Delayed return charges for gas cylinders are not consideration for transfer of the right to use goods under sales tax law.

Rent collected for delayed return of gas cylinders supplied with industrial gas was held not to be consideration for transfer of the right to use goods. The Kerala High Court reasoned that the sale was only of gas, not of the cylinders, and that the cylinders had to be returned after use. A charge imposed for detention beyond the permitted period was intended to secure prompt return and operated as an incidental or penal charge, not as payment under any agreement conferring a right to use the cylinders. The amount was therefore not taxable turnover under section 5(1)(iii) of the Kerala General Sales Tax Act, 1963, and the assessment was to be revised by deleting it.

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Issues: Whether rent received for delayed return of gas cylinders supplied along with industrial gas amounted to consideration for transfer of the right to use goods and was taxable under section 5(1)(iii) of the Kerala General Sales Tax Act, 1963.

Analysis: The sale was only of gas, not of the cylinders. The cylinders were required to be returned after use, and the charge for delayed return was intended to secure prompt return rather than to confer any contractual right to use the cylinders for consideration. A transfer of the right to use goods requires an agreement granting such right; mere continued possession of the cylinders by customers beyond the stipulated period, and the amount charged for that detention, did not amount to such a transfer. The court preferred the reasoning that detention beyond the permitted period was without authority and that the receipt was in the nature of a penalty or incidental charge, not taxable turnover under the charging provision.

Conclusion: The amount received as rent for delayed return of the cylinders was not assessable under section 5(1)(iii) of the Kerala General Sales Tax Act, 1963, and the assessments were liable to be revised by deleting that amount.

Ratio Decidendi: A charge collected only for delayed return or unauthorised detention of goods, without an agreement conferring a right to use those goods, is not consideration for transfer of the right to use goods and is not taxable as such.

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