TaxTMI 
TaxTMI 
2024 (12) TMI 1234
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....aman and Nicobar Islands Administration [A & N Administration] constituted a "transfer of a right to use" and thus exigible to tax under Section 2 (g) (vi) of the Central Sales Tax Act, 1956 [CST Act] and Section 2 (zc) (vi) of the DVAT Act. 3. The appellants had contended that the agreement dated 11 February 2003, and which constituted the repository of the bargain between the parties did not involve a "transfer of a right to use". The appellants would urge us to hold that tested on the principles underlying Article 366 (29A) (d) of the Constitution, the tax authorities as well as the Tribunal have clearly erred in holding to the contrary. 4. For the purposes of examining the challenge which stands raised, we at the outset, take note of the following two questions of law on which the appeal came to be admitted on 12 January 2023: "a) Whether as per terms of agreements executed by the Appellant with its customers, hiring of helicopters is covered under the meaning of "Sale" under Section 2 (g) (iv) CST Act? b) Whether in the facts and circumstances of the case, the hon'ble Tribunal has erred in coming to the conclusion that the Appellant has transferred the ....
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....s as required from time to time and Lessor shall provide flights in accordance with such schedules. Lessor's obligations and responsibilities to provide flights shall be limited to the flights as per the programme for the day. Notwithstanding the foregoing, the Lessor shall in an emergency endeavor to provide a flight or flights not later than two hour after the receipt of information thereof, from the Lessor's Representative unless there are any operational or regulatory limitations prohibiting or preventing such a flight which shall be intimated by the Lessor to the Lessee. 3.3 The Lessor shall provide experienced IFR, licensed pilots for operations and qualified & experienced maintenance crew for servicing of the helicopter in order to maintain the helicopter for operational use during the currency of this agreement 3.4 The Charterer shall (before departure of a flight) provide to the Lessor a Manifest containing the number, names & weights of the passengers, cargo weight on board and the estimated time of departure/ arrival of the flight. NOTWITHSTANDING the foregoing it shall be the Lessor's sole to determine the acceptable load/passengers before eac....
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....eing made available exclusively for the use of the Lessee. 12. Clause 3.2 of the agreement broadly set out the obligations of the Lessor and recognised its principal responsibility being to provision for flights as per the programme that may be curated for the day. The aircraft was to be operated by licensed pilots and maintenance crew to be provided by the appellant and which is duly recorded in Clause 3.3. In terms of Clause 3.4, it was the appellant's responsibility to determine the acceptable pay load as well as the number of passengers that may be permitted on each flight. 13. By virtue of Clause 3.7, the agreement provisioned for a contingency where a helicopter may become a "total loss" or a "constructive total loss" and in which situation, the lessor was to replace the equipment at its expense with an identical helicopter or a helicopter acceptable to the Charterer within 14 days of such loss. Clause 3.8 then clarified that the liability with respect to expenses and responsibilities with regard to licensing requirements permits and compliances would be of the appellant. 14. We also deem it apposite to extract 4.2, 5.1, 5.2 and 5.3.2 of the agreement hereinbelow: ....
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....f the helicopter pay to the Lessor during the term of the Lease Agreement the following charges: 10.1 FIXED MONTHLY CHARGES Fixed Monthly Charges per month and prorata thereof to the nearest half day for part of a month and the period during which the helicopter is in active service in accordance with this Agreement as follows: - (i) Fixed Monthly Charges : Rs. 28.25 lacs per helicopter Plus (ii) Additional overhead charges : Rs. 2.00 lacs per month No charges shall be payable for grounding in excess of allowable days subject to adjustment of accumulated days, if any, allowed to the Lessor as per Clause 5.3.1. 10. 2 Hourly Flying Charges The Lessee shall pay to Lessor the corresponding flying charges per hour and prorata thereof to the nearest 5 (Five) minutes to the flying hours of the helicopter as per the following rates: (i) Hourly Flying Charges Rs.29,250/- per hour upto 90 hrs flying per month (ii) Hourly Flying Charges beyond 90 hrs. flying per month will be increased by 30% over Rs. 29,250/- per hour mentioned above. In case fuel is provided by the Lessee at its cost, then in ....
