STATE OF ANDHRA PRADESH Vs. RASHTRIYA ISPAT NIGAM LIMITED
LAWS(SC)-2002-3-34
SUPREME COURT OF INDIA (FROM: ANDHRA PRADESH)
Decided on
March 06,2002
STATE OF ANDHRA PRADESH
Appellant
VERSUS
RASHTRIYA ISPAT NIGAM LIMITED
Respondents
Cited Judgements :-
BANDA TENT HOUSE ASSOCIATION VS. STATE OF U P [LAWS(ALL)-2003-9-133] [REFERRED TO]COMMISSIONER TRADE TAX VS. SHARMA TOURIST TRANSPORT BUS SERVICE [LAWS(ALL)-2005-8-57] [REFERRED TO]
COMMISSIONER TRADE TAX VS. JAMUNA PRAKASH JAISWAL [LAWS(ALL)-2005-8-32] [REFERRED TO]
JAY KUMAR BARDIA VS. STATE OF ASSAM [LAWS(GAU)-2006-5-27] [REFERRED TO]
HLS ASIA LTD VS. STATE OF ASSAM [LAWS(GAU)-2006-11-60] [REFERRED TO]
ORIENTAL BANK OF COMMERCE VS. STATE OF U P [LAWS(ALL)-2008-2-114] [REFERRED TO]
COMMISSIONER VAT TRADE AND TAXES DEPARTMENT VS. INTERNATIONAL TRAVEL HOUSE LTD [LAWS(DLH)-2009-9-154] [REFERRED TO]
INDIAN OIL CORPORATION LTD VS. COMMISSIONER OF TAXES ASSAM [LAWS(GAU)-2009-2-34] [REFERRED TO]
GREAT EASTERN SHIPPING COMPANY LIMITED VS. STATE OF KARNATAKA [LAWS(KAR)-2004-1-30] [REFERRED TO]
WEST COAST INDUSTRIAL GASES LTD VS. STATE OF KERALA [LAWS(KER)-2002-10-21] [REFERRED TO]
COMMISSIONER OF SALES TAX VS. ROLTA COMPUTER AND INDUSTRIES PRIVATE LIMITED [LAWS(BOM)-2009-6-159] [REFERRED TO]
COMMISSIONER OF SALES TAX MAHARASHTRA STATE VS. ROLTA COMPUTER AND INDUSTRIES PRIVATE LIMITED [LAWS(BOM)-2009-6-182] [REFERRED TO]
MALABAR GOLD PRIVATE LIMITED VS. COMMERCIAL TAX OFFICER [LAWS(KER)-2013-6-170] [REFERRED TO]
MAHESH TRAVELS (P) LTD VS. OIL AND NATURAL GAS COMMISSIONTL [LAWS(GAU)-2009-2-69] [REFERRED TO]
ESSAR TELECOM INFRASTRUCTURE PVT LTD VS. UNION OF INDIA [LAWS(KAR)-2011-4-83] [REFERRED TO]
M/S.ANAND CINE SERVICES VS. STATE OF TAMIL NADU [LAWS(MAD)-2013-3-1] [REFERRED TO]
STATE OF ORISSA VS. DREDGING CORPORATION OF INDIA LTD. [LAWS(ORI)-2009-3-59] [REFERRED TO]
Indus Towers Ltd No. 12 Tower-D, 7th Floor, Subramanya Arcade, Bannerghatta Road Bangalore-560029 (Represented by Sri K M Ashwin Kumar DGM-Finance) and other etc. VS. The Deputy Commissioner of Commercial Taxes Enforcement I. South Zone, Koraman [LAWS(KAR)-2011-9-239] [REFERRED TO]
MOHD WASIM KHAN VS. COMMISSIONER, TRADE TAX [LAWS(ALL)-2006-4-320] [REFERRED TO]
BRAHMAPUTRA VALLEY CONSTRUCTION AND SUPPLIERS VS. OIL AND NATURAL GAS CORPN. LTD [LAWS(GAU)-2012-7-95] [REFERRED TO]
ALI SINGHANIA BULK CARRIERS VS. STATE OF KARNATAKA [LAWS(KAR)-2011-6-219] [REFERRED TO]
DIPAK NATH VS. OIL AND NATURAL GAS CORPORATION LTD. AND ORS. [LAWS(GAU)-2009-11-66] [REFERRED TO]
W.B. CRANE & EQUIPMENT OWNERS WELFARE ASSN. AND OTHERS VS. ASSISTANT SALES TAX OFFICER, CENTRAL SECTION, INVESTIGATION WING AND OTHERS [LAWS(ST)-2012-2-1] [REFERRED TO]
UNIQUE INFLATABLES LIMITED VS. STATE OF ANDHRA PRADESH [LAWS(ST)-2013-7-3] [REFERRED TO]
THE COMMISSIONER OF SALES TAX MAHARASHTRA STATE VS. GENERAL CRANES NEAR PITRODA AUTOMOBILES WORKS [LAWS(BOM)-2015-4-137] [REFERRED TO]
