TaxTMI 
TaxTMI 
2007 (8) TMI 694
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.... transferor towards part or full satisfaction of the sales tax payable, under the TST Act, on account of such transfer of the right. Before we make endeavour to answer the questions posed above, it is imperative that some material facts, which have given rise to the present appeals, are taken note of. These facts are, in brief, set out as under: (i) Being in need of hiring a large number of vehicles of different types for the purpose of smooth running of their work, the Oil and Natural Gas Commission (in short, "the ONGC") and the Gas Authority of India Ltd. (in short, "the GAIL") issued notices inviting tender asking interested parties/transporters to submit tenders for lending vehicles, on hire, for a specified period, to be used by the ONGC and the GAIL for their officers and staffs. Pursuant to the tender, so floated, some persons submitted their tenders and their offers having been accepted, the ONGC and the GAIL entered into agreements with the selected tenderers for hiring different types of vehicles at different rates and accordingly issued work orders. Relevant extracts of the work orders, so issued by the ONGC and the GAIL, are reproduced hereinbelow as specimen: "To....
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....t of existing Commander jeeps. You are also requested to sign the duplicate copy of this letter and return back to us as token of acceptance immediately. Thanking you, (ii) In terms of the contracts entered into by the parties concerned, the selected tenderers placed their vehicles at the disposal of the ONGC and the GAIL. While the parties to the contracts aforementioned were performing their contracts, the Revenue Department, Government of Yours truly, For and on behalf of GAS AUTHORITY OF INDIA LIMITED. Sd/(BARUN BISWAS) Dy. Manager (HRM)" Tripura, issued, pursuant to the provisions of section 3A of the Tripura Sales Tax Act (in short, "the TST Act"), read with rule 3A of the Tripura Sales Tax Rules (in short, "the TST Rules"), Memorandum, bearing No. F. 1-7 (6), dated nil, requiring the hirers, namely, the ONGC and the GAIL, to deduct an amount equivalent to four per cent out of the respective bills of the suppliers of the vehicles. The relevant portion of the memorandum read as under: "No. F. 1-7(6)-Tax 92 GOVERNMENT OF TRIPURA Revenue Department Dated Agartala, the...1992. MEMORANDUM Sub.: Deduction of tax at source in respect of works c....
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....(iv) The sales tax authorities resisted the writ petitions, contending, inter alia, that the transactions, involved in all the present cases, amounted to "sale" within the meaning of section 2(g)(ii) of the TST Act and that under the second proviso to section 3(1) of the TST Act, tax at four per cent of the valuable consideration, is payable on transfer of the right to use any goods for any purpose and, hence, rule 3A(2), in question, prescribes merely a mode of recovery of sales tax, which is, otherwise, due and payable and, thus, rule 3A(2) is valid and the impugned memorandum, which is based on rule 3A(2), falls within the ambit of law. (v) By the judgment and order, dated August 3, 2001(1) passed in Civil Rule Nos. 546 of 1996, 497 of 1998 and W.P. (C) Nos. 487 of 1999, 488 of 1999 and 320 of 2000, the learned single judge held that rule 3A(2) is ultra vires the TST Act; hence, the impugned memorandum was accordingly struck down. Though the impugned memorandum was struck down, the suppliers of vehicles were held, nevertheless, liable to pay sales tax inasmuch as section 3AA of the TST Act, according to the learned single judge, was constitutional and permitted levy of s....
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....he Seventh Schedule to the Constitution of India, had carried the same meaning as a "sale" defined in section 4 of the Sale of Goods Act, 1930. Hence, prior to the 46th Amendment, "sales tax" could be imposed only upon transfer of property in goods from one person to the other. Thus, "sales tax" could not be imposed upon transactions, which might have resembled "sale", but did not involve transfer of property in goods. Prior to the 46th amendment of the Constitution, because of various judicial decisions, States were losing revenue on account of "sales tax" in respect of transactions like transfer of the right to use goods, transfer of property in goods involved in execution of works contract, supply of food by a hotelier, etc. As back as in 1967, the Madras High Court in A.V. Meiyappan v. Commissioner of Commercial Tax [1967] 20 STC 115, turned down the contention of the sales tax authorities by holding that even if copyright is regarded as a species of movable property, the transaction did not connote a sale at all and it was, therefore, not liable to payment of sales tax. In A.V. Meiyappan [1967] 20 STC 115 (Mad), the court was examining an agreement entered into by an assessee....
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....or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made. The Constitution (46th Amendment) Act, 1982, also added sub-clause (b) to clause (3) of article 286. Consequent upon this amendment of the Constitution, almost all the States amended their respective definition of the word "sale" by incorporating identical language used by the Constitution. Indisputably, the expression "transfer of the right to use any goods" cannot be equated with the expression "transfer of property in goods", because the transfer of the "right to use any goods" is not the same thing as the "transfer of the goods" itself. But according to the definition of "sale", as amended by the State legislations, a "sale" means "transfer of property in goods "and such sale includes "any transfer of the right to use any goods". Following the 46th amendment of the Constitution of India, the TST Act also underwent changes bringing, within the ambit of sales tax, the transfer of the right to use any goods for any purpose. Thus, the definition of "sale" was enlarged to include transfer of the right to use any goods for any purpose. In order to levy sales tax on the transfer o....
