, ratio laid down by the Supreme Court, while confirming the judgment of P. High Court, in the case of R.I.N.L. shall be squarely applicable.

v) In the case of M/s. G.S.Lamba and Sons transit mixers were given on hire to Grasim. The entire use of the same during the contract period was made by the Hirer Grasim. The petitioner, during this period had absolutely no control over the transit mixers. Entire economic benefits arising from use of transit mixers were reaped by the Hirer. The conclusion sought to be drawn by the Revenue that the cranes of the appellant were used for the business of SISL i.e. erecting windmill towers and generating electricity, entire economic benefit arising from the use of cranes was retained by the Hirer i.e. SISL and with these benefits the appellant had absolutely no concern, is farfetched.

vi). In the case of Jasper Aqua Exports Pvt. Ltd. the thing/ the goods involved were vehicles. Having regard, inter-alia, to the nature of goods involved conclusion was drawn that it was a case of transfer of the right to use the goods. In the instant case the thing/ goods involved are cranes. Therefore, ratio laid down in the cases of R.I.N.L and B.S.N.L. shall be applicable. The judgment of R.I.N.L. has been approved by the Supreme Court in the Great Eastern Shipping Company Ltd. which is the latest judgment.

vii). In the case of the Great Easten Shipping Company Ltd. ‘tug’ was given on hire. Presently we are concerned with cranes given on hire. Therefore ratio laid down in in the case of I.N.L. shall be applicable.

viii). In the case of Aurobindo Highway Services, this Tribunal considered the position relating to oil tankers / vehicles given on hire. The Hirer/ transferee was held to be in exclusive possession of tankers. By these tankers the transferee was supplying Petroleum Products to its customers at various locations. The transport Discipline Guidelines annexed to the agreement provided in clear terms that right to use tankers stood transferred in favour of Hirer. In this factual background it was held that there was transfer of the right to use the goods.

ix). In the case of Onaway Engineering Pvt. Ltd., on facts A.P. High Court held that there was transfer of right to use the cranes in favour of the Hirer. In the case of General Cranes, by relying on the case of I.N.L. decided by the Supreme Court the Bombay High Court interpreted such possession of cranes as custody and concluded that there was no transfer of right to use the cranes.

x), In the case of Jaykumar Bardia, the goods involved were furniture and not machinery. Hence , it would not be applicable to the facts of the instant case.

xi), In the case of Taluka Tent Decorators, tents and furniture were given on hire. No machinery was involved. The Rajsthan High ourt, while deciding the case did not consider the judgments in the cases of either R.I.N.L. or B.S.N.L. delivered by the Supreme Court. For these reasons this ruling will not be applicable to the facts of the instant case.

xii). In the case of M/s. Ananad Cine Services, Cinematographic Equipment was given on hire. On facts it was found by the Madras High Court that exclusive possession over the equipment was that of the Hirer as was held by the Tribunal. This case of Madras High Court is clearly distinguishable on facts.

xiii). In the case of Asiatic Gases Ltd. goods involved were Gas Cylinders. Considering factual scenario the Supreme Court preferred to rely on the case of Agarwal Brothers and not on the cases of either I.N.L. or B.S.N.L. This decision was delivered in a different set of facts.

xiv).In the cases of Tripura Bus Syndicate and Mahesh Travels Pvt. Ltd. (decided by Tripura High Court and Gauhati High Court respectively) the goods involved were vehicles. On facts, it was found that the vehicles were in exclusive possession and control of the Hirer during the contract period.

52. It was argued by Adv. Shri. Patkar that the Revenue has heavily relied on two judgments of Gauhati high Court viz. Dipak Nath v/s. O.N.G.C. and M/s. Bramhaputra Valley Construction but there are two more judgments of the same High Court viz. HLS Asia Ltd. and D.P.Agarwala in which contrary view is taken. In all these judgments the goods given on hire were cranes. According to Adv. Shri. Patkar facts of all these four cases were not substantially different yet divergent views were taken and for this reason the two rulings relied upon by the Revenue which have persuasive value and no binding force, need not be relied upon. So far as these two rulings on Revenue is relying, it was further submitted by Adv. Shri. Patkar inding precedent of the jurisdictional High Court i.e. General Cranes is available, this Tribunal will have to rely upon the same. The four judgments delivered by Gauhati High Court wherein the goods given on hire were cranes are mentioned chronologically i.e. in the order in which the same were pronounced. We have reproduced relevant portions of these judgments.

1. Dipak Nath v/s. O.N.G.C. and others (delivered on 25­11-2009)

“An analysis of the relevant provisions of the agreement between the parties indicated the clear dominion and control of ONGC over the crane during the entire period of operation of the contract once the crane was placed at the disposal of the ONGC under the contract. Though the cranes were operated by the crew provided by the contractor such crew while operating the crane were under the effective control of the ONGC and its authorities. Under the contract the normal operational time was 10 hours in a day but the ONGC was entitled to deploy the cranes, if required, for the entire period of 24 hours to perform duties, the kind of which and the locations whereof were to be decided by the ONGC. Even on maintenance-off days the crane could be called for operation by the ONGC at its sole discretion. Thus the ONGC was vested with the authority to requisition the crane for operational purposes at any time. The mere fact that after the operation of the crane was over on any given day the crane might come back to the owner /contractor was not material to decide as to who had dominion over the crane inasmuch as the crane could be recalled for duty by the ONGC at any time. Such temporary possession of the crane by the contractor did not militate against the transfer of the right to use the crane which event constituted the taxable event under article 366 (29A) (d) of the Constitution. The terms of other contracts pertaining to water tankers and trailers also visualized placing the required vehicles at the disposal of the ONGC and the commencement of the contract from the date of such placement. The terms of the contract did not visualize any operation of the tankers/ trailers by the owners thereof at any point of time during the period of the contract. In fact, the non-availability of the tankers/trailers on any given day for deployment in connection with the operational requirements of the ONGC entailed the payment of penalty and liability for damages on the contractor. Therefore the transaction between the parties was a transfer of right to use the goods liable to tax under the Assam General Sales Tax Act, as well as the Assam Value Added Tax Act.”