QUIPPO OIL AND GAS INFRASTRUCTURE LIMITED AND ORS. VS. STATE OF TRIPURA AND ORS. [LAWS(TRIP)-2014-11-75] [REFERRED TO]
VICEROY HOTELS LIMITED VS. COMMERCIAL TAX OFFICER AND THREE ORS [LAWS(APH)-2011-2-99] [REFERRED TO]
THE STATE OF KARNATAKA VS. UNITED BREWERIES LTD. [LAWS(KAR)-2015-10-103] [REFERRED TO]
NATIONAL FERTILIZERS LIMITED VS. STATE OF HARYANA AND ORS. [LAWS(P&H)-2005-2-137] [REFERRED TO]
TIM DELHI AIRPORT ADVERTISING PVT. LTD. VS. SPECIAL COMMISSIONER-II, DEPARTMENT OF TRADE & TAXES AND ORS. [LAWS(DLH)-2016-5-1] [REFERRED TO]
STATE OF UTTAR PRADESH VS. UNION OF INDIA [LAWS(SC)-2003-2-112] [REFERRED]
HSL ASIA LIMITED VS. STATE OF TRIPURA [LAWS(GAU)-2011-3-49] [REFERRED TO]
G S LAMBA AND SONS VS. STATE OF ANDHRA PRADESH [LAWS(APH)-2011-1-24] [REFERRED TO]
ALPHA CLAYS VS. STATE OF KERALA [LAWS(KER)-2003-8-81] [REFERRED TO]
STATE OF TAMIL NADU VS. TVL ESSAR SHIPPING LIMITED [LAWS(MAD)-2011-8-399] [REFERRED TO]
TATA CONSULTANCY SERVICES LTD. VS. STATE OF MEGHALAYA [LAWS(MEGH)-2014-2-3] [REFERRED TO]
COMMISSIONER, TRADE TAX VS. OSWAL AGRA MILLS LTD [LAWS(ALL)-2006-11-275] [REFERRED TO]
ASIAN OILFIELD SERVICES, A COMPANY, INCORPORATED UNDER THE COMPANIES ACT, 1956 VS. THE STATE OF TRIPURA AND ORS. [LAWS(TRIP)-2015-5-4] [REFERRED TO]
DELTA COMMUNICATIONS VS. THE STATE OF KERALA [LAWS(KER)-2015-7-130] [REFERRED TO]
NEWSCO INTERNATIONAL ENERGY SERVICES INC. VS. STATE OF TRIPURA [LAWS(TRIP)-2016-2-27] [REFERRED TO]
MAHYCO MONSANTO BIOTECH (INDIA) PVT LTD VS. UNION OF INDIA [LAWS(BOM)-2016-8-209] [REFERRED]
JAY KUMAR BARDIA VS. STATE OF ASSAM AND OTHERS [LAWS(GAU)-2009-12-77] [REFERRED TO]
COMMISSIONER OF TAXES, ASSAM AND OTHERS VS. D.P. AGARWALA AND OTHERS [LAWS(GAU)-2012-7-117] [REFERRED TO]
M/S. TRANSOCEAN OFFSHORE, INTERNATIONAL VENTURES LIMITED VS. UNION OF INDIA [LAWS(APH)-2017-4-33] [REFERRED TO]
MC DONALDS INDIA PVT. LTD. VS. COMMISSIONER OF TRADE AND TAXES, NEW DELHI [LAWS(DLH)-2017-5-208] [REFERRED TO]
WALTOR BUTHELLO OF MUMBAI AND ORS VS. COMMISSIONER OF SALES TAX [LAWS(BOM)-2017-2-271] [REFERRED TO]
DEEP INDUSTRIES LTD. VS. STATE OF GUJARAT [LAWS(GJH)-2017-12-288] [REFERRED TO]
GOPAL OIL COMPANY BINDKI FATEHPUR VS. COMMISSIONER COMMERCIAL TAX [LAWS(ALL)-2019-4-112] [REFERRED TO]
TATA MOTORS LIMITED CHINHAT INDUSTRIAL AREA LUCKNOW VS. COMMISSIONER COMMERCIAL TAX U.P.LUCKNOW [LAWS(ALL)-2019-12-16] [REFERRED TO]
JUDGEMENT
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(1.)The only point urged by the learned counsel for the appellants before us is that there was a transfer of right to use the machinery by the respondent in favour of the contractors by collecting hire charges looking to the clauses contained in the agreement. As such it was liable to pay sales tax under S. 5-E of the Andhra Pradesh General Sales Tax Act, 1957 (for short 'the Act'). On behalf of the respondent, the learned Senior Counsel made submissions supporting the impugned order pointing out to the various clauses contained in the agreement.
