Situs of transfer of right to use goods governs sales tax liability; mere location of goods is insufficient.

A transfer of the right to use goods was held taxable at the place where the agreement was executed and property in the goods passed, unless the statute creates a legal fiction fixing another situs. Section 3A of the Gujarat Sales Tax Act, 1969 did not create such a fiction. Because the deeds were executed in Mumbai, the transfer occurred outside Gujarat and the mere location of the goods in Gujarat could not attract tax there. The impugned notices and recovery action were therefore liable to be quashed.

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Issues: Whether the transfer of corporeal rights and the right to use goods, executed at Mumbai in Maharashtra, could be subjected to sales tax under the Gujarat Sales Tax Act, 1969 merely because the goods were located in Gujarat.

Analysis: The transfer in question was a transfer of the right to use goods within the meaning of the State enactment and Article 366(29A)(d) of the Constitution of India. The governing principle applied was that, in the absence of a statutory fiction fixing a different situs, the taxable event occurs where the property in the goods passes and the written agreement transferring the right to use is executed. Section 3A of the Gujarat Sales Tax Act, 1969 did not create any legal fiction fixing the situs of such specified sale. Since the deeds were executed at Mumbai, the transfer took place outside Gujarat and the mere location of the goods in Gujarat could not attract tax in that State.

Conclusion: The transaction was not exigible to sales tax in Gujarat, and the impugned notices and recovery action were liable to be quashed.

Ratio Decidendi: In a transfer of right to use goods, where the statute does not fix a different situs by legal fiction, tax is attracted at the place where the agreement is executed and property in the goods passes, not where the goods are merely located.

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