2. D.P.Agarwala v/s. O.N.G.C. Ltd and others[ 2010] 32 VST 8 (Gauhati) (judgment delivered on 21-05-2010)

“The clauses of the agreements showed that they constituted indivisible contracts. The various clauses considered in conjunction with the recital of the scope of work, did not comprehend a lease or transfer of the right to use the crane(s) and took the transaction out of the purview of lease/sale as contemplated by article 366 (29A)(d) of the Constitution of India or section 2 (27) /(43) of the Act. The covenants consciously incorporated by the contracting parties emphasized the singular responsibility and accountability of the contractors to guarantee timely placement, and availability of manned crane (s) as well as smooth and quality execution of the works. Though a few clauses of the contract were suggestive of the Corporation’s prerogative to use the crane(s) in accordance with its requirements, they did not per se constitute cessation of the contractor’s duties on various fronts for due discharge of the services expected of them. The terms and conditions of the contract agrements taken as a whole, did not proclaim the Corporation’s possession, custody and control of the crane(s) to the total exclusion of the contractors. The comprehension of service tax alone being payable also indicated the predominant service feature of the agreement. The parties did not contemplate transfer of right to use the cranes by the contractors in favour of the Corporation divesting themselves of their authority and control over the same. The essence of the agreements was not the cranes, but the covenants to employ them. The proposed action of the respondents to deduct tax under the Act at source qua the transactions was illegal and without jurisdiction.”

“The determination made by a Division Bench of this court in Writ Appeal No. 138 of 2007 (Dipak Nath v. Oil and Natural Gas Corporation Ltd. [2010] 31 VST 337) and a batch of other writ appeals and writ petitions accompanying the same in view of the apparent distinguishable features in the contract agreement involved, in the present adjudication does not wrest the issue in favour of the Revenue. Not only the contract agreements scrutinized in the aforementioned appeals, though otherwise substantially identical with those in hand did not inscribe the striking and unequivocal recital that the services of the manned cranes to be made available for performing the duties of the corporation would not be by way of lease or transfer of rights for use thereof by the contractors to it (corporation), the parties thereto, in clear terms contemplated realization and payment of service tax at the rate of 10.3 percent thereon under the Finance Act, 1994. Moreover, the plea of indivisibility of a composite contract of the type involved in the perspective of article 366 (29A) of the Constitution was not raised to be analyzed and adjudged in those appeals. The contract agreements therein also related to a point of time prior to the incorporation of sub-clause (zzzzj) in the definition of “taxable service” provided in section 65 (105) thereof vide the finance Act, 2008 with effect from May 16, 2008.”

3. HLS Asia Ltd. v/s. state of Tripura and others [2011] 41 VST 341 (Gau.) (judgment dated 30-03-2011)

“The various clauses referred to hereinabove if considered in conjunction along with the unqualified recital in the scope of work, in the estimate of this Court do not comprehend a lease or transfer of right of use the crane(s) and propel the transaction out of the purview of lease/ sale as contemplated by article 366(29A) (d) of the Constitution of India or section 2(27)/ 2(43) of the Act. A dominion of the corporation over the manned crane(s) though perceptible for the operational needs the overwhelmingly emphatic covenants consciously incorporated by the contacting parties emphasize as well as the singular responsibility and accountability of the contractors to unfailingly guarantee the timely placement, and availability of the manned crane(s) as well as the smooth and quality execution of the works. A few clauses of the contract though are suggestive of the corporation’s prerogative to use the crane(s) as per its requirements, the same per se do not constitute cessation of the contractor’s duties as enumerated on various fronts for due discharge of the services expected of them. The terms and conditions of the contract agreements taken as a whole, do not proclaim corporation’s possession, custody and control of the crane(s) to the total exclusion and estrangement of the contractors wholly alienating them from the assignment agreed to be undertaken. The parties seem to be ad idem to accentuate upon continuous supervision and surveillance of the contractors not only to affirm unhindered execution of the corporation’s works but also to ensure quality service. The residuary discretion and the power retained by the corporation in the matter of detailment of the works and the prohibition against the withdrawal of the crane(s) approved by it do not  ipso facto militate against the otherwise all pervasive service aura discrnible in the contract agreements. Though the working hours of the crane(s) have been specified, the contract agreements do not ordain continuance of the location thereof at the site(s) even thereafter. Payments on hourly pro rata basis are also contemplated. Not only the opening recital portraying the transaction to be neither a lease nor a transfer of right to use the crane(s) consciously incorporated in the contract agreements ought not to be readily trivialized, the comprehension of service tax only being payable is also redolent of the predominant service feature thereof. The parties, in spite of all the clauses bearing on the minutiae of the operations did not contemplate transfer of right to use of the cranes by the contractors in favour of the corporation divesting themselves of their authority and control over the same.”

“We respectfully agree with conclusion arrived at in D.P.Agarwala [2010] 32 VST 8 (Gau.) – what emerges from the above discussion is that the contract agreement, in the present case, obliges the contractor to render the services of “well logging, perforating and other wireline services” by using its own equipments and thereby no transfer of right to use equipments can be said to have taken place in the present case. Situated thus, it becomes clear, and we do hold, that the petitioner is not liable to pay tax, under the TST Act, 1976, in respect of the consideration received for the execution of contract, in question, hence, the action of the revenue authority, in raising the demand for deduction of sales tax at source treating the contract, in question, as transfer of rights to use goods is wholly without jurisdiction and liable to be set aside and quashed, which we hereby accordingly do.”

4. Bramhaputra Valley Construction and suppliers v/s. O.N.G.C.Ltd. [2018] (14) G.S.T.L. 355 (Gau.)

“Applying these tests, the Division Bench of this Court in Dipak Nath d that transfer of right to use the goods was involved in the transaction. We are in respectful agreement with the view taken therein. The distinguishing features pointed out by the Learned Single Judge are of no consequence to the core issue. Question whether it was transfer of right to use did not depend on the provisions of the Service Tax law and thus amendment by Finance Act, 2008 had no relevance to determine the said question. Plea of indivisibility of the contract also did not make any difference, if the transaction clearly involved transfer of right to use. The terms of the contract have already been analyzed in the Division Bench judgment in Dipak Nath and present contract is substantially identical.”

