Transfer of right to use goods requires legal control; mere custody of machinery under owner's supervision does not attract sales tax.

Tax under Section 5E of the Andhra Pradesh General Sales Tax Act applies only where there is a transfer of the right to use goods. On the agreement read as a whole, machinery supplied for project work remained under the assessee's effective control and possession, and the contractors could not use it for other purposes or move it at will. A custody clause while the machinery was on site did not amount to transfer of the right to use. The surrounding circumstances, including prior assessment treatment of the same agreement, supported this construction. The hire charges were therefore not exigible to sales tax, and the appeal failed.

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Issues: Whether the hire charges received by the assessee from contractors for supplying machinery for project work constituted consideration for transfer of the right to use goods so as to attract tax under Section 5E of the Andhra Pradesh General Sales Tax Act, 1957.

Analysis: Liability under Section 5E arises only when there is a transfer of the right to use goods. On a reading of the agreement as a whole, the machinery remained under the effective control and possession of the assessee. The contractors were not free to use the machinery for purposes other than the assessee's project work or to move it out at will. The clause making the contractor responsible for custody while the machinery was on site did not amount to transfer of the right to use. The surrounding circumstances, including the view taken in prior assessment proceedings on the same agreement, supported this construction.

Conclusion: The transaction did not amount to a transfer of the right to use machinery, and the hire charges were not exigible to sales tax under Section 5E. The appeal was without merit and failed.

Ratio Decidendi: Tax on the transfer of the right to use goods is attracted only when the transferee obtains the legal right to use the goods with corresponding control consistent with such transfer; mere custody or use under the owner's effective control does not satisfy the statutory requirement.

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