TaxTMI 
TaxTMI 
2017 (5) TMI 769
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....eal Nos.1130 and 1135 of 2015. The present appeal challenges the Tribunal's judgment in Appeal No.1130 of 2015. After hearing both sides we are of the view that this appeal raises the following substantial questions of law : (1) Whether the Appellate Tribunal, in the facts and circumstances of the case, is right in holding that the Appellant is a dealer within the meaning of Section 2(8) of the MVAT Act ? (2) Whether the Appellate Tribunal, in the facts and circumstances of the case, is right in holding that the transaction between the Appellant and PMPTL is a sale within the meaning of Section 2(24) of MVAT Act read with its explanation (b)(iv) in an appeal against the order of part payment of the first appellate authority and thereby rendering the appeal before the 1st Appellate Authority a mere formality ? (3) Whether the Appellate Tribunal, in the facts and circumstances of the case, is right in holding that the buses given on hire by the Appellant to PMT is a sale within the meaning of Section 2(24) of the MVAT Act read with its explanation (b)(iv) and subject to payment of the Value Added Tax ? 4 Hence admit. With consent of both sides and since detailed arguments ....
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....nd interest at Rs. 1,28,56,689/-. Further, the Deputy Commissioner also levied penalty of Rs. 1,07,13,907/-. 11 Vide Notice of demand dated 19th March, 2014, the Deputy Commissioner of Sales Tax directed the appellant to pay the aforesaid demand, interest and penalty. 12 After receipt of the said order, on 29th May, 2014, the appellant filed an application under Section 23(11) in Form - 316 for cancellation of the said assessment order dated 19th March, 2014, on the grounds mentioned therein. 13 Accordingly, by his order of cancellation dated 28th May, 2014, the Deputy Commissioner of Sales Tax cancelled the assessment order dated 19th March, 2014. 14 The Deputy Commissioner issued show cause notice calling upon the appellant to show cause as to why penalty under section 29(3) should not be levied on the appellant. 15 During the course of assessment, the appellant submitted monthly details of bus hire receipts, special trips and accident claims received. 16 Thereafter, vide Order dated 31st March, 2015, the Deputy Commissioner, based on the reason in the earlier order dated 19th March, 2014, raised the demand of Rs. 3,58,91,589/- on account of tax and interest. The Deputy Com....
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....ct, 2007. 22 He would submit that providing the buses to the Pune Municipal Corporation ("PMC" for short) would attract service tax by virtue of the amendment to the Finance Act. That is because the Parliament has expanded the scope of rent-a-cab service by defining motor vehicle capable of carrying more than twelve passengers for hire or reward as a cab. That is why the appellants are paying service tax on hire of buses to PMC under this amendment. The present appeal pertains to a period prior to such amendment, but even prior to the said amendment, activities performed by the appellant were undoubtedly a service. That may not be a taxable service for the purpose of the Finance Act, 1994. The appellants are wholly justified in not paying the value added tax on hire charges received from the PMC as the said activity does not amount to transfer of right to use goods, but amounts to provision of service. 23 Mr. Sridharan would attempt to equate the activities of the appellant with a Time Charter party arrangement. He seeks to draw support from a contract of charter party. In elaborating that concept and the type of charter party contracts, Mr. Sridharan would submit that a careful ....
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....lt up on an alternate premise. The primary contention is that relevant clauses in the tender document and agreement establish that there is no transfer of right to use. In that regard, he invites our attention to clauses 3, 7, 10, 11, 12, 15 and 16 of the tender document and clauses 7, 8,10, 16 to 18 of the lease agreement. The clauses which, according to Mr. Sridharan, are neutral are clauses 2, 4, 8 and 9 in the tender document and clauses 3 to 6 and 15 and 22 of the lease agreement. 26 Finally, Mr. Sridharan would submit that in any case, the appellant is not a dealer within the meaning of Section 2(8) of the MVAT Act. He elaborates this contention as under : " From the plain reading of Exception 3 to section 2(8) of MVAT Act, 2002, it transpires that a transporter holding permit for transport vehicles is specifically excluded from the definition of a dealer. The Appellant submits that the demand has been raised on motor vehicles for which stage carriage permit has been duly obtained as per Motor Vehicles Act, 1988. Accordingly, the Appellant is a transporter holding permit. Further, it is an undisputed fact that the vehicles are used for transportation of passengers. Acco....
