TaxTMI 
TaxTMI 
2009 (2) TMI 747
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....tening to deduct tax under the Assam Value Added Tax Act, 2003, treating the transactions, in question, as lease. I have heard Mr. T. Baidya, learned counsel, appearing on behalf of the petitioner, and Mr. D. Saikia, learned counsel, appearing on behalf of State respondent No. 4, namely, the State of Assam. There is no dispute that the power of the State Legislature to impose tax on sale and purchase of goods emanates from entry 54 of List II of the Seventh Schedule to the Constitution of India nor is there any dispute that 46th Amendment of the Constitution, which inserted clause (29A) in article 366 of the Constitution of India, has expanded the definition of "tax on sale or purchase of goods" inasmuch as it has included, within the definition of "sale", the transfer of the right to use any goods for any purpose, whether or not for a specified period, for cash, deferred payment or other valuable consideration. There is also no dispute that pursuant to the changes so introduced, amendments have been made by the Legislature, in the State of Assam, in the provisions of the Act, particularly, section 2(33) and 2(19) thereof, which embody the definition of "sale" and "lease" respect....
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....t, 1959. The Madras High Court, however, turned down the imposition of the sales tax by holding that even if a copyright is regarded as species of movable property, the transaction did not connote a "sale" at all inasmuch as there was no transfer of property in the goods in such a case and the transaction was, therefore, not liable to payment of sales tax. The decision of the Madras High Court, in A.V. Meiyappan [1967] 20 STC 115, created immense difficulty for the States for quite a long time, because novel device of leasing of films resulted into avoidance of huge amounts of sales tax. This apart, in State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. reported in [1958] 9 STC 353, the Supreme Court gave a new approach to the definition of "sale" by prohibiting States from taxing transfer of property in goods involved in the execution of indivisible works contract. This decision also affected the revenue of the States. The State's revenue was further reduced to a great extent in view of the decision in K.L. Johar & Co. v. Deputy Commercial Tax Officer reported in [1965] 16 STC 213, wherein the apex court decided that the State can tax only the depreciated value of the goo....
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....od or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made;" The effect of the amendment, which has been introduced to article 366, by inserting clause (29A), is that a State Legislature has become competent to impose sales tax, amongst others, on the transfer of the right to use any goods, which, before the amendment, so made, the State Legislature was not competent to do. What the insertion of clause (29A) has done is that various transactions, enumerated therein, which were, otherwise, not sales, have to be deemed, by a legal fiction, as sales. Such sales are commonly called deemed sales. Under clause (29A)(d), a "transfer of the right to use any goods" for any purpose and for any period, for cash, deferred payment or other valuable consideration, shall be deemed to be a sale of goods by the person making the transfer....
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....1) of the Act defines "lessor" to mean a person by whom any right to use any goods for any purpose is transferred under a lease. From a combined reading of the various provisions of law, which have been pointed out above, what clearly transpires is that there must be "a transfer of the right to use any goods" in order to attract levy of "sales tax". In other words, transfer of the right to use any goods, for any purpose, is a condition precedent for imposition of sales tax. This tax is not a tax on the right to use any goods or on the use of any goods; it is, rather, a tax on the "transfer" of the "right" to "use" any "goods". Thus, unless and until the incidence of "transfer" of the right to use goods, in a given case, is present, a transaction would not become a "sale" even under the expanded definition of "sale". Similarly, a transaction would not attract "sales tax" merely because of the fact that the goods have been hired and the hiring charges have been paid to the person, who gives, on hire, the goods unless one can show that the transaction is not confined to "use" of the goods, but it is, in substance, a "transfer" of the "right" to "use" the "goods". I may pause here t....
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....182; [2000] 6 SCC 12, read as under: "27. Article 366(29A)(d) further shows that levy of tax is not on use of goods but on the transfer of the right to use goods. The right to use goods accrues only on account of the transfer of right. In other words, right to use arises only on the transfer of such a right and unless there is transfer of right, the right to use does not arise. Therefore, it is the transfer which is sine qua non for the right to use any goods. If the goods are available, the transfer of the right to use takes place when the contract in respect thereof is executed. As soon as the contract is executed, the right is vested in the lessee. Thus, the situs of taxable event of such a tax would be the transfer which legally transfers the right to use goods. In other words, if the goods are available irrespective of the fact where the goods are located and a written contract is entered into between the parties, the taxable event on such a deemed sale would be the execution of the contract for the transfer of right to use goods. But in case of an oral or implied transfer of the right to use goods it may be effected by the delivery of the goods. 28.. No authority of this co....