53. It was argued by Adv. Shri. Patkar that in the case of Deep Industries Ltd. v/s. State of Gujrat [2018] (16) G.S.T.L 392 (Guj.) Gujrat High Court considered cases of Dipak Nath, Bramhaputra Valley, HLS Asia, Rolta (which is of Bombay High Court) as well as other rulings and by applying ratio of these cases to the facts of case in hand held that the transaction in question was not of transfer of the right to use the goods i.e. cranes. In the case before Gujrat High Court salient features of the contract were as follows:

“a. The contract is specifically for provision of workover services by the petitioners and not for transfer of right to use the workover rigs to customers such as ONGC.

b. The workover rigs are to be operated and managed by personnel of the petitioners.

c. The petitioners are bound to perform services with reasonable skill, diligence and care in accordance with sound industry practice and the responsibility for the quality of the work is on the petitioners.

d. The petitioners are responsible for the safety of their personnel who would be handling the work over operations.

e. The petitioners are responsible for arranging the insurance in respect of personnel deputed for the services as wall as the equipment, tools and any other belongings of the petitioners including the workover rigs.

f. The petitioners are responsible for the expenses incurred for the operation of the rigs as well as maintaining the equipment in sound and efficient operating condition.

g. The contract provides for time norms within which each activity relating to servicing of oil wells needs to be completed.

h. Consideration towards the contract is fixed on per day basis in accordance with the type of activity carried out with regard to the workover operations.

i. The rates are quoted inclusive of service tax since the contract is agreed to be a service contract by both the parties.

j. The petitioners are fully liable for any loss or damage to the workover rigs during the workover operations.

k. The petitioners are required to give performance bank guarantee for the contract.

l. Specific workover rigs are required to be imported by the petitioners for carrying out workover operations from the vendors which are approved by the customers and details of which are specified in the contract.”

54. The Revenue has relied on Walter Buthello’s case decided by the jurisdictional High Court and the Great Eastern Shipping Company’s case which is the latest pronouncement of the Apex Court. According to the appellant in Walter Buthello’s Case the goods given on hire were buses whereas in the case of the Great Eastern Shipping Company a tug was give on hire and considering this aspect neither of these rulings would be applicable. We have extensively reproduced relevant paragraphs of both these judgments hereinabove.

55. The appellant has heavily relied on the case of General Cranes which was delivered by the jurisdictional High Court in which judgments delivered by the Apex Court in the case of I.N.L. and B.S.N.L. were relied upon.

56. According to the Revenue the judgment of the jurisdictional High Court in the case of Walter Buthello was given after the judgment in the case of General Cranes, likewise the judgment in the case of the Great Eastern Shipping Company Ltd. is the latest judgment on this point and hence both these judgments need to be relied upon. In reply, it was submitted by Adv. Shri. Patkar that this Tribunal will have to rely upon the judgment/s which are applicable to the facts of the case.

57. Having regard to the rival contentions it would be necessary to compare clauses of the contracts in the case of General Cranes with the clauses contained in the contract which is the subject matter of instant case.

58. The impugned contracts which are the subject matter of this proceeding are quite elaborate compared with the contract which was the subject matter in the case of General Cranes. The primary reason for the same appears to be the difference in volume of financial implications of the contracts.

59. Salient features of the contracts in this proceeding which can be culled out from perusal of the clauses/ riders may be stated thus in nutshell.

a. Conjoint consideration of clause 1 of the main part of the contract and clause 3 of Annexure 1 shows that the appellant had to scrupulously meet all technical requirements of SISL about which the appellant was apprised in advance. Only if such requirements were met SISL was liable to make payment to the appellant.

b. Hiring charges were to commence only on deployment of requisite set of cranes which could then be put into operation without delay.

c. Shift timings for working of cranes could be mutually agreed by the appellant and the site-in-charge of SISL if the schedule originally agreed upon needed to be departed from. Overtime was to be paid on pro-rata basis.

d. Data of Diesel consumption was to be maintained by the appellant.

e. Fitness certificates/ load charts of all cranes were to be submitted/ kept ready along with PUC, RTO licences, etc. by the operating crew of the appellant.

f. The appellant was to guarantee strength of Indian/ local spare parts and shoulder the responsibility and liability arising, if any, therefrom.

g. Intra-site and inter-site movement of cranes was to be governed by the clauses pertaining to stipulated average speed and grace period.

h. Breakdown of cranes during mobilization of the same could be considered as the hiring period only if it did not go beyond the stipulated grace period.

i. Entry taxes for three states and RTO Tax for Gujrat were to be paid by SISL (payment of these taxes was to be made by the appellant in the first place since the cranes were being manned by its operators, and then the same were to be re-imbursed by SISL to the appellant.)

j. During contract period the appellant could not use subject set of cranes for any other party’s job unless a written approval was given by SISL. Thus, under the relevant clause use of any of the cranes in question by the appellant for job of any other party was not altogether ruled out.

k. Providing oil, carrying out maintenance of cranes was responsibility of the appellant.

l. All requisite tools for smooth functioning of cranes were to be provided by the appellant.

m. Entire and suitable manpower (operators, helpers, cleaners, maintenance personnel, etc.) for effective/ optimum use of cranes was to be supplied by the appellant.

n. Insurance of crane operators, helpers etc. was to be arranged and paid for by the appellant.

o. Log book (of each crane) was to be maintained by crane operators on a daily basis.

p. The appellant was to mobilize cranes as per requirement of SISL.

q. In the event of breakdown of any equipment leading to total set of cranes remaining idle, period of such breakdown was to be considered as de-hiring period for the whole set.

r. Crew of the appellant was to extend full co-operation to SISL so as to meet half-yearly deadlines, by putting in additional efforts, if required.

60.  The work order in the instant case mentions the address on which cranes were to be reached. There was identical mention of address (at Uran) in the case of General Cranes which was not treated as “delivery” contemplated in the “transfer of right to use.”

61. Clause 2 in this case only states when the hiring period was to commence. It does not state or even suggest that possession of the cranes was handed over to the site-in-charge of SISL. Since there was no delivery possession in the eye of law there was no question of any acceptance by SISL. This conclusion is supported by the clear distinction between “possession” and “custody” made in the case of R.I.N.L. by the A.P. High Court. This aspect can be viewed from one more angle i.e. intention of the parties which would be decisive. In the case of Agarwal Brothers, on facts, it was found that in one case there was intention to transfer the right to use the goods and in another there was no such intention.

