2007 (9) TMI 553 - HC - VAT and Sales Tax

High Court affirms Tribunal decision on transfer of effective control; delivery of possession crucial

Commissioner, Trade Tax, UP., Lucknow Versus Nand Transport Co.

The High Court upheld the Tribunal's decision, emphasizing that the transfer of effective control of goods is essential to invoke the provisions of ... Transfer of right to use the goods and to invoke the provisions of section 3F of the U.P. Trade Tax Act, 1948 - Held that:- In the case of Bharat Sanchar Nigam Ltd. v. Union of India reported in [2006 (3) TMI 1 - Supreme court] the apex court held that for the transfer of right to use the goods, goods must be at a deliverable stage and at some stage it should be delivered. This court, in the case of Commissioner, Trade Tax, U.P., Lucknow v. Jamuna Prosad Jaiswal, Allahabad, reported in [2005 (8) TMI 649 - ALLAHABAD HIGH COURT] held that unless possession and control of the goods is transferred there cannot be transfer of right to use the goods under section 3F of the Act. In view of the above law laid down in the aforesaid decision by the apex court and the High Courts, it is clear that for the transfer of right to use the goods and to invoke the provision of section 3F of the Act, the delivery of the possession is sine qua non. Issues:Interpretation of Section 3F of the U.P. Trade Tax Act, 1948 in relation to the transfer of right to use goods for transportation services provided by a transport company.Analysis:The case involved four revisions under section 11 of the U.P. Trade Tax Act, 1948, challenging the assessment orders for the years 1990-91, 1991-92, 1992-93, and 1993-94. The dispute arose from the tax levied on transportation charges received by a transport company for transporting petroleum products under an agreement with Indian Oil Corporation. The assessing authority argued that there was a transfer of right to use the tankers provided by the company, making the charges taxable under section 3F of the Act.Upon appeal, the Deputy Commissioner (Appeals) set aside the assessment orders, leading to further appeals by the Commissioner of Trade Tax before the Tribunal. The Tribunal dismissed the appeals, emphasizing that the transport company retained possession and control of the tankers, bearing all expenses, and thus, the provisions of section 3F were deemed inapplicable.The High Court analyzed the provisions of section 3F, which apply to cases involving the transfer of the right to use goods. Reference was made to precedents such as Kandoi Transport and Rashtriya Ispat Nigam Ltd., where the courts held that the essence of transfer lies in the passage of control over the economic benefits of property. The court stressed that delivery of possession is crucial for a transfer of right to use goods.Citing the decision in Ahuja Goods Agency, the court reiterated that without the transfer of possession, there is no transfer of the right to use goods. The court also referred to the case of Bharat Sanchar Nigam Ltd., highlighting the requirement for goods to be at a deliverable stage for a transfer of right to use.Relying on the legal principles established by the apex court and previous High Court decisions, the High Court upheld the Tribunal's order, emphasizing that the transfer of effective control of goods is essential to invoke the provisions of section 3F. Consequently, all revisions were found to lack merit, and the Tribunal's decision was affirmed, leading to the dismissal of the revisions.