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....Jaiswal (2008) 13 VST 403 (All) (x) UTI Mutual Fund vs. Income Tax Officer & Ors. (2012) 345 ITR 71 (Bom.) 28 Mr. Sonpal, learned Special Counsel appearing on behalf of the respondents would support the impugned order. Mr. Sonpal has argued that the view taken by the Tribunal cannot be termed as perverse. He would submit that though the matter is brought at the stage of part-payment / interim relief, the Tribunal has decided the entire appeal. The Tribunal ordinarily should not have adopted this course. Mr. Sonpal would submit that unless the material placed on record at the interim stage is enough to dispose of the appeal finally, then alone and by consent of the parties, the above course should be adopted. The Tribunal has gone ahead and disposed of the appeal and with conclusive findings. 29 Be that as it may, according to Mr. Sonpal, the conclusion of the Tribunal is the only one that a judicial authority can reach on the present facts and circumstances. Mr. Sonpal has, during the course of his arguments, submitted that the assessment order correctly records that the factual aspects are already decided and discussed in the order of the Commissioner of Sales Tax on the app....
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....they have to ply, the hours of the same are all matters determined by the PMT. The PMT has complete possession and control of these buses. The General Manager, PMT has the sole discretion to identify the routes on which hired buses have to be deployed. The contractor will have no right to claim any particular route for operation. It is in these circumstances that the view taken by the Tribunal is in accordance with law. 30 Mr. Sonpal has also relied upon some of the clauses in the agreement and particularly the one where there would be exclusive authority or the General Manager of the PMT. Mr. Sonpal has also brought to our notice, the terms and conditions of the Hindi advertisement and which bind the bidder. Mr. Sonpal has then referred to the order of the Tribunal and submitted that the definition of the term 'sale' includes such a deal. On the analysis of the terms and conditions of the agreement, according to Mr. Sonpal, the Tribunal has correctly concluded that the buses have been given for a specified period, the period during which the contract is subsisting, the buses may either be idle or free or not under use by PMT, but the appellant is prohibited from using the....
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.... any principal whether disclosed or not and whether the offer of the intending purchaser is accepted by him or by the principal or a nominee of the principal; (c) a non resident dealer or as the case may be, an agent, residing in the State of a non-resident dealer, who buys or sells goods in the State for the purposes of or consequential to his 5[engagement in or in connection with or incidental to or in the course of, the business], (d) any society, club or other association of persons which buys goods from, or sells goods to, its members; Explanation.- For the purposes of this clause, each of the following persons, bodies and entities who 6[sell any goods] whether by auction or otherwise, directly or through an agent for cash, or for deferred payment, or for any other valuable consideration shall, notwithstanding anything contained in clause (4) or any other provision of this Act, be deemed to be a dealer, namely:- (i) Customs Department of the Government of India administering the Customs Act, 1962 (52 of 1962); (ii) Departments of Union Government and any Department of any State Government; (iii) Local authorities; (iv) Port Trusts; (iv-a) Public Charita....
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.... section 4 of the Central Sales Tax Act, 1956 (74 of 1956); (b)(i) the transfer of property in any goods, otherwise than in pursuance of a contract, for cash, deferred payment or other valuable consideration; (ii) the transfer of property in goods (whether as goods or in some other form) involved in the execution of a 13[14[works contract including], an agreement for carrying out for cash, deferred payment or other valuable consideration, the building, construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning of any movable or immovable property;] (iii) a delivery of goods on hire-purchase or any system of payment by instalments; (iv) 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; (v) the supply of goods by any association or body of persons incorporated or not, to a member thereof for cash, deferred payment or other valuable consideration; (vi) the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for h....
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....Annexure A to the said document. However, the General Manager reserves the right to accept lesser number of buses. These buses were to operate as stage carriages within the operation area of the Undertaking. The kilometers operated per month will be 6000 minimum, subject to the reasonable daily operation. The tenderer having ready vehicles shall submit details of the vehicles in the format Annexure-B and those who do not have vehicles shall submit details of the proposed vehicles and to be supplied as and when communicated by the Undertaking. The tenderer having their own garage and workshop with parking space will be given preference. The Undertaking will provide conductors with tickets, waybill and other conductor's equipment. The right of the Undertaking to collect fare and charges is clearly spelt out. The tenderer does not possess any such right. Then, the General Manager of the PMT has sole discretion to identify the routes on which the hired buses shall be deployed. The tenderer shall have no right to claim any particular route for operation. The responsibilities of the tenderer are set out in condition No.10 and they read as under : "(i) To provide the bus with driver....
