2015 (7) TMI 1180 - HC - VAT and Sales Tax

Tax ruling: Hoardings deemed 'goods' under Kerala VAT Act. Transfer of rights taxable. No legal questions.

The court dismissed the revision petition, holding that hoardings are considered 'goods' under the Kerala Value Added Tax Act. The petitioner transferred ... Taxability - Sec.6(1)(c) of the Act - rental charges received for letting out the hoardings - control over the hoardings let out to lessee - Held that: - Here is a case where under a contract or work order hoarding is transferred to a lessee for a specified period enabling the lessee to display the advertisement works on it according to the wishes and imaginations of the lessee and therefore the assessee is totally excluded from the realm of the work that is carried out by the lessee in the hoardings let out. So also, with regard to the maintenance of the advertisement materials on the hoardings, the revision petitioner has no manner of role during the period of the contract and the same are also absolutely under the control of the lessee. Therefore, we are of the considered opinion that there is definitely a transfer of right to use goods by transferring the hoardings to the lessee by the revision petitioner and therefore the said product is exigible to tax as provided under the Act. After the introduction of sub-article 29A and clause (d) of Article 366, there is a clear power conferred on the Legislature to impose tax on the transfer of right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. So the duty casted on the authority was to find out whether there is a transfer of right by an assessee to a third person for the use of goods and once it is found, the assessee is liable to pay tax. The goods defined under Sec.2(xx) of the K.V.A.T Act takes in not only the goods identified in common parlance but also various other kinds of products including livestock, all materials, commodities and articles and every kind of property (whether as goods or in some other form) involved in the execution of a works contract, and all growing crops, grass or things attached to, or forming part of the land which are agreed to be severed before sale or under the contract of sale. Therefore, when the facts of this case are considered, taking into account the said definition also, we are of the opinion that there was transfer of right to use goods by the revision petitioner which makes it exigible and liable to pay tax under Sec.6(1)(c) of the Act. Revision dismissed - decided against assessee. Issues Involved:1. Whether the structures (hoardings) are considered 'goods' under the Kerala Value Added Tax Act.2. Whether the Appellate Tribunal was justified in holding the revision petitioner liable to pay tax based on the control and custody of the hoardings.3. Whether the transaction is taxable under Section 6(1)(c) of the Kerala Value Added Tax Act.4. The sustainability of the Appellate Tribunal's decision in light of various Supreme Court and High Court decisions.5. The legality of the additions sustained.Detailed Analysis:1. Whether the structures (hoardings) are considered 'goods' under the Kerala Value Added Tax Act:The revision petitioner argued that the structures (hoardings) are immovable properties attached to the earth and thus cannot be termed as 'goods' under the Act. The petitioner cited Supreme Court judgments in 'T.T.G. Industries Ltd. v. Collector of Central Excise' and 'Mittal Engineering Works (P) Ltd. v. Collector of Central Excise' to substantiate that the structures are immovable properties. However, the court found that the structures, made of tempered steel and attached to a concrete base using nuts and bolts, are easily detachable and thus movable. The court referenced the Madras High Court decision (AIR 1969 Mad. 346) and the Calcutta High Court decision (AIR 2011 Cal. 13), which clarified that structures attached to the earth for beneficial use are not necessarily immovable properties. Therefore, the court held that the hoardings are 'goods' under the Act.2. Whether the Appellate Tribunal was justified in holding the revision petitioner liable to pay tax based on the control and custody of the hoardings:The petitioner contended that the effective control of the hoardings remained with them, as the hoardings were installed on leased premises. However, the court found that once the hoardings were let out, the lessee had absolute control over them for the contract period, as per the work order. The lessee had the right to finalize the nature of advertisements displayed on the hoardings, indicating a transfer of control. Thus, the court concluded that there was a transfer of the right to use the hoardings, making the petitioner liable to tax under Section 6(1)(c) of the Act.3. Whether the transaction is taxable under Section 6(1)(c) of the Kerala Value Added Tax Act:The petitioner argued that since they were paying service tax on the rental income, they should not be liable to pay VAT, citing the Supreme Court decision in 'Imagic Creative (P) Ltd. v. Commissioner of Commercial Taxes'. However, the court referenced the Kerala High Court decisions in 'Saj Flight Service Pvt. Ltd. v. Superintendent of Central Excise' and 'Kerala Non-Banking Finance Companies Welfare Association v. Union of India', which established that service tax and VAT are not mutually exclusive. The court held that the petitioner was liable to pay VAT on the transfer of the right to use the hoardings.4. The sustainability of the Appellate Tribunal's decision in light of various Supreme Court and High Court decisions:The court examined various judgments, including 'Bharat Sanchar Nigam Ltd. v. Union of India', which outlined the attributes necessary for a transaction to constitute a transfer of the right to use goods. The court found that the transaction met these attributes, as the hoardings were available for delivery, there was consensus on the identity of the goods, and the lessee had a legal right to use the hoardings to the exclusion of the petitioner. Thus, the court upheld the Appellate Tribunal's decision.5. The legality of the additions sustained:The court found no illegalities or infirmities in the Appellate Tribunal's order. The Tribunal had correctly applied the principles laid down by the Supreme Court and other courts, and the questions raised by the petitioner did not warrant interference.Conclusion:The court dismissed the revision petition, holding that the hoardings are 'goods' under the Kerala Value Added Tax Act, the petitioner transferred the right to use the hoardings to the lessee, and the transaction was taxable under Section 6(1)(c) of the Act. The court found no substantial questions of law warranting interference with the Appellate Tribunal's decision.