Transfer of right to use goods: crane-hiring contracts are taxable only when effective control passes to the customer.

A crane-hiring arrangement is taxable as a deemed sale only if it involves a transfer of the right to use goods with effective control passing to the transferee. Where the owner retains operational responsibility, staff, fuel, maintenance and control, and the customer merely regulates work for its own purposes, the transaction remains a service arrangement and not a lease of goods. On that analysis, the crane contract described here did not amount to a transfer of the right to use the cranes and was not exigible to tax as a deemed sale, so tax deduction at source from the bills was not justified on that footing.

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Issues: Whether the hiring arrangement for cranes constituted a transfer of the right to use goods so as to attract tax deduction under the Assam Value Added Tax Act, 2003.

Analysis: The constitutional power to tax sale of goods extends to deemed sales under Article 366(29A)(d) of the Constitution of India, but tax can be levied only where there is a transfer of the right to use goods and not merely a hiring arrangement or provision of services. The decisive test is the substance of the contract, including who retains effective custody and control, who provides the operating staff, fuel, maintenance, and risk, and whether possession and the right of user are truly parted with. The contract terms showed that the cranes were to be made available only for performing the Corporation's work, with the contractor retaining operational responsibility, staff, fuel, maintenance, and control, while the Corporation merely regulated the work and could not treat the cranes as having been leased to it.

Conclusion: The arrangement was not a lease or transfer of the right to use the cranes and did not amount to a taxable deemed sale.

Final Conclusion: The respondents were not entitled to deduct tax at source from the petitioner's bills under the Act on the footing that the crane-hiring contract was a sale.

Ratio Decidendi: A transaction is exigible as a deemed sale only when the contract effects a real transfer of the right to use goods, with effective control passing to the transferee; a service-oriented hiring arrangement where control remains with the owner is not taxable as such.

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