2023 (4) TMI 866 - HC - VAT and Sales Tax

Court rules crane services not a sale under RVAT Act-2003.

The Court dismissed the revision petitions, ruling in favor of the respondent-assessee and against the Revenue. It held that the crane services provided ... Transfer of the right to use goods - deemed sale / sale by transfer of right to use goods - service contract v. sale - dominant nature test - availability of goods for delivery, legal right to use and exclusion of transferor - composite transaction and Article 366(29A) - splitting testTransfer of the right to use goods - service contract v. sale - dominant nature test - availability of goods for delivery, legal right to use and exclusion of transferor - Whether crane services supplied under the contract dated 13.10.2008 amounted to a transfer of the right to use goods constituting a 'sale' under Section 2(35)(iv) of the RVAT Act, 2003 read with Article 366(29A) of the Constitution. - HELD THAT: - The Court applied the dominant-nature test and the attributes identified by the Apex Court for a transfer of right to use goods - availability of the goods for delivery, consensus as to identity of goods and a legal right to use the goods to the exclusion of the transferor for the period. The Rajasthan Tax Board's finding that the contract was one for services was upheld after examining the contractual stipulations (notably Condition Nos. 17 and 28) which required the assessee to supply driver and helper, to undertake repair and maintenance, to maintain log books and permitted interchange of cranes. Those terms demonstrate that effective control, possession and responsibility for the cranes remained with the supplier and that the Transport Department's entitlement was to specified services (loading, unloading, lifting and shifting) rather than an exclusive legal right to use the cranes. The fact that service tax was paid and that the contractual obligations kept operational control with the assessee reinforced the conclusion that the transaction was a service contract and not a transfer of the right to use goods. Reliance on Great Eastern Shipping Company Ltd. was considered but the facts and contractual stipulations distinguished that authority. [Paras 16, 18, 19, 20, 21]Crane services did not constitute a transfer of the right to use goods and therefore did not amount to a 'sale' under Section 2(35)(iv) of the RVAT Act, 2003; the Tax Board's order in favour of the assessee is affirmed.Final Conclusion: The question of law is answered in favour of the respondent assessee and against the Revenue; the Sales Tax Revisions are dismissed and the Tax Board's finding that the crane services were contracts of service (not sales by transfer of right to use goods) is maintained. Issues Involved:1. Whether the crane services provided by the assessee fall within the ambit of Section 2(36)(iv) of the RVAT Act-2003 as a transfer of right to use goods. Summary:Issue 1: Whether the crane services provided by the assessee fall within the ambit of Section 2(36)(iv) of the RVAT Act-2003 as a transfer of right to use goods. 1. The revision petitions were admitted on the question of law: 'Whether in the facts and circumstances of the case of Rajasthan Tax Board was justified in law in holding that the crane services given by the assessee to the Govt./Private institution will not fall within the ambit of Section 2(36)(iv) of the RVAT Act-2003 and will not fall within the ambit of transfer of right to use goodsRs.'2. The Assessing Officer found that the respondent-assessee provided crane services, which should be deemed a 'sale' under Article 366(29A) of the Constitution of India and Section 2(35)(iv) of The Rajasthan Value Added Tax Act, 2003.3. The Appellate Authority upheld the levy of tax for the Transport Department but remanded the matter for other stakeholders. The Rajasthan Tax Board dismissed the Revenue's appeal, adjudicating in favor of the respondent-assessee.4. The Revenue argued that the Tax Board's order was bad-in-law and perverse, relying on Section 2(35)(iv) of the Act of 2003 and the Apex Court judgment in Great Eastern Shipping Company Ltd. vs. State of Karnataka & Ors., which stipulated conditions for the transfer of the right to use goods.5. The Revenue contended that the crane services met the conditions laid down by the Apex Court for the transfer of the right to use goods, as the cranes were under the control and disposal of the Transport Department for a fixed period.6. The respondent-assessee argued that the contract was for hiring and leasing the crane, with the control and possession of the crane remaining with the assessee, supported by various judgments including Bharat Sanchar Nigam Ltd. & Anr. vs. Union of India & Ors.7. The Tax Board found that the contract was a contract of service, not of sale, as the Transport Department did not have exclusive control over the cranes. The respondent-assessee was responsible for providing a driver, maintenance, and other services.8. The Court observed that the contract was a service contract, and the crane services did not constitute a sale under Section 2(35)(iv) of the Act of 2003. The respondent-assessee had paid the service tax, indicating the nature of the contract.9. The Court applied the 'substance of the contract' test, concluding that the contract did not transfer the right to use goods exclusively to the Transport Department.10. The Court dismissed the revision petitions, answering the question of law in favor of the respondent-assessee and against the Revenue, stating that the crane services provided did not constitute a sale under Section 2(35)(iv) of the Act of 2003.