62. Fitness Certificates, Load Charts, PUC and RTO licences were to be kept with the cranes (by the operators). Clause 5 providing for the same did not further stipulate use of any of these certificates/ licences by SISL. Consequently, attribute (C)of “transfer of right to use the goods” listed in the judgment of B.S.N.L. in para 97 was missing. This had a definite bearing on the point of SISL not deriving any economic benefit by using the cranes for any other project undertaken by them.

63. Clauses 7, 8 & 22 regulated speed of mobilizing cranes. Stipulation regarding grace period was also there. Since the project was undertaken by SISL it was only to be expected that the cranes were to be mobilized as per requirement of SISL.

64. In the case of General Cranes some of the salient features of the contract were as follows:

a. Though the shift timings were predetermined, there was provision for working overtime and payment for the same on pro-rata basis.

b. Breakdown of equipment was to entail pro-rata deduction from payment.

c. Hire charges were to commence only on the equipment being ready in all respects for operation on the site.

d. All papers statutorily required to operate cranes were to be kept with the crane and copies thereof were to be submitted to the client.

e. General Cranes was to supply requisite set of accessories, spares so as to meet the contingency of breakdown and maintenance.

In one respect the contract in the case of General Cranes differs from the contracts which we are considering in this case. In the former matter Fuel Cost was to be borne by General Cranes. In the instant matter, so far as the contract between the appellant and SISL is concerned, clause 5 of Annexure specified that cost of fuel i.e. Diesel was to be borne by SISL and not the appellant provided consumption was within 1800 litres per month. The same clause envisaged also the contingency of consumption of Diesel per month exceeding 1800 litres. In this eventuality the additional cost was to be borne by the appellant. It is a matter of record that in the contract between the appellant and another client i.e. Enercon, as per the stipulation Diesel Cost was to be borne in its entirety by the appellant. On this aspect of variance it is the contention of the appellant that it was a matter of commercial bargain and the clauses which were ultimately incorporated in the contracts were based on what was agreed between the parties commercially. We find merit in this submission.

In para 16 of the judgment in the case of General Cranes it was observed-

“Perusal of the terms of contract, the driver, cleaner, Diesel and oil was to be provided by the respondent (General Cranes) so also, transportation of accessories was to be done by the respondent. It can further be seen that there is no provision in the contract that the legal consequences such as permissions or licences were to be transferred to the transferee. The ultimate control over the crane retained with the respondent.” (bracketed portion supplied)

In General Cranes, in para 11, the High Court referred to attributes of “transfer of the right to use goods” as laid down in the case of B.S.N.L. and then observed-

“It would thus be seen that unless all the requirements are  transferred, the transaction will not come within the meaning of “transfer of tie rights to use any goods”.                                             

(Emphasis supplied)

65. In this case-

i. The employees for operation of cranes are provided by the appellant.

ii. The contract is entered into to accomplish a particular work/ project.

iii. The contract involves execution of activity which requires considerable skill.

iv. It was the exclusive responsibility of the appellant to reach the equipment on the site/s as per requirement of SISL.

v. Further responsibility of the appellant was to ensure that the equipment confirmed to technical specifications spelt out in advance by SISL.

vi. Mobilization of the equipment was to be carried out by the appellant.

viii. Though the contract spelt out that the cranes were to be used as per requirement of SISL, the same could not have resulted in diluting reciprocal duty of the appellant to discharge the work. This could not have brought about any change in the control of the appellant over the cranes.

We have compared the clauses of the contracts in the instant case and

General Cranes. The clauses in both these cases having a bearing on the point in issue i.e. whether the impugned contracts brought about transfer of the right to use the cranes in favour of SISL (and others), are substantially similar. No clause in the contracts in this case can be construed so as to conclude that there was intention to transfer the right to use the cranes in favour of SISL and others. Propositions i. to vii. set out hereinabove in the imediately preceding sub paragraph unmistakably lead to conclusion that the cranes were under effective control and possession of the appellant and during contract period the same were In the custody of SISL arid callers.

In the case of General Cranes provisions under the Maharashtra Sales Tax on the Transfer of Right To Use Any Goods For Any Purpose Act, 1985 i. e. the Lease Act were considered. Sction 2(10) of the Lease Act is as under:

“Sale” means the transfer of the rights to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or any valuable consideration and the word “sell’ with all its grammatical variations and cognate expressions shall be construed accordingly.

Corresponding provision under the MVAT Act is to be found under section 2(24) [Expl. iv]. We have already quoted it hereinabove. Comparison of these two provisions fully supports contention of the appellant that the same are in “pad materia”. Therefore, the ruling in the case of General Cranes shall squarely apply.

66. The Revenue has relied on the case of Walter Buthello. This was a case in which PMT had hired buses from the owner. Permits/ licences of the buses were transferred in favour of PMT to ply the buses on the routes of their choice. PMT was exclusively receiving fare from the passengers/ users. In this factual background it was held that the contract had brought about transfer of right to use the buses in favour of PMT. In this case, the case of General Cranes was distinguished on facts. In the facts and circumstances which prevail in the case before us we have, after comparing the contract clauses, and by taking into account other facts of the case and legal position applicable thereto as laid down in R.I.N.L. and B.S.N.L. by the Supreme Court come to the conclusion that the ratio laid down in the case of General cranes would be applicable. It may be reiterated that in the case of General cranes rulings of the Supreme Court in R.I.N.L. and B.S.N.L. were reliedupon. It may also be mentioned that in the case of The Great Eastern Shipping Company Ltd. the goods were “tug”. The contract in this case specified that the vessel was to remain during the charter period for all purposes at the disposal of the charterers and under their control. It may be further mentioned that in this case the Supreme Court considered the ratio laid down in the case of R.I.N.L. and observed that it was arrived at keeping in view facts of the case. It may also be mentioned that in the case of R.I.N.L. the goods were sophisticated machinery including cranes. Here, in this case also the goods involved are cranes.