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....ould be reckoned is then set out. The calculation is on the basis that the tender shall make available the hired buses for minimum 14 hours a day and in case a bus is not available minimum for 14 hours a day, it will not be counted as a day for the purpose of reckoning the number of days operated in a month. Then, how the cancellation of kilometers, trips for any reason shall be made for actual kilometers operated and that would be reckoned for payment of hire charges. Reliance is strongly placed on term and condition No.13 which says that the tenderer shall have no claim or right whatsoever on stage carriage permit which would be obtained by the Undertaking. Pertinently, no private bus under the Undertaking's operation will be allowed to be sold / ownership changed during the tenure of the contract. In case that is established, the payment for the period along with security deposit would stand forfeited. Then, under no circumstance a hired bus will be diverted by the tenderer for the personal use or a gain of any other business during its operation under the Undertaking. Condition No.16 stipulates the hire charges fixed will be valid for the period of three years. That can be ....
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....the form of recitals and covenants of the lessee. This is thus a broad agreement, under which everything enabling the appellant to ply the bus as a stage carrier and to pick up passengers from designated places and to drop them as per the route charted by PMT, abiding by the other covenants, which is envisaged. Thus, the bus and driver may be provided by the appellant, but the conductor is provided by PMT. The driving of the bus would be on the specified / designated routes. Even the halts or stops are decided in advance by the PMT. A complete chart / table / schedule is prepared for plying these buses within the operational area. The fare to be collected from the passengers is determined by PMT. The bus would have a conductor who shall collect it. He alone can carry out this function and duty and neither the private bus contractor, namely, the appellant or the driver can lay any claim on the fare and luggage charges or any amount so collected. 40 The sole discretion of the General Manager, as referred above, is also incorporated at recital No.6. The responsibilities of the contractor are set out in recital No.7. The contractor is responsible and obliged to provide the bus with dr....
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.... nature would invite the action contemplated in this clause. The contractor has also to deposit the photocopy of the RC Book, insurance policy of the bus, fitness certificate etc. with the PMT duly exhibiting the copy of the above documents in the bus or under the safe custody of the driver in the bus while on duty as per statutory requirement. These documents of title nor the vehicles themselves can be transferred or otherwise alienated by the contractor. The contractor is obliged not to use any of the buses covered by the agreement for plying for any other purpose at any time during the period of this agreement. The contractor is obliged to provide the bus within sixty days from the date of signing of the agreement. 41 The assessment and the demand proceeds on the footing that this contract between the appellant and the PMT can safely be brought to tax. That is how the order of assessment was passed and the demand raised. Then, the matter was carried to the First Appellate Authority. The First Appellate Authority initially granted an interim stay and passed an order to that effect on 15th September, 2015. 42 While imposing this condition of part-payment and an interim stay, the....
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....ver, there is no other service which has been permitted to be so split. Thus, he would rely upon this paragraph specifically to urge that this is a contract of either a pure service or, in any event, it is a composite contract and so long as the Constitution does not envisage any splitting up of the contract in the manner permitted with regard to other contacts, we should hold in favour of the appellant. 45 We are unable to agree with Mr. Sridharan. Firstly, we find that the Tribunal has rightly construed the deal / transaction with reference to the tender, its terms and conditions and recitals so also the covenants of the agreement. A harmonious reading of all these has led the Tribunal to conclude that this is a case of a deemed sale. There is a transfer of right to use the goods. We do not find any substance in the complaint of the appellant that the right to use the goods / business is not exclusive. In other words, though it is a transfer of the right to use the buses, that is not exclusive. This submission overlooks the fact that PMT may be rendering a service to the residents of Pune. It may provide Municipal transport service and which is a public transport service. It may....
