2017 (3) TMI 1708 - AAR - VAT and Sales Tax

Court rules supply of printed vinyl banners as works contract taxable at 6%. Mounting charges included. Leasing hoardings taxable.

In Re : M/s. Bright Outdoor Media Pvt. Ltd.

In Re : M/s. Bright Outdoor Media Pvt. Ltd. - [2018] 2 GSTL (AAR) 70 (AAR) Issues Involved:- Whether the supply of printed vinyl/flex banner is sale or works contract under MVAT ACT, 2002.- The rate of tax on printed vinyl/flex banner.- Whether the mounting charges received by the applicant form part of the sale price.- Whether leasing out the hoarding to the customer for a specific period for remuneration is 'a sale' within the meaning of Section 2(24) of the MVAT Act.- Whether there is a transfer of the right to use goods, i.e., hoardings.- Whether the goods, namely hoardings, are movable or immovable.- Whether discretionary powers should be used to give the benefit of prospective effect to this order under section 55(9) of MVAT ACT, 2002.Detailed Analysis:1. Supply of Printed Vinyl/Flex Banner:The applicant argued that the supply of printed materials on vinyl/flex is a works contract, not a sale, as the materials are customized and governed by the Copyright Act. The court referenced various judgments, including Sarvodaya Printing Press, and concluded that the transaction is indeed a works contract. The goods incorporated during the execution of the works contract are taxable at the prescribed rate.2. Rate of Tax on Printed Vinyl/Flex Banner:The applicant charged VAT at 6% under schedule entry C-76 for printed materials. The court affirmed that the rate of tax on printed flex/vinyl/advertisement material should be determined at 6%, either as per the rate applicable to flex/vinyl and ink in respective entries or under entry C-76 as printed material.3. Mounting Charges:The applicant contended that mounting charges should not form part of the sale price as they are for labor and not for goods. The court disagreed, stating that the mounting charges are part of the sale price as defined under section 2(25) of MVAT ACT, 2002, and are therefore taxable. The court referenced several judgments, including ACC Ltd. v. State of Karnataka, to support this conclusion.4. Leasing Out Hoardings:The applicant argued that leasing hoardings is not a transfer of the right to use goods and thus not taxable under MVAT. The court, however, found that the leasing of hoardings for a specific period constitutes a transfer of the right to use goods, making it taxable. The court referenced multiple judgments, including Delta Communications v. State of Kerala and Aggarwal Brothers v. State of Haryana, to support this conclusion.5. Movable or Immovable Goods:The court analyzed whether hoardings are movable or immovable by considering various judgments, including Commissioner of Central Excise v. Solid & Correct Engg. Works. The court concluded that the assessing officer should determine whether the hoardings are movable or immovable based on the principles laid down by the Hon. Apex Court and other relevant judgments.6. Prospective Effect:The applicant requested the benefit of prospective effect, arguing that the current tax position has been followed for over ten years without adverse judgments. The court denied this request, stating that there was no ambiguity in the provisions and no compelling circumstances to warrant the use of discretionary power to protect the applicant's liability. The court referenced the Hon. Bombay High Court's decision in Lalbaugcha Raja Sarwajanik Ganeshotsav Mandal to support this conclusion.Conclusion:- The supply of printed vinyl/flex banners is a works contract.- The rate of tax on printed vinyl/flex banners is 6%.- Mounting charges form part of the sale price and are taxable.- Leasing out hoardings constitutes a transfer of the right to use goods and is taxable.- The assessing officer should determine whether hoardings are movable or immovable.- The request for prospective effect is denied.