67. From analysis of various clauses in the contracts we have come to the conclusion that the ultimate control over the cranes was retained by the appellant. While arriving at this conclusion we have been precedentially guided by what is held in General Cranes by the jurisdictional High Court, by relying on the cases of Supreme Court viz. I.N.L. and B.S.N.L. As a result of this conclusion what is held in the two cases of Gauhati High Court (supra) will not in any way further the case of the Revenue. The other citations sought to be relied upon by the Revenue are clearly distinguishable on facts.

68. The orders levying and confirming VAT and CST have been also impugned by the appellant on the ground of limitation. Submission of the appellant on this point is as follows:

“The Assessment Order passed under Section 23(6) of the MVAT Act is unsustainable.

It is submitted that the Assessment Order has been passed under Section 23(6) of the MVAT Act. Relevant portion of Section 23(6) of the MVAT Act is reproduced below:

“(6) If the Commissioner is of the opinion that, in respect of any period covered by a return, any turnover of sales or of purchases has not been disclosed, or that tax has been paid at a lesser rate, set-off has been wrongly claimed, or deduction has been wrongly claimed, then, notwithstanding anything contained in the other provisions of this section, the Commissioner may, serve a notice in the prescribed form on the dealer and proceed to asseess him in respect of the said period after giving him a reasonable opportunity of being heard: Provided that, the assessment order shall be passed, by the Commissioner to the best of his judgment, where necessary, within six years from the end of the year containing the said period.”

On perusal of the above, it is submitted that an order under this Section can be passed in the event of following specific instances:

• • Turnover of sales or purchases has not been disclosed ;or
  • Tax has been paid at a lesser rate; or
  • Set-off or deduction has been wrongly claimed.

In the present facts, none of the above scenarios exist as the Appellant has appropriately disclosed the sales/ purchase turnover. Further, the tax has been paid at appropriate rate and deductions have also been claimed appropriately. Thus, invocation of Section 23(6) by the Respondent is not tenable.

Without prejudice to the above, it is submitted that, it is the responsibility of the Officer to prove that any of the above circumstances exist in the transaction to invoke Section 23(6) of the t. In the Notice issued to initiate the proceedings under the said section, the Officer has not provided any specific reason for invoking section 23(6) of the VAT Act. Thus, the said notice is against the principles of natural justice and provisions of Section 23(6) are not applicable in the present facts.

The Assessment Order  dated March 31,2015 is hit by the  limitation period  prescribed u/s.23(2) of the MVAT Act

As discussed above, Section 23(6) of the MVAT Act is not invokable and accordingly assessment is required to be made under Section 23(2). In terms of the said section, as Assessment Order for the period April 1,2008 to March 31,2009 should be made on or before June 30, 2013. Relevant portion of the Section is reproduced below:

” (2) Where the return in respect of any period] is filed by a registered dealer by the prescribed date and if the Commissioner considers it necessary or expedient to ensure that 3[return is correct and complete] and he thinks it necessary to require the presence of the dealer or the production of further documents, he shall serve on such dealer, a notice requiring him on a date and at a place specified therein, either to attend and produce or cause to be produced all documents on which such dealer relies in support of his return or to produce such documents or evidence as is specified in the notice.

Provided further that, no order of assessment under this sub­section shall be made after the expiry of four years from the end of the year containing the period to which the return relates.

Provided also that. in respect of the period commencing on or after the 1^st April 2008 and ending on or before the 31^st March 2009,  an order of assessment under this sub-section may be made on or before the 30⁽¹‘ June 2013.

Thus, the Original Assessment Order is made on March 31, 2015-which is beyond the prescribed period of limitation and hence time barred and required to be set aside.

According to the Revenue, the proceeding under section 23(6) of the Act was initiated within limitation as can be gathered from various relevant dates which have been furnished by the appellant.

Sine-qua-non for initiation of proceeding under section 23(6) of the MVAT Act is formation of an opinion by the Commissioner that any of the contingencies stipulated therein is present justifying such initiation. According to the Revenue, on receipt of specific information that the appellant had evaded tax payable on hire charges received by him on leasing of cranes, the Investigation Officer visited the Place of Business of the appellant on 03-09-2013 and conducted investigation. The Investigation Officer then issued notice in F-603. The appellant was called upon to produce relevant record before the Investigation Officer. The Investigation Officer perused the record produced by the appellant and came to the conclusion that the activity of leasing of cranes in which the appellant was engaged, was in the nature of transfer of the right to use goods and hence exigible to VAT in view of extended definition of “sale” in Expl.iv of section 2(24) of the MVAT Act. An opportunity was given to the appellant to file Revised Return which the appellant did not avail. Hence, notice in F-302 was issued to the appellant. The appellant still did not comply. Hence, notice in F-315 was issued on 25-02-2015 setting out therein the grounds enumerated in section 23(6) of the MVAT Act. Before the date of appearance i.e. 15-03-2015 the appellant submitted his reply dated 23-02-2015 and objected to proposed levy of tax.

The chronology mentioned above would go to show that initiation of proceeding under section 23(6) of the MVAT Act was preceded by detailed investigation. Opportunity was given to the appellant at every stage to submit the record and put forth his objections to levy of tax. After going through this process requisite opinion was formed to initiate action under section 23(6) of the MVAT Act. This provision only contemplates formation of an opinion. In this case such opinion was formed on the basis of what, according to the Revenue, transpired during the investigation. Therefore, the opinion cannot be said to be totally unfounded. As mentioned earlier, by issuing notices, the appellant was made aware about what was the case which was being made out against him by the Revenue. An opinion as per Merriam – Webster Dictionary, is “a view, judgment or appraisal formed in the mind about a particular matter”. Keeping in view this definition it becomes apparent that for formation of opinion cogent or concrete material may not be necessary, as is the case when any authority is said to have “a reason to believe”. In the former, the material may be less than concrete, even speculative or inferential whereas in the latter it has to be demonstrably concrete/ cogent. For these reasons we have come to the conclusion that initiation of action under section 23(6) of the MVAT Act was not bad in law. Hence, contention of the appellant that the only recourse available to the Revenue was to proceed under section 23(2) of the MVAT Act and this remedy had, by the time the Revenue chose to act, had become time-barred cannot be accepted.