Section 5-E reads :-
"5-E. Tax on the amount realized in respect of any right to use goods-
Every dealer who transfers the right to use any goods for any purpose whatsoever, whether or not for a specified period, to any lessee or licencee for cash, deferred payment or other valuable consideration, in the course of his business shall, on the total amount realized or realisable by him by way of payment in cash or otherwise on such transfer or transfers of the right to use such goods from the lessee or licencee, pay a tax at the rate of five paise in every rupee of the aggregate of such amount realized or realisable by him during the year.
Provided that no such tax shall be levied if the total turnover of the dealer including such aggregate is less than Rs. 1,00,000/-."
(Emphasis supplied)
(2.)The respondent is owning Visakhapatnam Steel Project. For the purpose of steel project, it allotted different works to contractors. The respondent undertook to supply sophisticated machinery to the contractors for the purpose of being used in execution of the contracted works and received charges for the same. The appellant made provisional assessment levying tax on hire charges under S. 5-E of the Act. The respondent filed writ petition seeking declaration that the tax levied, exercising power under S. 5-E of the Act on the hire charges collected during the period 1988-89, was illegal and unconstitutional. The appellant filed a counter-affidavit in the writ petition contending that the respondent was lending highly sophisticated and valuable imported machinery to the contractors engaged in the execution of the project work on specified hire charges; the machinery was given in the possession of the contractor and he was responsible for any loss or damage to it and in view of the terms and conditions contained in the agreement, there was transfer of property in goods for use and on the amounts collected by the respondent as charges for lending machinery attracted tax liability under S. 5-E of the Act.
(3.)The High Court after scrutiny and close examination of the clauses contained in the agreement and looking to the agreement as a wole, 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 S. 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 Cls. 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 possesson and control of the machinery. It may also be noticed that even the Appellate Deputy Commissioner, Kakinada in the order dated 15-11-1999 in regard to assessment years 1986-87 and 1987-88 held that under the terms and conditions of the agreement, there was no transfer of right to use the machinery in 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.
Section 5-E reads :-
"5-E. Tax on the amount realized in respect of any right to use goods-
Every dealer who transfers the right to use any goods for any purpose whatsoever, whether or not for a specified period, to any lessee or licencee for cash, deferred payment or other valuable consideration, in the course of his business shall, on the total amount realized or realisable by him by way of payment in cash or otherwise on such transfer or transfers of the right to use such goods from the lessee or licencee, pay a tax at the rate of five paise in every rupee of the aggregate of such amount realized or realisable by him during the year.
Provided that no such tax shall be levied if the total turnover of the dealer including such aggregate is less than Rs. 1,00,000/-."
(Emphasis supplied)
(2.)The respondent is owning Visakhapatnam Steel Project. For the purpose of steel project, it allotted different works to contractors. The respondent undertook to supply sophisticated machinery to the contractors for the purpose of being used in execution of the contracted works and received charges for the same. The appellant made provisional assessment levying tax on hire charges under S. 5-E of the Act. The respondent filed writ petition seeking declaration that the tax levied, exercising power under S. 5-E of the Act on the hire charges collected during the period 1988-89, was illegal and unconstitutional. The appellant filed a counter-affidavit in the writ petition contending that the respondent was lending highly sophisticated and valuable imported machinery to the contractors engaged in the execution of the project work on specified hire charges; the machinery was given in the possession of the contractor and he was responsible for any loss or damage to it and in view of the terms and conditions contained in the agreement, there was transfer of property in goods for use and on the amounts collected by the respondent as charges for lending machinery attracted tax liability under S. 5-E of the Act.
(3.)The High Court after scrutiny and close examination of the clauses contained in the agreement and looking to the agreement as a wole, 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 S. 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 Cls. 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 possesson and control of the machinery. It may also be noticed that even the Appellate Deputy Commissioner, Kakinada in the order dated 15-11-1999 in regard to assessment years 1986-87 and 1987-88 held that under the terms and conditions of the agreement, there was no transfer of right to use the machinery in 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.
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