Transfer of right to use goods depends on possession and effective control, not mere equipment hiring service.

Liability under section 5-C of the Karnataka Sales Tax Act arises only on a transfer of the right to use goods, which requires delivery of possession and effective control to the customer. Where the supplier transports equipment to the venue, installs and operates it through its own technicians, retains possession and control, and removes it after the programme, the transaction is a composite service rather than a deemed sale. On those facts, hiring of audio, visual and multimedia equipment did not amount to a taxable transfer of the right to use goods, and the proposed levy was not sustainable.

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Issues: Whether the hiring of audio, visual and multimedia equipment, where the petitioner transported the equipment to the venue, installed and operated it through its own technicians, retained possession and control, and dismantled and returned it after the programme, amounted to a transfer of the right to use goods liable to tax under section 5-C of the Karnataka Sales Tax Act, 1957.

Analysis: Liability under section 5-C arises only when there is a transfer of the right to use goods. Such transfer requires delivery of possession and effective and general control of the goods to the customer, as distinct from mere custody. The nomenclature of the transaction is not decisive; the real test is whether the customer acquires the right to use the goods with effective control. Where the transaction is only for the rendering of services and the goods continue under the effective control of the supplier, there is no transfer of the right to use goods and no deemed sale. On the undisputed facts, the petitioner did not merely hire out equipment for the customer's independent use; instead, it provided a package service in which the equipment was taken to the site, installed, operated and removed by the petitioner's own technicians, while possession and control never passed to the customer.

Conclusion: The transaction did not amount to a transfer of the right to use goods and was not exigible to tax under section 5-C; the notices proposing such levy were liable to be quashed.

Ratio Decidendi: A transaction is taxable as a transfer of the right to use goods only when possession and effective control of the goods pass to the customer; where the supplier retains possession and control and merely renders a composite service using its own equipment and personnel, no deemed sale arises.

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