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.... be discharged by him. Therefore, these three documents read as a whole and harmoniously lead only to one conclusion that in the given facts and circumstances, there was a transfer of the right to use the goods and exclusively. Everything in respect of these buses, including their usage, their plying, their deployment is handed over to the PMT. Even the documents such as the permit, its renewal and the nature of the same is in the control so also authority of the PMT. Importantly, all this is to the exclusion of the appellant. 46 Mr. Sridharan gave instance of time charter party arrangements and then equated the present transactions with them. We are unable to see how we can and in the teeth of the constitutional provision and the definition of the term 'sale', rely upon the charter party agreements in relation to sea going vessels. It is true that charter by demise is something by which the ship owner surrenders the possession and control of the vessel to the charterer, whereas in a charter, which is not a charter by demise, the arrangement could be as noted in paragraph 16 of the written submissions tendered by the appellant (page 6). Mr. Sridharan has laid great emphasi....
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....r. Sridharan laid heavy emphasis on Anson's Law of Contract particularly where the learned author observes that a charterer under a voyage or time charter party (even if of long duration) only has a personal right that the ship-owner should continue to use the ship to perform the services which he has covenanted to perform. The charterer has no proprietary interest in the subject matter of the contract, the ship. We are considering a situation under sub-clause (d) of clause (29A) of Article 366 which is a case of deemed sale and which sub-clause has found its way even in the definition of the term 'sale' as appearing in the MVAT Act. Therefore, proprietary interest is not a matter which should detain or bother us. Hence, this passage in Anson's Law of Contract and equally the reliance placed on Chitty on Contracts at page 34 and 39 of Volume II fails to impress us. 48 True it is that the principle in Chitty is also based upon a possessory interest. The passage relied upon by Mr. Sridharan is that the contracts affecting chattels may require the use of some particular chattel for the performance and without creating any proprietary or possessory interest in the chat....
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....AC Omni vans on 24 hours/2500 km per month per vehicle basis on a monthly cumulative rate of Rs. 23,000/- per vehicle per month and 16 non-AC Omni vans on 12 hours/300 km basis at Rs. 16,000/- per car per month. Then the extra kilometers were chargeable and as noted by the Delhi High Court. The salient features of this arrangement were that the rates were inclusive of fuel, maintenance and driving charges. The terms and conditions as reproduced in paragraph 4 of the order, so also the general conditions of the contract enabled the Delhi High Court to conclude that the contract in question is taxed as service under the Finance Act, 1994. It is a composite contract of sale of goods and service. Therefore, the splitting up and bifurcation is not permissible by applying the Delhi Value Added Tax Act, 2004. Pertinently, the Delhi High Court also dealt with the second question. That was whether the Article 366(29A)(d) would be attracted and whether the contract in question is at all a contract of sale of goods. The Court then discussed this aspect from paragraph 8 onwards to arrive at a conclusion that the permissions and licences with respect to cabs are not available to the transferee ....
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.... duty bound for payment of motor vehicle tax and other taxes and levies on the operation of the hired buses to all concerned. It is the tenderer who shall ensure the insurance of all buses covering third party risk passenger and to property damage, including buses which had been renewed from time to time. The tenderer should produce the vehicle for inspection at the time of deployment and also subsequently whenever required by the Undertaking. The specification of the buses to be hired would be as per Annexure A. The buses shall be painted as per PMT colour code and shall have to comply with all the stipulations in Annexure A read with term and condition No.3. The stipulations in the lease / hire agreement would indicate that the agreement will come into force only after the buses are handed over by the contractor to PMT as per Schedule B, duly registered with the Regional Transport Office, Pune and permitted by the RTO, Pune to ply the buses on stage carriage permits held by the PMT and no liability will be incurred on the PMT till the agreement comes into force. Thus, it is apparent from all these clauses that the case is not similar to that dealt with by the Delhi High Court. Th....
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....t was before the Division Bench is a plea raised by the State of Orissa. The State of Orissa was aggrieved by the Tribunal judgment allowing the appeals of the Dredging Corporation. Once again, the Dredging Corporation engaged dredgers for dredging the floor of Paradip Port under the Paradip Port Trust ("PPT" for short). During the years and relevant for the High Court judgment, it was noticed that the Corporation filed a return disclosing turnover of sale of empty tins, burnt oil without including the amount received towards hire charges of dredgers to PPT. The Assessing Officer on consideration of certain clauses of the agreement entered into between the parties, arrived at the conclusion that it was a transfer of the right to use the dredgers. That is how the return filed by the Corporation was accepted and tax was levied on the consideration money / hire charges received on account of the transaction noted above. 54 Then the assessment orders came to be challenged by the Dredging Corporation successfully. It is in these circumstances that the analysis of the terms and conditions of the contract enabled the Orissa High Court to hold that the findings of the Tribunal are not per....
