TaxTMI 
TaxTMI 
2022 (12) TMI 595
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....s Department to the Petitioner Company. The levy of tax was under Section 2(s)(vi) of the VAT Act for the assessment year 2009-10. The assessment for the year 2009-10 was completed on 22.12.2014. In the course of assessment, the Assessing Officer assessed the income of Rs.29,20,347/- as lease rent obtained by the Assessee from the Railways Department. Treating the said receipt of lease rent by the Petitioner Company from the Railways Department as deemed sale, tax was assessed on the above mentioned amount at the rate of 18% which came to around Rs.4,08,849/-. 3. This Court on an earlier occasion had dismissed the present Writ Petition vide Order dated 5.12.2017. However, subsequently, the Writ Petition was reviewed and vide Order dated 4.11.2022, the Review Petition was allowed by this Court and the matter has again come for hearing and is now being decided on merits by this Order. 4. Crux of the matter in brief is that the Indian Railways had floated a Scheme known as "Own Your Wagon Scheme" to which the Petitioner Company expressed their interest in purchasing Wagons and for which necessary proposal was put forth by them. The proposal was approved by the Railways Board. In res....
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....ngal) both being outside the State of Chhattisgarh and even thereafter the Wagons not being stationed within the territories of the State of Chhattisgarh, the amount received as lease charges cannot be accepted to be a taxable income under the VAT Act. 8. Learned Counsel for Petitioner further submits that, in respect of transfer of right to use any goods, the situs of sale would be the place where the Agreement transferring the right to use is executed. The tax could have been levied by the Respondents only in the event of intra-state sale and where the sale brings the goods purchased within the territories of the State of Chhattisgarh. Hence, alleging lack of jurisdiction for the Authorities, the Wagons being not delivered into the State of Chhattisgarh and also the two impugned Orders being without properly dealing with the aspect of the Agreement being entered into outside the State of Chhattisgarh, the same deserve to be set-aside/quashed. 9. Learned Counsel for Petitioner, in support of her contentions, apart from relying upon the case of "20th Century Finance Corpn. Ltd. & Anr. Vs. State of Maharashtra" [2000 (6) SCC 12], has also relied upon the case of "State of Madras v....
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....or cash, deferred payment or other valuable consideration; (f) a tax on 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 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;" 13. The Assessing Officer in the Commercial Tax Department of the State of Chhattisgarh has held that VAT is leviable on the Petitioner Company under Section 2(s)(vi) of the VAT Act. For ready reference, Section 2(s)(vi) of the VAT Act is reproduced below:- "2. Definitions. - xxx xxx xxx (s) "Sale" with all its grammatical variations and cognate expressions means any transfer of property in goods for cash or deferred payment or for other valuable consideration and includes xxx xxx xxx (vi) a transfer of the right to use any goods including leasing thereof for any purpose (wheth....
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....goods other than newspapers, subject to the provisions of Entry 92A of List I." 18. There is yet another Entry in the Constitution of India introduced by the Sixth Amendment in 1956 whereby Entry 92A was inserted in List I of the Seventh Schedule, which also for ready reference is being reproduced as under:- "92A. Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-state trade or commerce." 19. The aforesaid provisions of law came up for consideration before the Hon'ble Supreme Court in the matter of "20th Century Finance Corpn. Ltd. & Anr. Vs. State of Maharashtra" [2000 (6) SCC 12] and the Apex Court in its Judgement in paragraphs 24, 25, 26, 27 & 35 has held as under:- "24. The aforesaid decisions unambiguously laid down that where situs of sale has not been fixed or covered by any legal fiction created by the appropriate legislature, the location of sale would be place where the property in goods passes. The Constitution Bench held, that it was the passing of the property within the State that was intended to be fastened on for the purpose of determining whether the sale was inside or outside the ....
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....lates the transaction would fall squarely within the Explanation and yet it would not come within clause (2), for there is no movement of the goods across the border of any State and both the seller and the buyer are in the same place. Surely, the Explanation will, in presenti, govern such cases irrespective of whether Parliament has lifted the ban under clause (2). If these postulates are accepted then by virtue of clause (1)(a) read with the Explanation the State of Delhi alone will be entitled to impose a tax on such a sale or purchase and the State of Punjab will be precluded from doing so by reason of the fictional situs assigned to such a sale or purchase by Explanation, although the contract was made, price was paid and symbolical or constructive delivery of the goods by the handing over of the delivery order took place in Gurgaon in the State of Punjab." We, therefore, find that the location or delivery of goods within the State cannot be made a basis for levy of tax on sales of goods. Under general law, merely because the goods are located or delivery of which has been effected for use within the State would not be the situs of deemed sale for levy of tax if the transf....
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....se (d) of clause (29A) be equated with the third sort of bailment referred to in Bailment by Palmer, 1979 edition, page 88. The third sort referred to there is when goods are left with the bailee to be used by him for hire, which implies the transfer of the goods to the bailee. In the case of sub-clause (d), the goods are not required to be left with the transferee. All that is required is that there is a transfer of the right to use the goods. In our view, therefore, on a plain construction of sub-clause (d) of Clause (29A), the taxable event is the transfer of the right to use the goods regardless of when or whether the goods are delivered for use. What is required is that the goods should be in existence so that they may be used. And further contract in respect thereof is also required to be executed. Given that, the locus of the deemed sale is the place where the right to use the goods is transferred. Where the goods are when the right to use them is transferred is of no relevance to the locus of the deemed sale. Also of no relevance to the deemed sale is where the goods are delivered for use pursuant to the transfer of the right to use them, though it may be that in the case o....
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....e goods, such transactions may be effected by the delivery of the goods. In such cases the taxable event would be on the delivery of goods. (e) The transaction of transfer of right to use goods cannot be termed as contract of bailment as it is deemed sale within the meaning of legal fiction engrafted in clause (29A) (d) of Article 366 of the Constitution wherein the location or delivery of goods to put to use is immaterial." 20. The High Court of Orrisa in "M/s Shrei International Finance Ltd. Vs. State of Orissa & Ors." [2008 (Supp.-l) OLR-764] in somewhat identical set of facts has held that since the sale or purchase was in the course inter-state trade and commerce, the State of Orissa has no jurisdiction to levy tax on the lease rent received. The taxable event is the transfer of right to use goods and not the right to use goods or the use of goods. Therefore, the right to use goods or the use of goods is not the relevant factor to justify the levy of tax. 21. It is pertinent to mention at this juncture that a Single Bench of the Madhya Pradesh High Court on identical set of facts in the case of "M/s Raymond Limited & Anr. v. Commercial Tax Officer & Ors." in W.P. No.757/19....