AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (10) TMI 806
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....e under the Maharashtra Value Added Tax Act (MVAT Act) and admittedly on which VAT is levied and collected by respondent no.5. 3. Petitioner is the Liquidator of a company - Swire Oilfield Services India Private Limited [hereinafter referred to as the company (in liquidation)]. The company (in liquidation) was engaged in providing Cargo Carrying Units (CCU or containers) on rental basis to its customers. Admittedly, the containers were not owned by the company (in liquidation) but were taken on lease from one Monument Containers Limited, England (hereinafter referred to as Monument). The containers were used in the offshore exploration industry to transport and store all types of goods such as consumables, equipment, spares etc. that were required during the offshore exploration activity. 4. As per the lease agreement with Monument, the company (in liquidation) was permitted to give the containers on sub-lease to any party deemed fit and proper. Accordingly, the company (in liquidation) had, vide a lease agreement dated 1st April 2011, given on lease various containers on hire for consideration to one CU Inspection India Private Limited (hereinafter referred to as the lessee)....
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....ssee was responsible for the upkeep, maintenance and safety of such containers during the lease period and all risk and reward associated with the containers belonged to the lessee. Copy of the agreement was also submitted to respondent no.3. 7. According to petitioner, and as submitted to respondent no.3, the transfer of right to use goods was subject to levy of VAT. As per Article 366 (29A)(d) of the Constitution of India, tax on sale or purchase of goods includes a tax on 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. Consequently, the definition of sale under the MVAT Act also includes such transfer of right to use goods for any purpose as a deemed sale transaction and accordingly is subject to VAT. The company (in liquidation) has accordingly discharged VAT on the transfer of right to use the containers to the lessee and undertaken necessary compliances under the MVAT Act. 8. Mr. Shah submitted that service tax is applicable on provisions of services and service has been defined under Section 65B(44) of the Finance Act, 1994, which excludes an activity which co....
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....mpany (in liquidation) or the company (in liquidation) could simultaneously lease the containers to any other party. Mr. Adik submitted that, that was the interpretation by respondent no.3 of the agreement between the company (in liquidation) and lessee but when we asked Mr. Adik is there any evidence to show that what respondent no.3 has assumed was the intention of the parties, Mr. Adik in fairness submitted that there is no such evidence. 12. In the circumstances, in our view, respondent no.3 has proceeded purely on the basis of surmises and what he felt could have been the arrangement between the company (in liquidation) and the lessee. Moreover, as Mr. Shah pointed out, for the previous years respondent no.3 has accepted that no service tax was payable for the same agreement between the company (in liquidation) and the lessee. As submitted by Mr. Shah a notice similar to the one in this case had been issued but it was later withdrawn. 13. Having considered the submissions of Mr. Shah and Mr. Adik and the agreement between the company (in liquidation) and the lessee, copy whereof is annexed to the petition, we are satisfied that the relationship between the company (in li....
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....s that the Lessor is under no obligation to, and will not conduct any inspection of the Equipment before, on or after delivery thereof. xxxxxxxxxxxxxxxxxx 5.1. The Lessee shall (subject to Clauses 5.6 and 5.7) keep the Lessor indemnified in full against all costs, expenses, damages and losses (whether direct or indirect), including any interest, fines, legal and other professional fees and expenses awarded against or incurred or paid by the Lessor as a result of or in connection with any claim made against Lessor by a third party arising out of, or in connection with this Agreement to the extent that such claim arises out of the breach, negligent performance or failure or delay in performance of the Agreement by the Lessee, its employees, agents or subcontractors. xxxxxxxxxxxxxxxxxx 6.1. All risk of loss of or damage to the Equipment shall pass immediately from the Lessor to the Lessee on the Commencement Date or on delivery under clause 6.3 as the case may be. 6.2. The Lessee acknowledges that execution of this Agreement shall be conclusive evidence that the Lessee shall have taken delivery of and unconditionally accepted the Equipment ....