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....urt, namely, Commissioner of Sales Tax, Maharashtra State vs. General Cranes (supra), the Division Bench was not dealing with the MVAT Act, but Maharashtra Sales Tax on Transfer of Right to use any goods for any purpose Act, 1985 (for short "Lease Act"). The question was whether the respondent M/s. General Cranes is a dealer within the meaning of that term as defined in section 2(4) of the Lease Act. The respondent before the Division Bench was in the business of hiring cranes. It filed an application under section 8 of the Lease Act for determination of the question as to whether he would fall under the term 'dealer'. The Additional Commissioner, while dealing with that application, held that the respondent would fall within the definition of the term 'dealer'. The transaction entered into by the dealer with M/s. Offshore Hookup & Construction Services (India) Private Limited would be governed by the provisions of the Act and, as such, taxable. Being aggrieved by this finding, the respondent General Cranes preferred an appeal to the Tribunal and the Tribunal reversed that finding. It held that the transaction cannot be said to be a sale as defined under section 2(1....
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....r. 58 Our case is clearly distinguishable on facts. It is not on par with M/s. General Cranes. Our extensive reference to the terms and conditions of the contract leaves us in no manner of doubt that it is the PMT alone which can use the hired buses. They cannot be put to use by the appellant privately nor he can divert the user in contravention of the directions of the PMT. The exclusive possession is with the PMT. All the licences, permissions and the benefit thereof is transferred to the PMT. Nothing insofar as the hired bus is concerned remains within the control of the appellant. Thus, the PMT has effective and complete control of the vehicles and the earmarked buses are in exclusive possession of the PMT. The appellant stands totally excluded from the use, possession and control thereof. 59 It is in these circumstances that we are of the view that the conclusion by the Tribunal in the present case cannot be faulted. This is not a case of any perversity or an error of law apparent on the face of the record. This is a clear case and which, to our mind, stands covered by application of all the legal principles to the subject contract, in favour of the Revenue. 60 It is in the....
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....to educational institution carrying on the activity of manufacturing, buying or selling of goods in the performance of its functions for achieving its objects, and that shall not be deemed to be a dealer within the meaning of this clause. The last exception, Exception No. III, is relevant and that refers to a transporter holding permit for transport vehicles (including cranes) granted under the Motor Vehicles Act, 1988. The argument before us is that the appellant is a transporter and he holds permit for transporting vehicles granted under the Motor Vehicles Act, 1988, and which vehicles are used or adopted to be used for hire or reward. Therefore, he shall not be deemed to be a dealer within the meaning of this clause in respect of sale or purchase of such transport vehicles or parts, components or accessories thereof. 63 Mr. Sridharan's arguments overlook the fact that we are not dealing with the first part of the definition of the term 'sale' appearing in clause (24) of section 2. We are dealing with the Explanation to clause 24 and where the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or ....
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.... These clear stipulations in the agreement, therefore, would denote that it is not the appellant and who is supplying buses to the PMT who can be said to be independently operating them. He is not holding a permit for transport vehicles, including cranes, granted under the Motor Vehicles Act, 1988, though the vehicles may be used or adopted to be used for hire or reward by the PMT. Moreover, given the clear understanding that the registration with the RTO will be in the name of the Pune Municipal Transport and it is the PMT which is termed as the permanent holder, then, the first part of the exception in this case is not satisfied. The Department / Revenue proceeded against the appellant because it was not a case of sale of the buses or parts, components or accessories thereof. Thus, even the second part this exception, namely of a transporter holding a permit for transport vehicles granted under the Motor Vehicles Act, 1988, and which are used or adopted to be used for hire or reward, shall not be deemed to be a dealer within the meaning of clause 2(8) of the MVAT Act in respect of sale or purchase of such transport vehicles or parts, components or accessories thereof is not satis....