2021 (2) TMI 1035 - HC - VAT / Sales Tax

Tax Orders Quashed in TN VAT Case: No Transfer of Right to Use Goods Found in BHEL Transaction.

The HC ruled in favor of the petitioner, quashing the impugned orders levying tax under Section 4 of the Tamil Nadu Value Added Tax Act, 2006. It ... Levy of Tax - transfer of right to use of goods or not - supply of cranes under the agreement to the Bharath Heavy Electricals Limited - Section 4 of the Tamil Nadu Value Added Tax Act, 2006 - tax levied on the ground that the petitioner has effected sale within the meaning of extended definition of sale under Section 2(33) of the Tamil Nadu Value Added Tax Act, 2006 of transfer of right to use of goods - HELD THAT:- Though it is the contention of the learned counsel for the petitioner that they have paid the service tax and have registered with the Service Tax Authority, there are no records to substantiate the same before the this Court. The Hon'ble Supreme Court in Bharath Sanchar Nigam Limited and Another Vs. Union of India and Others, [2006 (3) TMI 1 - SUPREME COURT], has enumerated the situation, under which, there would be transfer of right to use where it was held that the lifts were in possession of the petitioner. Thus, there is no transfer of right to use. In the facts of the case, there is no transfer of right to use and no case was made out for recovery of tax amount from the petitioner under Section 4 of the Tamil Nadu Value Added Tax Act, 2006 - the impugned orders are liable to be quashed and are accordingly quashed - petition allowed - decided in favor of petitioner. Issues Involved:1. Jurisdiction and legality of the impugned orders.2. Whether the transaction constituted a 'transfer of right to use goods' under Section 2(33) of the Tamil Nadu Value Added Tax Act, 2006.3. Applicability of tax under Section 4 of the Tamil Nadu Value Added Tax Act, 2006.Detailed Analysis:1. Jurisdiction and Legality of the Impugned Orders:The petitioner challenged the impugned orders on the grounds of being 'without jurisdiction, illegal, arbitrary and error on the face of record.' The orders pertained to the levy of tax under Section 4 of the Tamil Nadu Value Added Tax Act, 2006 for the Assessment Years 2012-2013 and 2013-2014. The petitioner argued that the orders were passed without proper jurisdiction and were arbitrary in nature.2. Whether the Transaction Constituted a 'Transfer of Right to Use Goods':The core issue was whether the petitioner's transaction with Bharath Heavy Electricals Limited (BHEL) constituted a 'transfer of right to use goods' under Section 2(33) of the Tamil Nadu Value Added Tax Act, 2006. The petitioner supplied cranes to BHEL under a service agreement for material handling activities. The petitioner contended that the effective control over the cranes remained with them, and they merely provided a service to BHEL. Various conditions from the agreement were cited to support this claim, such as the requirement for the contractor to maintain cranes, provide trained operators, and ensure cranes were in good working condition.The respondent, represented by the Additional Government Pleader, argued that the effective control of the cranes was with BHEL, indicating a transfer of the right to use under the extended definition of sale, thereby making the petitioner liable to tax.3. Applicability of Tax under Section 4 of the Tamil Nadu Value Added Tax Act, 2006:The court examined whether the transaction met the criteria for a 'transfer of right to use' as enumerated by the Supreme Court in Bharath Sanchar Nigam Limited and Another Vs. Union of India and Others. The criteria included the availability of goods for delivery, consensus ad idem on the identity of the goods, the transferee's legal right to use the goods, exclusive right to use the goods during the transfer period, and the inability of the owner to transfer the same rights to others during that period.The court found that the cranes were in possession of the petitioner and no transfer of right to use occurred. The petitioner did not provide sufficient records to substantiate the claim of having paid service tax or being registered with the Service Tax Authority.Conclusion:The court concluded that no case was made out for levying tax under Section 4 of the Tamil Nadu Value Added Tax Act, 2006 as there was no 'transfer of right to use goods' involved in the transaction. Consequently, the impugned orders were quashed, and the writ petitions were allowed with no costs. The connected miscellaneous petitions were also closed.