Transfer of right to use goods requires possession and effective control; excavator hire charges alone were held insufficient.

Taxability under section 5(1)(iii) of the Kerala General Sales Tax Act arose only if there was a transfer of the right to use goods, requiring parting with possession and effective control in favour of the customer. Mere hire charges or sharing of operational expenses was insufficient by itself. As the excavator was operated by a person engaged by the assessee and the materials did not clearly show that the customer obtained possession and control at its own discretion, the finding of taxable transfer was set aside and the matter was remitted for fresh consideration.

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Issues: Whether hire charges received for the excavator amounted to a transfer of the right to use goods under section 5(1)(iii) of the Kerala General Sales Tax Act, 1963.

Analysis: Liability under section 5(1)(iii) arises only when there is a transfer of the right to use the goods, which requires parting with possession and effective control in favour of the customer. Mere receipt of hire charges, or a sharing of operational expenses, is not by itself sufficient to establish such transfer. The record showed that the excavator was operated by a person engaged by the assessee and that the inference of transfer drawn by the authorities rested mainly on entries relating to expenses, without clear materials showing that the customer had obtained possession and control of the excavator according to its own discretion.

Conclusion: The finding of taxable transfer of the right to use the excavator was set aside and the matter was remitted to the assessing authority for fresh consideration in accordance with law.

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