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..... The apex court also pointed out, in Bharat Sanchar Nigam Ltd. [2006] 3 VST 95; [2006] 145 STC 91; [2006] 282 ITR 273; [2006] 3 SCC 1 that in 20th Century Finance Corpn. Ltd. [2000] 119 STC 182; [2000] 6 SCC 12, what the Constitution Bench was required to determine was the situs of the taxable event. In other words, what the Constitution Bench, in 20th Century Finance Corpn. Ltd. [2000] 119 STC 182 (SC); [2000] 6 SCC 12, was required to determine was as to where the taxable event, for the purpose of sales tax, takes place in the context of sub-clause (d) of article 366(29A), because the States had selected three distinct places for imposing sales tax. In other words, in 20th Century Finance Corpn. Ltd. [2000] 119 STC 182 (SC); [2000] 6 SCC 12, three distinctly separate criteria were found to have been used by the States for the purpose of levying sales tax under article 366(29A)(d). Some States had levied tax, on the transfer of the right to use goods, on the basis of the location of the goods at the time of their use irrespective of the place, where the agreement for such transfer of the right to use such goods was made; while some States had levied tax upon delivery of the goods....
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....sary concomitant for completing a transaction of sale for the purposes of article 366(29A)(d) of the Constitution. In that decision the court had to determine where the taxable event for the purposes of sales tax took place in the context of sub-clause (d) of article 366(29A). Some States had levied tax on the transfer of the right to use goods on the location of goods at the time of their use irrespective of the place where the agreement for such transfer of right to use such goods was made. Other States levied tax upon delivery of the goods in the State pursuant to agreements of transfer while some other States levied tax on deemed sales on the premise that the agreement for transfer of the right to use had been executed within that State (vide para 2 of the judgment as reported). This court upheld the third view, namely, merely that the transfer of the right to use took place where the agreements were executed... " Explaining, in Bharat Sanchar Nigam Ltd. [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 3 SCC 1, its earlier decision, in 20th Century Finance Corpn. Ltd. [2000] 119 STC 182; [2000] 6 SCC 12, the apex court pointed out that while determ....
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.... Bench that although the possession of the machinery was given to the transferee, yet the effective custody and control of the machinery having remained with the transferor, such transaction would not amount to transfer of the right to use goods. This decision of the Division Bench was upheld by the apex court in State of Andhra Pradesh v. Rashtriya Ispat Nigam Ltd. [2002] 126 STC 114; [2002] 3 SCC 314. In contrast, Aggarwal Brothers v. State of Haryana reported in [1999] 113 STC 317 (SC); [1999] 9 SCC 182, was a case, wherein assessee had hired shuttering in favour of the contractor for use of the latter in the course of construction of the building. The apex court opined that the possession of the shuttering materials had been transferred by the assessee to the contractor for their use and, therefore, the transaction was a deemed sale. What is immensely important to note is that in both the cases, namely, in Rashtriya Ispat Nigam Ltd. [2002] 126 STC 114 (SC); [2002] 3 SCC 314 as well as in Aggarwal Brothers [1999] 113 STC 317 (SC); [1999] 9 SCC 182, the goods were in existence and the same were delivered to the contractors for their use. However, while in one case, namely, in R....
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....rather than the form of it. The mere fact that the word 'agent' or 'agency' is used or the words 'buyer' and 'seller' are used to describe the status of the parties concerned is not sufficient to lead to the irresistible inferences that the parties did in fact intend that the said status would be conferred. Thus the mere formal description of a person as an agent or a buyer is not conclusive, unless the context shows that the parties clearly intended to treat a buyer as a buyer and not as an agent..." From the above discussion, what also clearly emerges is that the question as to whether, in a given case, there is or there is no transfer of the right to use goods becomes a question of fact and this fact can be determined on the basis of the terms of the contract, which may govern a given transaction. In fact, in North East Gases Pvt. Ltd. v. State of Assam reported in [2004] 134 STC 249, this court has held that the question relating to transfer of the right to use any goods is essentially a question of fact, which has to be determined, in each case, having regard to the terms of the contract, wherein the transfer is made. In view of the fact that ....