2023 (12) TMI 166 - HC - VAT / Sales Tax

Crane deployment hire contracts and 'deemed sale' under s. 2(24): no right-to-use transfer; tax appeal dismissed

The dominant issue was whether contracts for deployment of cranes amounted to a 'deemed sale' by transfer of the right to use goods under s. 2(24) of the ... Interpretation of statute - Deemed sale - transfer of right to use the cranes - proper construction of Section 2(24) of Maharashtra Value Added Tax Act, 2002 - right to transfer the cranes - transaction entered into by the Respondent with its customers with specific reference to the discernible and distinguishing contract clauses amount to “sale” under the Maharashtra Value Added Tax Act, 2002 or not - HELD THAT:- The Tribunal has compared the attributes of transfer of the right to use goods as discussed in General Cranes [2015 (5) TMI 32 - BOMBAY HIGH COURT] with those in the present matter, i.e., the clauses of the contracts in both matters. The Tribunal has observed that the clauses in both the cases are substantially similar. No clause in the contract in this case can be construed so as to conclude that there was intention to transfer the right to use the cranes in favour of SISL. Every clause in contract and in particular the emphasized portion as quoted above, unmistakably lead to the conclusion that the cranes were under effective control and possession of Respondent herein and during the contract period, the same were in the custody of SISL. It indicates there was no transfer at all, let alone transfer of the right to use. It was a clear case of giving on hire of cranes. The corresponding provision under the Act is the definition of ‘sale’ in Section 2(24) of the Act. Comparing the two corresponding provisions, the Tribunal has found full support in the contention of Respondent that the same are in ‘pari materia’. Hence the Tribunal has held that the decision in General Cranes is totally applicable to the present case and thus, the ultimate control over the cranes being retained by Respondent, there is no question of transfer of right to use. Thus, the Tribunal allowed the Appeal of Respondent. All the clauses indicate that the effective control and possession have always remained with Respondent and what was being provided to SISL was only the deployment of the cranes on hire. The work order/contract clearly indicates the intention of parties that the custody and effective control of the cranes was to remain with Respondent. In these circumstances, it would be incorrect to contend that there was a transfer of right to use the cranes. Appeal of the revenue dismissed. Issues Involved:1. Whether the transaction of hiring cranes amounts to 'sale' under the Maharashtra Value Added Tax Act, 2002.2. Whether the Tribunal was justified in holding that the transaction did not amount to 'sale' under the Act.Summary:Issue 1: Whether the transaction of hiring cranes amounts to 'sale' under the Maharashtra Value Added Tax Act, 2002.The appeal was filed under Section 27 of the Maharashtra Value Added Tax Act, 2002, challenging the judgment of the Maharashtra Sales Tax Tribunal, which held that the transaction of hiring cranes did not amount to a 'sale' under the Act. The Tribunal had allowed the appeals of the respondent, concluding that the cranes were merely hired and there was no 'transfer of right to use' within the definition of 'sale' under the Act, thus no VAT was payable. The appellant contended that the transaction should be treated as a 'deemed sale' as the cranes were under the control of the lessee (SISL) during the contract period.Issue 2: Whether the Tribunal was justified in holding that the transaction did not amount to 'sale' under the Act.The Tribunal examined the terms and conditions of the contract between the respondent and SISL. It noted that the effective control and possession of the cranes remained with the respondent, and the cranes were merely deployed at the client's site. The Tribunal emphasized that there was no intention to transfer the right to use the cranes to SISL, and the transaction was a clear case of hiring cranes. The Tribunal compared the present case with the decision in General Cranes, where similar conditions were found, and concluded that there was no transfer of the right to use the cranes. The High Court upheld the Tribunal's decision, stating that the effective control and possession always remained with the respondent, and there was no transfer of right to use the cranes.Conclusion:The High Court dismissed the appeal, affirming the Tribunal's judgment that the transaction of hiring cranes did not amount to a 'sale' under the Maharashtra Value Added Tax Act, 2002. The court held that the effective control and possession of the cranes remained with the respondent, and there was no transfer of the right to use the cranes to SISL.