69. The appellant has also raised alternative grounds. It would be necessary to deal with them as well. The first of these grounds reads as under:

DEALER-EXCEPTION III

The appellant gives on hire the Crawler Cranes and also Truck Mounted Cranes. Crawler Cranes are to be transported to the site on the Trailer in the dismantled condition and then assembled at site. However, the Truck Mounted Cranes are driven to the site in the assembled condition since those arc mounted on Truck. These 1 ruck mounted Cranes require registration under the Motor Vehicles Act,1988. The copies of the Registrations granted to our Truck Mounted Cranes by the authorities under the Motor Vehicles Act, 1988 are on Page Nos. 112 to 143 of the Compilation of Documents. However, even though, the registration of such Cranes is required under that Act, the ‘ Permit’ ( Transport Permit) is not required for such Cranes. The reason is that the Crane Mounted Vehicles are registered in the non-transport category. We have enclosed the relevant letters issued by the concerned authorities alongwith the Notifications on Page Nos,107 to110 of the compilations of Documents.

Exception III to the Definition of Dealer reads as follows:

Exception III,– A transporter holding permit for transport vehicles (including cranes) granted under the Motor Vehicles Act, 1988 (5 of 1988), which are used or adopted to be used for hire or reward 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.

The appellant submits that the Truck Mounted Cranes given by them on hire are squarely covered by this Exception. They are not ‘dealer’ qua the Truck Mounted Cranes. Assuming but not accepting that the contracts effected by the appellant result in the transfer of right to use, still, they are not dealer since the word ‘sale’ used in this exception includes therein a deemed sale of right to use.

The words ‘A transporter holding permit’ used in this Exception should be interpreted to mean, ‘holding permit, if required to be held under the Motor Vehicles Act, 1988. Any other interpretation shall defeat the intention of the legislature. The appellant relies on the following judgments for this proposition:

• • M/s Giridhari Lal And Sons Vs. Balbir Nath Mathur And Others (1986) 2 SCC 237 (SC)

‘Our own court has generally taken the view that ascertainment of legislative intent is a basic rule of statutory construction and that a rule of construction should be preferred which advances the purpose and object of legislation and that though a construction according to plain language, should ordinarily be adopted, such a construction should not be adopted where it leads to anomalies, injustices or absurdities—’

• • Rajendra Prasad Yadav and Others Vs. State of M.P. and Others (1977) 6 Supreme Court Cases 678

‘it is settled principle of interpretation that all the provisions should be harmoniously interpreted to give effect to all the provisions and no part thereof rendered surplusage or otiose.’

• • Southern Motors Vs. State of Karnataka and Others (2017) 3 SCC 467

‘it is now well settled rule of construction that where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result which could never have been intended by the legislature, the court may modify the language used by the legislature or even ‘do some violence’ to it, so as to achieve the obvious intention of the legislature and produce a rational construction.’

The appellant submits that they are not covered by the definition of ‘dealer’ under Clause (8) of Section 2 of the MVAT Act.2002 qua Truck Mounted Cranes due to the operation of Exception III to that definition. The Revenue earned from such Cranes during the period of appeal is stated on Page No.106 of the Compilation of Documents. VAT levied on the same should be removed. The appellant submits that, this defence is in the alternate. Their principal contention is, there is no transfer of right to use in any contract effected by them irrespective of the type of the Crane used.

Reply of Revenue to this submission is as follows:

The service provider, who is in the business of transport and having buses, cars, trucks, taxis, or any other vehicles, by charging fare or freight charges, transports the goods, passenger or weight from one place to another, where such activity is done for temporary duration without entering into contract, is covered by the said Exception III. The specific work as to transfer the oods, any assigned specific work would have been covered by exception. As discussed in above paras the appellants activity does not cover under above Exception III to definition of dealer.

Exception III on which the appellant wants to rely cover only the transporter and “transport vehicles (including cranes). According to the appellant the truck mounted cranes would be squarely covered by this exception. The appellant has placed on record Notification dated 19-06-1992 issued by Government of India, Ministry of Surface Transport (Transportation Wing). As per this Notification “crane mounted vehicle” falls within the category of “non-transport vehicles”. The exception III expressly refers to a transporter and transport vehicles. Truck mounted cranes do not belong to the category of “transport vehicles”. Hence, such cranes would fall beyond the ambit of exception III. Since such cranes are not transport vehicles permit is not needed therefor. For these reasons aforesaid submission cannot be accepted.

70. Another alternative submission of the appellant is as follows:

Application of Merind’s Judgment

The appellant has produced before the Hong)le Tribunal the assessment Orders passed by the assessing authorities for the years 2000-2001 to 2004-2005 under the erstwhile Bombay Sales Tax Act,1959 and the Central Sales Tax Act,1956. Those are on Page Nos 169 to 199 of the Compilation of Documents. The assessing officer, in 2000-2001 assessment order, has in categorical terms expressed a view that the main activity of the appellant was not liable as sale and the operating (Crane Operating) charges received by the appellant were not liable to Sale Tax. This view was followed in all further assessments under the BST Act. Under the VAT Act, the appellant filed .returns and also Audit Reports in form No. 704. They never declared the receipts as the receipts against the Transfer of right to use. None of the authorities pointed out to them till the year 2014 (assessment for the year 09-10 was passed on 20.03.2014-this was the first order which levied the tax) that they had changed the view which they held in BST era. Hon’ble Maharashtra Sales Tax Tribunal had also expressed the same view as held by the appellant in similar terms of contract in General Cranes in the year 2005 which was approved by the Hon’ble High Court in 2015. The appellant submits that when such view prevailed in this State for almost 11 years the same should not be disturbed.

In the case of Merind Ltd. v/s. State of Maharashtra (judgment dated 06-05-2004 delivered by the Bombay High Court in Sales Tax Reference No. 21 of 2003 [R. A. No. 32 of 2002]) the question was whether the Tribunal was justified in interpreting word “externally” appearing in schedule entry to mean “used upon as well as outside body” and holding said product to be not a medicine. The High Court came to the conclusion that in view of long standing judicial interpretation the Tribunal was not justified in holding that entry C-II-37 has to be interpreted restrictively so as to include only those medicinal formulations which are used inside or upon the body. Following observations of the Supreme Court in the case of R.I.N.L. shall suffice to reject aforesaid submission of the appellant-

“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 favour of the contractor Although it cannot be said that the appellant (State of A.P.) was estoped  from contending otherwise in regard to assessment year 1988-89, it is an additional factor and circumstance, which supports the stand of the respondent”. (Bracketed portion and emphasis supplied)

It is settled legal position that there can be no estoppel against statute. The State is not precluded from taking a stand, based on statutory provision, which is contrary to the stand taken by it earlier. Whether the contrary stand taken subsequently is sustainable in law is a different matter.