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....pt from payment of tax, either in whole or in part the sale of any taxable goods or class of taxable goods or any dealer or class of dealers for such period as may be specified therein. (3) Subject to such restrictions and conditions as may be prescribed, the State Government may make an exemption, or reduction in rate, in respect of any tax payable under this Act on the sales of any taxable goods to such person or class of persons as may be prescribed. (4) Where exemption from the levy of tax under this Act on any sale of taxable goods is claimed by a dealer under the provisions of this section the burden of proof shall lie on such dealer and the Commissioner may require the dealer to substantiate the claim in the manner prescribed. (5) If any dispute or question regarding payment of tax arises, the matter shall be referred to the Commissioner whose decision thereon shall be final." From a bare reading of section 3, it becomes clear that section 3 provides that every "dealer", in taxable goods, shall pay tax at four per cent for transfer of the right to use any goods for any purpose (whether or not for a specified period). In the face of the definition of "sale" given ....
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....uded within the definition of "dealer". Considered thus, it is clear that without broadening the definition of the word "dealer" and without including, within the expression "dealer", a person who transfers the right to use any goods for any purpose, in the present cases, could not have been subjected to levy of sales tax. To put it a little differently, no one, who transfers the right to use any goods for any purpose, can be treated as a "dealer" and made liable to pay sales tax. In short, thus, section 3 has not created any charge or liability on a person, to pay sales tax, who transfers the right to use any goods for any purpose. As section 2(b) makes an executor of a works contract a "dealer", it is possible to treat an executor of a works contract as a "dealer", within the scope of the charging section, i.e., section 3. Logically, therefore, when a transferor of the right to use goods has not been included within the definition of "dealer", he does not fall within the ambit of the charging provision, i.e., section 3. Let us, now, turn to the question as to whether rule 3A(2) is ultra vires the TST Act? For this purpose, a careful reading of sections 3, 3A and 3AA is necessar....
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....eate charge, on any person, who transfers his right to use any goods for any purpose, section 3AA cannot be invoked for the purpose of deducting, at source, any amount as sales tax. Otherwise also, it would be impossible to hold that deduction, at source, as sales tax, is permissible out of the bills of a person, who gives, on hire, vehicle(s) for any purpose, when no liability to pay sales tax has been imposed on such a person by section 3, which is, admittedly, the charging section. We, now, turn to rule 3A(2), which we find reads as under: "Rule 3A(2). Every person responsible for making payment to any person for discharge of any liability on account of valuable consideration payable for any transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash or in any manner, shall at the time of making such payment, deduct an amount equal to four per centum of such towards part or as the case may be, full satisfaction of the tax payable under the Act, on account of such transfer of right: Provided no such deduction shall be made from the bill(s) or invoice(s) of the transferor- (a) On account of such transfer where the transfer of r....
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.... before the expiry of the session in which it is so laid or the successive session aforesaid the legislative assembly agree in making any modification in the rule or the legislative assembly agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect as the case may be, so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule." It is, no doubt, true that sub-section (1) of section 44 gives a general power to the State Government to make rules for carrying out the purposes of the TST Act; but when the statute itself has not brought, within its net, anyone, making it mandatory for him to deduct sales tax, at source, general power of rule-making, contained in sub-section (1) of section 44, could not have been invoked to create such a legal obligation on a person, who was, otherwise, not liable under the statute, to make deductions as rule 3A(2) mandates. In other words, in the present case, there is no provision in the statute making compulsory deduction at the time of making payment for transfer of the right to use goods. Hence, in such ....
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.... subject, which the enactment has kept excluded, or to bring into existence any substantive obligation, which the provisions of the enactment do not contemplate. (See Kunj Behari Lal Butail v. State of H.P. reported in [2003] 3 SCC 40). It is trite that if, in a fiscal legislation, the person, sought to be taxed, does not fall within the letter of the law, he cannot be taxed even if the spirit of the law may appear to include him. More than a century ago, Lord Cairns, in Partington v. Attorney-General reported in [1869] LR 4 (HL) 100, observed thus, "As I understand the principle of all fiscal legislation it is this: If the person sought to be taxed comes within the letter of the law he must be taxed, however, great the hardship may appear to the judicial mind to be. On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be." The above view, with regard to fiscal legislation, received approval and support by the Privy Council in Bank of Chettinad Ltd. v. Commissioner of Income-tax, Madras[1940] 8 ITR 522; AIR 1940 PC ....
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....earing of crash-helmet by the drivers of two wheelers can be made compulsory by framing rule under clause (i) of sub-section (2) of section 91 of the Motor Vehicles Act, 1939. At the relevant point of time, sub-section (1) of section 91 and clause (i) of sub-section (2) of section 91 read as under:- "91(1) The State Government may make rules for the purpose of carrying into effect the provisions of this Chapter. (2) Without prejudice to the generality of the foregoing power, such rules may provide for- ... (i) generally, the prevention of danger, injury or annoyance to the public or any person, or of danger or injury to property or of obstruction to traffic;" In view of the fact that clause (i) did not refer to the driver of a motor cycle or a scooter, it was contended that the State Government could not have framed rules making compulsory wearing of crash helmet by drivers of two wheelers. In view, however, of the fact that the expression "any person", occurring in clause (i), would have included even a driver of a two wheeler, rule 498A, which had made the wearing of crash helmet compulsory, was held to be a valid piece of delegated legislation. It is in this backdrop ....