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.... use including any permissions or licences required therefor is the responsibility of the lessee for the period during which the lessee has the legal right. The company (in liquidation) cannot hand over those containers to anyone else and the right to use the containers during the period of lease is effectively transferred. 15. Section 65B (44) of the Finance Act, 1994 reads as under : (44) "service" means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include - (a) an activity which constitutes merely, - (i) xxxxxxxxxxxxxxxxxx (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29-A) of Article 366 of the Constitution; or xxxxxxxxxxxxxxxxxx 16. Clause (29A) of Article 366 of the Constitution of India reads as under : (29A) - tax on the sale or purchase of goods includes xxxxxxxxxxxxxxxxxx (d) a tax on 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; xxxx....
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....aler, who, immediately before the appointed day, holds a valid or effective certificate of registration or licence under any of the earlier laws or, who is liable to pay tax under any of the earlier laws, in the year ending immediately before the appointed day shall, if his turnover of sales or purchases has, in the said year under any of such earlier laws, exceeded rupees [five lakh], or, as the case may be, who was an importer in the said year [and his turnover of sales or purchases in the said year had] exceeded rupees one lakh, be liable to pay tax, with effect from the appointed day, in accordance with the provisions of this Act, till his certificate or licence is duly cancelled under this Act. Explanation.-For the purposes of this sub-section, the expressions turnover of sales, turnover of purchases― ― and importer shall have the respective meanings― assigned to them under the relevant earlier laws. (2) A dealer to whom sub-section (1) does not apply and whose turnover, [of all sales] made, during the year commencing on the appointed day or any year subsequent thereto, first exceeds the relevant limit, specified in subsection (4), shall, un....
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.... sales], if any, referred to in clause (a), (b) or (c), the [turnover of sales] shall also include the sales [***] of the non-resident dealer effected in the State. (6) Notwithstanding anything contained in any contractor any law for the time being in force, but subject to the provisions of this Act, any person covered by [sub-clause (a), (b) or (c)] of clause (8) of section 2 shall be liable to pay tax under this Act, whether, or not the principal is a dealer and whether, or not such principal is liable to pay tax under this Act and whether or not the principals are disclosed. (7) [***] (8) Where a dealer liable to pay tax under this Act is succeeded in the business by any person in the manner described in clause (a) of sub-section (1) or sub-section (4) of section 44, then such person shall, notwithstanding anything contained in this section, be liable to pay tax on the sales or purchases of goods effected by him on and after the date of such succession and accordingly nothing contained in the proviso to sub-section (2) shall apply to him in any year. (9) Any person who is not liable to pay tax under the foregoing, provisions of this section bu....
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....eferred payment or other valuable consideration. Here from the documents, and in particular the clauses reproduced in paragraph 14 above, it is quite clear that there has been a transfer of the right to use the containers for valuable consideration. Clause (29A) of Article 366 of the Constitution does not distinguish between an owner or a lessor of the goods. Only requirement is there should be a transfer of the right to use the goods for valuable consideration. Factually there has been and, as Mr. Adik fairly agreed, there is no evidence to the contrary, except surmises. 22. Further, service tax is applicable on provision of services and for this purpose, 'service' has been defined under Section 65B(44) of the Finance Act, 1994. Additionally, a 'declared service' is defined under Section 66E(f) of the Finance Act, 1994 to include the following : transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods; 23. "Transfer of right to use goods" is excluded from the definition of 'service' as well as 'declared service' and hence, the same is not subject to service tax. Therefore, it is clear that a transfer of goods....
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....of right to use and the criteria to determine whether the transaction involves transfer of right to use goods. Respondent no.3 has also referred to BSNL (Supra) where the Apex Court has outlined the pre-requisites for an activity to qualify as a transfer of right to use goods. Respondent no.3 does not elaborate why these were not applicable to the facts of the case at hand. Respondent no.3 has proceeded on the incorrect presumption that the company (in liquidation) was not the owner of the containers and hence cannot again transfer the same right to others. The activities outlined by the Apex Court, in our view, squarely applies to the case of the company (in liquidation). 28. In the present case, it is not in dispute that the company (in liquidation) had given the containers to the lessee on rental basis and possession and control was always with the lessee and the sole ground on which the demand is confirmed is that the company (in liquidation) was not owner of the containers. 29. For a transaction to be deemed sale there is no requirement of transfer of ownership and once it is not disputed that the containers are given on lease and possession and control is transferred, i....