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Issues: Whether the transaction of renting out equipment amounted to a transfer of right to use goods so as to attract value added tax, and whether the assessment and revisional orders suffered from any error warranting interference.
Analysis: The agreement showed identified equipment made available to the customer for consideration, for exclusive use during the contractual period, with advance rental, restrictions on use at other sites, and the customer's entitlement to deploy the equipment continuously without interference. On these terms, the owner was divested of the right to use during the subsistence of the contract and the customer obtained exclusive dominion and control. The fact that maintenance and operators were provided by the owner did not change the legal character of the transaction. A transaction may involve service elements, but where the goods are delivered for exclusive use and the owner cannot itself use them during the period, the legal effect is a transfer of the right to use. The authorities distinguishing mere service or permissive user on their facts did not assist the assessee.
Conclusion: The transaction was a transfer of right to use goods and was liable to VAT under the Assam Value Added Tax Act, 2003; the assessment and revisional orders were upheld.
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