TaxTMI 
TaxTMI 
2017 (5) TMI 769
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....e two appeals that have been disposed of are Appeal 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 ? ....
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....assessment order dated 19th March, 2014, assessed the demand at Rs. 1,07,13,907/- and 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 Mar....
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....the category of "Rent-a-Cab Service" as defined in The Finance Act, 1994, which is amended by Finance Act, 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 e....
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....ot be split up, taxing the deemed sale element in the composite contract. This argument of Mr. Sridharan is built 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 t....
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....ustries Pvt. Ltd. (2009) 25 VST 322 (Bom.) (viii) State of Orissa vs. Dredging Corporation of India Ltd. (2009) 25 VST 522 (Orissa) (ix) Commissioner, Trade Tax, U.P., Lucknow vs. Jamuna Prosad 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. ....
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....nd that nothing is within the domain of the appellant-contractor as far as these buses are concerned. These buses ply on the routes and halt at the stoppages determined by PMT. The number of buses and the routes on which 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 co....
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.... whether disclosed or not; (b) an auctioneer who sells or auctions goods whether acting as an agent or otherwise or, who organises the sale of goods or conducts the auction of goods whether or not he has the authority to sell the goods] belonging to 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 d....
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....n but does not include a mortgage, hypothecation, charge or pledge; and the words "sell", "buy" and "purchase", with all their grammatical variations and cognate expressions, shall be construed accordingly; Explanation.- For the purposes of this clause,- (a) a sale within the State includes a sale determined to be inside the State in accordance with the principles formulated in 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 good....
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....h the buses were being hired are enumerated at Exhibit-B, page 42 of the paper-book. These terms and conditions state that the buses will be hired for a period of three years at the first instance, which can be extended further for two years at the discretion of the General Manager of the Undertaking. Then it is stated that the tenderer will offer minimum ten buses on hire basis to the Undertaking with specifications, more particularly described in 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 ....
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....rance should be renewed in time. (xii) The Tenderer shall produce the vehicle for inspection at the time of deployment and also subsequently whenever required by the Undertaking. (xiii) The Tenderer will have to enter into contract of lease of buses for three years in favour of PMT." 37 Then, what is important for our purpose is that there is a calculation of kilometers of hired buses. The Undertaking shall pay hire charges for the actual effective kilometers at the rate to be determined. How the distance would 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.....
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....l this agreement comes into force. The buses must comply with the specifications enumerated in Annexure A and the number and size of buses to be provided shall be as per Annexure B. The tenure will be for a period of five years from the date of permission to ply the buses of the contractor on PMT permit granted by the RTO, Pune. The hired buses would be registered with the RTO, Pune in the name of PMT as a lessee and would be operated as above in terms of and consistent with the tender conditions, every stipulation incorporated in 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....
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....de available and for use of the PMT is then set out and in recital No..8. In recital No.10 appearing at pages 56 and 57, the parties agreed that the contractor shall have no claim or right whatsoever on stage carriage permit which would be obtained by PMT and secondly under no circumstance a hired bus will be diverted by the contractor for his personal use or a gain of any other business during its operation under PMT. He would also not be allowed to cancel or change the ownership during the tenure of the contract and any act of this 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 th....
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.... 42 of this judgment. He would submit that of all the different kinds of composite transactions, the drafters of the 46th Amendment chose three specific situations, namely, a works contract, a hirepurchase contract and a catering contract to bring them within the fiction of a deemed sale. Of these three, the first and third involve a kind of service and sale at the same time. Apart from these two cases, splitting up of the service and supply has been constitutionally permitted in sub-clauses (b) and (f) of clause (29- A) of Article 366. However, 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 harmon....
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..... The agreement must be read in the backdrop of the tender and the terms and conditions thereof. It is only upon compliance with the terms and conditions of the tender that the appellant was chosen by the public body. The public body entered into an agreement with the appellant in exercise of its statutory powers and to fulfill certain obligations. The appellant knowing fully well this backdrop and background voluntarily executed the agreements. He must, therefore, be held as bound by these covenants and obligations so also responsibilities to 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 th....
