2000 (9) TMI 1007 - AT - VAT and Sales Tax

Inter-State Machinery Transactions Exempt from Sales Tax under Tamil Nadu Act

The Tribunal ruled in favor of the petitioners in both cases, holding that the transactions involving the transfer of right to use machinery were not ... - Issues:1. Whether the lease of machinery to a party in Maharashtra is taxable under section 3-A of the Tamil Nadu General Sales Tax Act, 1959.2. Whether the transactions involving the transfer of right to use goods are inter-State in nature, allowing Tamil Nadu authorities to levy sales tax.3. Whether the assessing authority correctly determined the tax liability in cases involving the transfer of right to use machineries.Issue 1 Analysis:In the first case, the petitioner included a turnover of Rs. 1,00,000 from the lease of machinery, claiming it was not taxable as the machinery was leased to a party outside Tamil Nadu. The assessing authority disagreed and included the sum in the taxable turnover. Various penalties were imposed for non-compliance. The appellate authority upheld the decision, stating that the lessor being in Tamil Nadu gave jurisdiction to levy tax under the Act. The Appellate Tribunal also confirmed the assessment, mentioning that although the machinery was moved to Maharashtra, it did not qualify as an inter-State sale. The Tribunal dismissed the appeals, leading to a tax revision case challenging the assessment under section 3-A of the Act.Issue 2 Analysis:In the second case, the assessing authority determined tax liability on the transfer of right to use machineries. The assessee contended that the transaction was an inter-State sale and not liable under the Tamil Nadu General Sales Tax Act. The Appellate Assistant Commissioner dismissed the appeals, upholding the levy. The Sales Tax Appellate Tribunal also upheld the levy, stating that the transfer of right to use goods took place in Tamil Nadu. The tax revision case was filed against this decision, focusing on whether the transactions were inter-State in nature, allowing Tamil Nadu authorities to levy sales tax.Issue 3 Analysis:The Supreme Court judgment in a related matter clarified that States cannot levy sales tax on the transfer of right to use goods if the sale occurs outside the State or in the course of inter-State trade. In both cases, it was established that the transactions involved the movement of goods from one State to another due to the transfer of right to use the machineries. Consequently, the turnovers were deemed not liable to be assessed under section 3-A of the Tamil Nadu General Sales Tax Act. The Tribunal allowed the tax revision cases, ordering the deletion of consequential levies based on the main turnover.In conclusion, the Tribunal ruled in favor of the petitioners in both cases, determining that the transactions were not subject to tax under the Tamil Nadu General Sales Tax Act due to their inter-State nature. The judgments highlighted the importance of the movement of goods in determining the tax liability on the transfer of right to use goods.