Transfer of right to use goods: lease rental for exclusive use of lorries was taxable, but penalty was deleted.

Consideration received for granting a sister concern exclusive use of lorries was taxable as a transfer of the right to use goods under section 3A of the Tamil Nadu General Sales Tax Act, 1959, because exclusive use and receipt of consideration brought the transaction within the statutory levy; transfer of ownership was not required, so the tax demand was upheld. Penalty was not sustained because taxability on such transactions had remained debatable until clarification by the Supreme Court, and the departmental circular directed that prior completed assessments need not be reopened, so the penal component was set aside.

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Issues: (i) whether lease rental received for permitting the sister concern to use the lorries was liable to tax under section 3A of the Tamil Nadu General Sales Tax Act, 1959; (ii) whether penalty could be sustained in the facts of the case.

Issue (i): whether lease rental received for permitting the sister concern to use the lorries was liable to tax under section 3A of the Tamil Nadu General Sales Tax Act, 1959.

Analysis: Section 3A levies tax on the transfer of the right to use goods. The finding recorded on the materials was that the vehicles were in the exclusive use of the sister concern and the assessee received consideration for such use. Transfer of ownership was not necessary for attracting the levy. On those facts, the amount received for use of the lorries fell within the statutory charge.

Conclusion: The turnover represented lease rental exigible to tax under section 3A, and the levy of tax was upheld.

Issue (ii): whether penalty could be sustained in the facts of the case.

Analysis: The liability to tax on such transactions had been a debatable issue until the Supreme Court clarified the position. A departmental circular was also issued directing that prior completed assessments for the relevant period need not be reopened and pending matters be dealt with accordingly. In that setting, the default was not one warranting penalty.

Conclusion: The imposition of penalty was set aside.

Final Conclusion: The tax demand was sustained on the lease rental turnover, but the penal component was deleted.

Ratio Decidendi: Consideration received for granting exclusive use of goods is taxable as a transfer of the right to use goods under section 3A, but penalty is not justified where the issue was debatable and covered by the applicable departmental circular.

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