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....particularly a charter party. We are not dealing with any obligations of the ship owner qua the charterer or vice versa. We are dealing with a case where in the light of the constitutional provision and the broad definition of the term 'sale' appearing in the MVAT Act arises the liability of the appellant to pay value added tax under the present transaction and deal with PMT. That is how the matter comes before us. Hence we are not impressed by Mr. Sridharan's reliance on the works Anson's Law of Contract and Chitty on Contracts. Mr. 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 MVA....
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....ate Tribunal, Value Added Tax, whereby it held that the respondent before the Delhi High Court was providing only services and there is no transfer of the right to use the goods for levy of tax under the Delhi Value Added Tax Act, 2004. 50 The gist of the contract appearing in paragraph 4 of the judgment of the Division Bench is that the New Delhi Power Limited (NDPL) as also the respondent before the Delhi High Court entered into and executed an agreement for hire of Maruti Omni cabs by the respondent to NDPL. The respondent was to provide nine non-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, 19....
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....must provide the bus with driver possessing valid driving licence with PSV Badge who shall follow the instructions of the authorities of the Undertaking. The tenderer shall provide uniform to the driver as prescribed by the Undertaking. The tenderer shall bear the cost of the driver, including his wages, daily allowance and meet all statutory obligations, but he shall not employ a person as a driver for operating any bus or hire people who have been removed or dismissed / retired on superannuation from the service of the Undertaking. The tenderer shall be 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 ....
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....n and custody of the vehicles remained and for all practical purposes with the contractors and Indian Oil Corporation only paid the hire charges to the contractors for the vehicles hired from them. The lack of above facets enabled the Gauhati High Court to conclude that there is no transfer of the right to use the vehicles. Hence, the demand to deduct the tax at source was not upheld, but quashed. That is the demand raised in the circumstances set out in sub-para (ii) of main paragraph 1 of the judgment of the Gauhati High Court. 53 In the Orissa case, what 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 agree....
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....erefore, enabled the High Court to hold that the effective control of the buses was never transferred to the two companies and it remained with the assessee. He only provided the buses for transportation of employees of the Corporation from one place to another and the price was stipulated only for the purpose of transportation and not for the leasing of the entire bus as such for a definite period. That is how the order of the Tribunal was upheld. 56 On facts, once again, this decision is distinguishable. 57 In the case of the Division Bench judgment of our Court, 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 'deale....
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....en extensively referred in the Tribunal's order. A perusal of these terms would reveal that the driver, cleaner, diesel and oil was to be provided by M/s. General Cranes. The transportation of accessories was to be done by M/s. General Cranes. There is no provision in the contract that legal consequences such as permissions or licences were to be transferred to the transferee. The ultimate control over the cranes was retained by M/s. General Cranes. It is in these circumstances that the Division Bench came to the conclusion that the Tribunal's order was proper. 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 ....
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....ministering the Customs Act 1962, Departments of Union Government and any Department of any State Government, local authorities, port trusts, public charitable trust etc. One of the entities mentioned is the Maharashtra State Road Transport Corporation constituted under the Road Transport Corporation Act, 1950. The exceptions then are set out and the first exception is that an agriculturist who sells exclusively agricultural produce grown on land cultivated by him personally, shall not be deemed to be a dealer within the meaning of this clause. Then, there is a reference made 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....
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.... needs of commuters in and around Pune city. It was empowered by the General Body of the PMC vide its Resolution No.427 dated 17th October, 2003, to enter into an agreement to hire buses to supplement and augment the fleet of PMT. The hired buses in complying with the specifications enumerated in Annexures A and B for a period of five years will ply on PMT permit granted by the Regional Transport Office, Pune. The hired buses will be registered with the RTO, Pune in the name of the PMT as lessees and will be operated as stage carriages within the operational area of the PMT. 64 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 t....