71. By relying on Imagic Creative Pvt. Ltd. v/s. Commissioner of Commercial Taxes (2008) 2 SCC 614 the appellant contended that in this ruling payments of Service Tax as also VAT are held to be mutually exclusive and since the appellant has already paid Service Tax levy of VAT would be bad in law.

Reply of the Revenue on this point is as follows:

The other contention of the Appellant that, the Appellant has paid the service tax on consideration for crane services received by it under the category of “Supply of Tangible goods”. In terms of section 66E (f) of Finance Act, 1994, hence there is no transfer of right to use is involved in his case. The submission submitted by the Appellant is devoid of merit. In number of cases various Courts have held that, what is pivotal is to determine the true nature of the transaction. Once the true nature of transaction is unveiled, then, the appropriate tax, either levied by State Legislature or by Parliament of India, should be levied and recovered from the citizen. If any Government agency levies the incorrect tax on a particular transaction due to wrong interpretations of the Assesse to pay incorrect tax, then, it would not militate against the recovering correct and valid tax according to the provisions of law from the Assesse. Hence if Assesse has paid service tax on the transaction and if it is found that VAT was leviable on the same tansaction instead of Service Tax then there would not be any bar in levying the VAT and recovering the same from the Assesse. As rightly held by Hon Gauhati High court in the case of Brahmputra Valley (53VST 401 (GAUT) “Question whether It was transfer of right to use did not depend on the provisions of the service tax law and thus amendment by the finance Act , 2008 had no relevance to determine the said question.”

In this case before us, in view of Hon. Apex Court decision in case of M/s. The Great Eastern Shipping Co Ltd., the question germane to the instant matter is not whether service tax is leviable or not. The question involved in the case is only to the extent whether the State of Maharashtra can realize the sales tax on deemed sale under Section 2 (24) (b) (iv) of the MVAT Act, 2002, in view of the provisions contained in Article 366(29A) (d) of the Constitution. Thus, we may not go through whether service tax is payable or not as this is not the question involved in the present case.

We find merit in the aforesaid submission of the Revenue. We have decided the point involved in the proceeding i.e. whether the appellant had transferred the right to use cranes in favour of the Hirers. In view of said determination we refrain from dealing with submission of the appellant with regard to levy of VAT in addition to levy of Service Tax.

72. The appellant has pressed into service all the submissions dealt with hereinabove to the assessment made under the CST Act. It may be mentioned that the following definition of “sale” given in Section 2(g) of the CST Act and its relevant limb (iv) are in “pari materia” with the definition of “sale” and its relevant limb which includes concept of deemed sales under the MVAT Act.

“Sale” with its grammatical variations and cognate expressions; means any transfer of property in goods by one person to another for cash or deferred payment or for any other valuable consideration, and includes,–

(i) XXXXX

(ii) XXXXX

(iii) XXXXX

(iv) a 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) XXXXX

(vi)XXXXX… “

73. So far as levy of tax under the CST Act is concerned, submission made by the appellant in the alternative and the grounds on which the Revenue seeks to refute them are as follows:

The Head Office of the appellant is at Pune i.e. in the State of Maharashtra. The appellant receives all the orders in the Head Office. It be noted that the nature of the transaction is such that only Work Orders are issued by the client. There is no formal contract other than such Work Orders. Those are issued either from this State or form other States, but, in all the cases received in the State of Maharashtra. However, the Cranes which are required to be appropriated to such contracts are not always located within the State of Maharashtra and those are dispatched to the destination State from the nearest location. For example, if the order is received for the user of the Crane in the State of Tamil Nadu, the Crane located in the State of Kerala may be dispatched from the State of Kerala to the State of Tamil Nadu. Further, in some cases the Crane located in one City may be sent to another city in the same State. Thus, the Crane located at Ahmadabad may be sent to Baroda. This is because most of the cranes of the appellant are heavy duty cranes and it is uneconomical to bring those cranes back to Pune, after the completion of the job there, and then dispatch them to the destination State. The appellant has submitted the file before this Hon’ble Tribunal containing the documents evidencing the movemenl of We cranes when those are appropriated to the contracts of deemed sales,

I. Within the State of Maharashtra;

II. From the State of Maharashtra to other States;

III. From other States to Other States (Out and Out);

IV. From Other States to the State of Maharashtra.

On Page No. 1 of this file, the appellant has stated the revenue received in each of these categories. The appellant submits, if at all it is held that the appellant has effected the deemed sales, the State of Maharashtra has jurisdiction to levy tax, under the MVAT Act,2002 on such deemed sales falling under the first category ( MH to MH and under the CST Act,1956 on such deemed sales falling under the second category ( MH to Other States). The State of Maharashtra, has no jurisdiction to levy tax on the deemed sales covered under the remaining two categories, since the location of the cranes was outside the Slate of Maharashtra at the time the Work order was received in this State.

The Revenue has opposed these submissions saying that the Supreme Court of India in the case of 20^th Century Finance Corporation Limited Vs. The State of Maharashtra, (2000) 6 SCC 12 has held otherwise. It be noted that the CST law was amended in the year 2002 ( 11.05.2002) and therefore the law laid down by the Apex court in that judgment has to be understood in the light of those amendments. Kindly see the following observations of the court in that case, on Page No. 60 of the First Compilation of the

Para No.35 on Page No. 60 :

‘ As a result of the aforesaid discussion our conclusions are these:

(a) ———————————————————————–

(b) the appropriate legislature by creating legal fiction can fix situs of sale. In the absence of any such legal fiction the situs of sale in case of the transaction of transfer of right to use any goods would be the place where the property in goods passes, i.e. where the written agreement transferring the right to use is executed.’

