Permanently embedded furnace treated as immovable property, so lease rent was not taxable as sale or deemed sale of goods.

A furnace permanently embedded in factory premises and never intended to be dismantled or moved was treated as immovable property, so it did not answer the description of goods or machinery liable to Orissa sales tax. Lease rent for that embedded furnace also was not taxable as a sale or deemed sale of goods, because tax on transfer of the right to use goods applies only where the subject is movable goods and the lease concerned an immovable installation. The earlier stage of tax payment did not create a fresh basis to tax the lease rental. The revision petitions succeeded and the adverse assessment and appellate orders were set aside.

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Issues: (i) Whether a furnace permanently embedded to the earth is an immovable property not liable to Orissa Sales Tax as sale of machinery and not covered under machinery for the relevant schedule entry; (ii) Whether receipt of lease rent for leasing the flameless furnace constitutes sale or deemed sale of goods and can be subjected to tax under the Orissa Sales Tax Act despite the goods having suffered tax at an earlier stage.

Issue (i): Whether a furnace permanently embedded to the earth is an immovable property not liable to Orissa Sales Tax as sale of machinery and not covered under machinery for the relevant schedule entry.

Analysis: The furnace was found to remain permanently embedded in the factory premises and was never intended to be dismantled or moved. The governing principle applied was that plant or machinery which is so attached to the earth that it cannot be treated as movable goods does not answer the description of goods capable of being sold as machinery for sales tax purposes. The Court preferred the line of authority treating such permanently embedded installations as immovable property rather than taxable movable goods.

Conclusion: The issue is answered in favour of the assessee. The furnace is an immovable property and is not exigible to sales tax as sale of machinery.

Issue (ii): Whether receipt of lease rent for leasing the flameless furnace constitutes sale or deemed sale of goods and can be subjected to tax under the Orissa Sales Tax Act despite the goods having suffered tax at an earlier stage.

Analysis: The Court held that the lease arrangement concerned the same furnace after it had been erected and embedded, and that the tax under the Act can arise only where there is a transfer of the right to use goods. Once the furnace was treated as immovable property, the lease rental could not be characterised as a sale or deemed sale of goods. The earlier payment of sales tax at a prior point did not supply a fresh basis to tax the lease rental as a goods transaction. The claim for concessional treatment in Form IV was held to be unnecessary in view of the answer on taxability.

Conclusion: The issue is answered in favour of the assessee. Lease rent for the flameless furnace is not taxable as sale or deemed sale of goods under the Orissa Sales Tax Act.

Final Conclusion: The revision petitions succeed and the contrary assessment and appellate orders are set aside, with consequential relief to follow in accordance with law.

Ratio Decidendi: A permanently embedded installation that is not intended to be dismantled is immovable property and not goods for sales tax purposes, and a lease of such property cannot be taxed as a transfer of the right to use goods under the sales tax law.

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