TaxTMI 
TaxTMI 
2015 (4) TMI 527
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....RPL'). It has been the claim of the petitioner that the sales were made in the course of Inter State Lease transaction within the meaning of Section 3(a) of the Central Sales Tax Act (for short, 'CST Act'). It is the contention of the petitioner-assessee that the Inter State movement of goods was in pursuance of the lease agreement as goods were delivered to RPL (lessee) upon the instructions of RIIL (lessor) and since the assessee was a seller, therefore, the transaction was clearly in the nature of lease and as such, the holding of the Assessing Officer (for short, 'AO') that it is liable to tax was entirely illegal and unjustified. It was the contention that the tripartite agreement was in between RIIL, RPL and the petitioner-assessee was supplier of EGC and the purchase order and the lease agreement between the three were integrally connected as one and which could not be split from one another. It has been further contention of the petitioner-assessee that it being a supplier of the EGC was equally involved in the transaction. 2.The AO, in the assessment order held that the transaction was a simple sale and merely because of an independent agreement in bet....
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.... supplied goods in pursuance of a lease agreement and assessee being a party to the transaction it becomes Inter State Lease Agreement and thus is not liable to pay tax under the CST Act. It was further contended that the purchase order placed by RIIL with the petitioner-assessee was in pursuance of the above lease agreement entered into by and between RIIL with RPL, who inter-se had entered into a lease agreement but both the purchase order and the lease agreement were integrally connected, mutually inter-dependent and thus it could not be said that the impugned transaction is of sale and supply. He contended that both these contracts were interconnected in the sense that one could not have taken place without the other. Thus, he contended that there was Inter State Lease Transaction and not Inter State Sale Transaction. He relied upon judgments rendered by Karnataka High Court in the case of India Equipment Leasing Ltd. Vs. Deputy Commissioner of Commercial Taxes, (1998) 111 STC 403 (Kar); English Electric Co. of India Ltd. and Anr. Vs. The Deputy Commercial Tax Officer and Ors.: (1976) 38 STC 475 (SC); 20th Century Finance Cropn. Ltd. & Anr. Vs. State of Maharashtra (2000) 119 S....
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....the EGC in the lease agreement, in my view, cannot claim any benefit out of the two lease agreements which were basically in between RIIL and RPL Ltd.. It would be appropriate and fruitful to quote Section 3 of the CST Act, which is the bone of contention between the parties, which provides ad-infra:- "3.When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce.- A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase-- (a)occasions the movement of goods from one State to another; or (b)is effected by a transfer of documents of title to the goods during their movement from one State to another. Explanation 1.--Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier to bailee. Explanation 2-Where the movement of goods commences and terminates in the same State it shall not be deemed to be a movement of goods from one State to another by reason merely of the fact that....
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....le aimed at purchasing goods from the assessee, the contract of lease provided for leasing the goods after procurement. Hence, both these contracts despite being mutually inter-dependent were exclusive in seeking the fulfillment of different objectives for which these were entered. The RIIL, in pursuance of the contract of sale, placed the order with the assessee for the supply of goods on behalf of the RPL (lessee) in compliance of which the assessee sent goods to RPL (lessor) after raising invoices in favour of RIIL (lessor). Therefore, in my view, the justification of the Tax Board and the Revenue Authorities appears to be just and proper that the inter-State movement of the goods was the result of the purchase order placed by the RIIL and in pursuance thereof, the assessee supplied goods which occasioned the movement of the goods and not the lease agreement. Admittedly, as observed earlier, except that the assessee got purchase order and nothing more on the basis of the lease agreement between RIIL and RPL, which does not mean that the assessee was functioning in furtherance of the lease agreement between RIIL and RPL and in my view, the Revenue Authorities including the Tax Bo....
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....e sale vis (i) there must be inter-State movement of the goods and (ii) the nature of such movement of goods must be occasioned by a contract of sale. 11.The Hon'ble Apex Court, in the case of M/s. Tata Iron and Steel Co. Ltd. Bombay Vs. S.R. Sarkar and others: (1960) 11 STC 655 held ad-infra:- "A transaction of sale is subject to tax under the Central Sales Tax Act, 1956, on the completion of the sale, and a mere contract of sale is not a sale within the definition in section 2(g). A sale being by the definition, transfer of property, becomes taxable under section 3(a) if the movement of goods from one State to another is under a covenant or incident of the contract of sale, and the property in the goods passes to the purchaser otherwise than by transfer of documents of title when the goods are in movement from one State to another." 12.In my view, the subsequent leasing after having goods purchased from the assessee by the two Reliance Companies does not take the entire transaction as contended by counsel for the assessee that it is a lease agreement in between the assessee RIIL and RPL, as the case may be. The goods were delivered and title passed. If under the agreement,....
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....g with the question whether the purchase order and the lease agreement are separate or constitute one integral transaction." 14.On perusal of the aforesaid judgment as also the judgment of the Hon'ble Apex Court in the case of M/s. Tata Iron and Steel Co. Ltd. Bombay Vs. S.R. Sarkar and others (supra), in my view, the facts of the present case vis-a-vis I.T.C. Classic Finance and Services (supra) are squarely covered. In the aforesaid case I.T.C. Classic Finance and Services, purchased equipment from the manufacturer outside the State for being supplied to the lessee in pursuance of the lease agreement for giving equipment on lease and the lessor placed the order for supply of the goods to its specification with the manufacturer outside the State and later on the lessor confirmed it, as in the present case, the goods were supplied by the manufacturer directly to the lessee upon the instructions of the lessor, the invoice was raised against the lessor, showing the lessee as consignee. However, in the said case, the Revenue levied tax on the lease money collected by the company i.e. the lessor from the hiring of the equipment received by the lessee outside the State but the Cour....
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....alf of the English Electric Co. of India Ltd. that the sale was at Bombay inasmuch as the Bombay buyer placed the firm order at Bombay, payment was at Bombay, railway receipt of the Bombay branch and the goods were to be delivered at Bombay and the question whether the sale was an inter-State sale or a sale at Bombay, the Honble Apex Court held that the steps taken from the beginning to the end by the Bombay branch in coordination with the Madras factory show that the Bombay branch was merely acting as an intermediary between the Madras factory and the buyer, it was the Madras factory which pursuant to the covenant in the contract of sale caused the movement of the goods from Madras to Bombay. Thus facts are quite distinguishable and there no question of lease, arose at all. 17. The case of 20th Century Finance Corpn. Ltd. and Anr. (supra) relied upon by assessee is also distinguishable. 18.In the case of Srei International Finance Ltd. vs State of Orissa and Ors (supra), the judgment is distinguishable inasasmuch as in that case the lease rent was agreed at Rs. 23 lakhs per year, no sale consideration had passed and only goods were being used at an agreed lease rental of Rs. 23 ....