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.... were the notices which were framed for the subsequent periods. 20. The authority under the DVAT Act also proceeded to reject the objections taken holding that the terms of the agreement were liable to be acknowledged as constituting a "transfer of a right to use". This becomes evident from a reading of paragraph 10 of the order of the Tribunal which is extracted hereinbelow: 10. Learned OHA upheld all the assessments pertaining to tax, interest and penalties by observing in the manner as:- "Further, in terms of clause 13.3 of an Agreement of the objector made by him with one of his Charterers also reads as "however, the charterer shall indemnify and keep harmless the Lessor and shall assume the risk of and be solely responsible for any and all damages to the helicopter, associated and: allied equipments, tools, supplies, spare parts, materials and all other properly furnished by the Lessor or caused by the gross negligence of the Charterer, its employees, agents of sub-contractors". This too clearly and unequivocally goes to suggest and prove beyond any doubt that the helicopters, crew and others related goods etc. were placed by the objector at the disposal o....
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..... Pawan Hans Helicopters would position one helicopter at Port Blair. The helicopter would be made available exclusively to the lessee and if so required by the lessee; the helicopter could be utilized for other appropriate/suitable tasks within the Andaman & Nicobar Islands and other adjoining areas. 3.2 The lessor shall be allowed to ground the helicopter for maintenance for four days per month. The lessor shall give notice to the lessee of any scheduled payment to be carried out for the helicopter at-least for 7 days or 10 flying hours in advance. 9a. wherever required the lessee shall provide suitable helipads with necessary equipments and facilities like firefighting, fuel, adequate communication etc. The lessee shall pay for and provide accommodation, transport and meals for the lessor personnel whenever they are required to stay out overnight of the base. 9.2 Security of helicopters and helipads, security checking of passenger's baggage and cargo is to be arranged by lessee on all locations. 9.4 The lessee shall provide necessary security for helicopters, crew and fuel at the main base and the other locations. Therefore, as seen, ....
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....ive control over the helicopters and their operation was entirely with the clients/customers of the objector. It is a different thing that crew of the helicopters were to be of the objector and it could be because of the reason that for operating and flying of the helicopters, some specialized, experienced and licensed hands were essentially required and this mere fact of supplying the crew by the objector did not establish beyond doubt that the effective control over the helicopters was that of the objector and not that of his clients/customers. Moreover, the judgments of higher Courts cited and relied upon by the objector in support of his case support the case of the Revenue rather than the case of the objector. Therefore, in the entirety of the facts and circumstances of the case and the detailed discussion made above, the irresistible conclusion arrived at by the undersigned is that there is no force and substance in the arguments of the objector and orders of default assessments framed by the VATO of Special Zone are found to be absolutely in accordance with the provisions of law. Hence, the objections of the objector are rejected and the orders of default assessment....
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.... Island Administration are almost same and that the matter in dispute be disposed of keeping in view the terms and conditions of the agreements produced here, mainly, between dealer-appellant and Government of Punjab, Andaman & Nicobar Island Administration and Ministry of Home Affairs. By way of example, Learned CA for the appellant has referred to the terms and conditions of the agreements available in the agreement between appellant and Andaman & Nicobar Island Administration and submitted that the same be treated as a sample agreement. Learned counsel for the Revenue referred to the agreement between appellant and M.H.A as well and in reply learned CA for the appellant also referred to its terms also. In the given situation, the issue regarding transfer of right to use Helicopter is being decided keeping in view the terms and conditions of the agreements made available to this Appellate Tribunal." 22. The Tribunal thereafter proceeded to notice the various decisions which appear to have been cited for its consideration and took note of what it chose to describe as the special features of the agreement in question. It, in this regard, firstly took i....
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....n the agreements, it can safely be said that effective control of the helicopter(s) as a result of the agreements was with the lessee(s) and not with dealer-appellant." 24. The Tribunal also appears to have been swayed by the period of the lease and the fact that it had continued to bind and regulate the obligations of parties for a sufficient length of time. It also took note of the fact that during the currency of the lease, the helicopter was to remain stationed at a specified base. It further bore in consideration that all approvals were to be obtained from the Director General of Civil Aviation [DGCA] by the appellant for the Charterer's use of the helicopter. 25. As we peruse the impugned order further, it becomes apparent that the Tribunal has thereafter proceeded to evaluate a host of judgments which were cited by respective sides and essentially sought to ascribe and assign reasons as to why those were either distinguishable or did not apply to the facts which obtained in the present matter. 26. Its conclusions ultimately appear in paragraph 37 and which is extracted hereinbelow: "37. As a result, it is held that this is a case of transfer of legal right ....