Thus the Apex Court in that case has said that their decision about the situs of sale will apply only in the absence of the appropriate legislature by creating legal fiction fixing the situs of sale. The appropriate legislature i.e. the Parliament has fixed the situs by amending the definition of Sale u/s 2(g) of the Central Sales Tax Act 2002 on 11.05.2002 and including therein the transfer of right to use. Kindly note that originally Sections 3. 4 and 5 of the Central Sales Tax Act, 1956 were enacted by the Parliament under the powers granted under article 286 of the Constitution of India. The said article reads as follows : ‘286. Restrictions as to imposition of tax on the sale or purchase of goods. – (1)

no law of the state shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place –

(a) outside the state; or

(b) in the course of the import of the goods into, or export of the goods out of, the territory of India.

(2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1).

Accordingly, the Parliament formulated the principles in Chapter II of the Central Sales Tax Act, 2002. The opening part of Chapter II itself says, formulation of principles for determining when a sale or purchase of goods takes place in the course of interstate trade or commerce or outside a state or in the course of import or export. Section 4 of thereof formulates a principle for determining when is a sale or purchase of goods said to take place outside a State. It creates a legal fiction of deeming the sale inside or outside the State.

On and form 11.05.2002 i.e. after the introduction of an amendment to the definition of ‘Sale’, such legal fiction applies even to the deemed sale of transfer of right to use.

The Commissioner of Sales Tax, Maharashtra State has therefore aptly stated in his Circular No. 15T dated 2002 that the Judgment of the Supreme Court in 20^th Century Finance Corporation Limited was superseded after the amendment carried out to the definition of Sale. The Circular is in accordance with the law and therefore binding on the Sales Tax Department. Kindly see the judgment of the Supreme Court in Commissioner of U.P. Vs. Indra Industries,( 2001) 122 STC 100. Copies of the Circular and the Judgment are annexed herewith and marked Exhbt. C & D respectively.

The Revenue has also opposed these submissions on the basis of the observations made by the Supreme Court in Great Eastern Shipping Company Ltd; on the situs of sale. It is submitted that the Court in that case was considering the Charter Party agreement dated 08.01.98 (signed in the State of Karnataka on 08.01.1998). Naturally, the Court applied the law laid down by the Court in 20^th Century Finance Corporation Limited. The post amendment law could not have been applied in that case. Therefore, Great Eastern Shipping Company’s case is not applicable.

The Revenue has also opposed the submissions saying, this is the new ground and these particular submissions were not made before the authorities below. The appellant submits that this is the interpretation of the nature of the transaction by applying the correct law to the transaction in question. It goes to the root of the case. The Tribunal is the last fact finding authority. Therefore, in several cases the Tribunal has allowed such ground to be taken up even in Second Appeal. One such judgment of this Hon’ble Tribunal in M/s Hind Enamal, S.A. No.145A of 2012, judgment dated 4^th August, 2014 is annexed hereto. Exhbt. E. In fact, the appellant had kept ready Application for Additional Ground of Appeal on 15.10.2019 itself. However, it remained to be submitted. The same is also being forwarded herewith. Exhbt.F

On Facts, the Revenue has raised following 2 objections:

In some cases, expense vouchers have been produced and  not Lorry Receipts:

The appellant submits that in all cases they have submitted the Purchase Orders (Work Orders /Contracts) wherein there are instructions for the movement of Cranes. Thus, there is a movement of Crane in pursuance to the Contract of deemed sale. Therefore, the transactions are squarely covered by Sections 3 & 4 of the Central Sales Tax Act, 2002. The Cranes involved in such cases are Truck Mounted Cranes and those are driven by our own drivers to the destination. The Expense vouchers of those drivers are therefore relevant evidence.

The date of L.R. of L& T is prior to the date of Purchase  Order:

In this case the formal Purchase Order of L & T was issued on 24 .12, 2008. However, the Letter of Intent for hire of such Cranes by L & T was issued on 20.10.2008. kindly see the date of LOI mentioned in the Invoice of the appellant enclosed on Page No.122 of the file.

Thus, both the objections raised by the Revenue are frivolous objections. No doubt, the appellant has submitted only sample transactions before this Hon’ble Tribunal and all such transactions require verification. The appellant therefore submits that the claims of Inter-State deemed Sale and the Deemed Sale outside the State of Maharashtra be principally decided and the case may please be sent for verification to the lower authorities.

Aforesaid submission proceeds on a footing that the impugned transactions were deemed sales. Since we have held otherwise  this submission need not be considered.

74. The upshot of foregoing discussion is that the impugned orders cannot be sustained since while passing the same the authorities below proceeded on a footing that the receipts of hire charges received by the appellant were exigible to VAT and CST because the same were received on account of transactions of deemed sale i.e., under these transactions the appellant had transferred in favour of the Hirers the right to use the cranes. We have reached the conclusion which is contrary to what was held by the authorities below. In view of our determination VAT and CST levied on account of purported “transfer of right to use the goods i.e. cranes” needs to be deleted. As a consequence of this determination amount of penalty imposed under section 29(3) of the MVAT Act (under MVAT assessment) and section 9(2) of the CST Act read with section 29(3) of the MVAT Act (under CST assessment) will also have to be deleted. Amount of interest levied under section 30(3) of the MVAT Act (under MVAT) and under section 9(2A) of the CST Act read with section 30(3) of the MVAT Act (under CST) shall be re­calculated and modified in accordance with this determination. Hence the order.

ORDER

Appeals are allowed and impugned orders are set aside in following terms.

i. VAT and CST levied by treating the transactions as transfer of right to use the goods i.e. cranes stands deleted.

ii. As a consequence of conclusion reached above penalty imposed under section 29(3) of the MVAT Act (under MVAT assessment) and section 9(2) of the CST Act read with section 29(3) of the MVAT Act (under CST assessment) stands deleted.

iii. Amount of interest levied under section 30(3) of the MVAT Act under MVAT) and under section 9(2A) of the CST Act read with section 30(3) of the MVAT Act (under CST) shall be re-calculated arid modified In accordance with this determination.

iv. The assessing authority shall, in view of this determination, re­calculate the tax liability after taking into consideration the ount of part-payment already deposited by the appellant.