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....n List II of the Seventh Schedule, as existing under the Government of India Act, 1935 and which had employed the expression 'sale of goods'. In Gannon Dunkerley, the Supreme Court had essentially held that it would be the concept of sale as generally understood and which would necessarily have to be comprised of the three essential components of an agreement to transfer, supported by consideration and an actual transfer of title and goods which would govern. The Supreme Court thus had held that absent one of the aforenoted three essential elements being found to form part of the contract, the law would not envisage a sale having occurred. The States thus stood deprived of the right to levy a tax on a transfer of goods in the course of a works contract, taxation of hire purchase transactions as well as transfer of controlled commodities. It was these complexities faced by various Provincial Governments, Mr. Gulati explained, which led to a reference being made to the Law Commission of India. 30. It was the recommendations ultimately formulated by the Law Commission which led to the insertion of clause (29A) in Article 366 of the Constitution. According to Mr. Gulati the scope an....
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....STC 474] That decision has by this clause been effectively legislatively invalidated. 42. All the sub-clauses of Article 366 (29-A) serve to bring transactions where one or more of the essential ingredients of a sale as defined in the Sale of Goods Act, 1930 are absent, within the ambit of purchase and sales for the purposes of levy of sales tax. To this extent only is the principle enunciated in Gannon Dunkerley Ltd. [State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd., (1958) 9 STC 353 : AIR 1958 SC 560 : 1959 SCR 379] (sic modified). The amendment especially allows specific composite contracts viz. works contracts [sub-clause (b)]; hire-purchase contracts [sub-clause (c)], catering contracts [sub-clause (e)] by legal fiction to be divisible contracts where the sale element could be isolated and be subjected to sales tax. xxxx xxxx xxxx 44. Of all the different kinds of composite transactions the drafters of the Forty-sixth Amendment chose three specific situations, a works contract, a hire-purchase 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 sa....
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....he transferee should have a legal right to use the goods- consequently all legal consequences of such use including any permissions or licences required therefor should be available to the transferee; (d) for the period during which the transferee has such legal right, it has to be the exclusion to the transferor-this is the necessary concomitant of the plain language of the statute viz. a "transfer of the right to use" and not merely a licence to use the goods; (e) having transferred the right to use the goods during the period for which it is to be transferred, the owner cannot again transfer the same rights to others." 33. The pre-enacting history and the legislative amendments were thereafter noticed in the concurring opinion and from which the following passages lucidly explain the legal position: "103. The Statement of Objects and Reasons for the Forty-sixth Amendment is, inter alia, as follows: "2. By a series of subsequent decisions, the Supreme Court has, on the basis of the decision in Gannon Dunkerley case [State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd., (1958) 9 STC 353 : AIR 1958 SC 560 : 1959 SCR 379] held various other ....
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....d that the said definition as to deemed sales will have to be read in every provision of the Constitution wherever the phrase "tax on sale or purchase of goods" occurs. This definition changed the law declared in the ruling in Gannon Dunkerley & Co. [State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd., (1958) 9 STC 353 : AIR 1958 SC 560 : 1959 SCR 379] only with regard to those transactions of deemed sales. In other respects, law declared by this Court is not neutralised. Each one of the sub-clauses of Article 366 (29-A) introduced by the Forty-sixth Amendment was a result of ruling of this Court which was sought to be neutralised or modified. Sub-clause (a) is the outcome of New India Sugar Mills Ltd. v. CST [(1963) 14 STC 316 : 1963 Supp (2) SCR 459] and Vishnu Agencies (P) Ltd. v. CTO [(1978) 1 SCC 520 : 1978 SCC (Tax) 31 : AIR 1978 SC 449]. Sub-clause (b) is the result of Gannon Dunkerley & Co. [State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd., (1958) 9 STC 353 : AIR 1958 SC 560 : 1959 SCR 379] Sub-clause (c) is the result of K.L. Johar and Co. v. CTO [(1965) 2 SCR 112 : AIR 1965 SC 1082] . Sub-clause (d) is consequent to A.V. Meiyappan v. CCT [(1967) 20 STC 115 (Mad....
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....r the custody of the machinery while it was on the site did not militate against the respondent's possession and control of the machinery. It may also be noticed that even the Appellate Deputy Commissioner, Kakinada in the order dated 15-11-1999 in regard to Assessment Years 1986-87 and 1987-88 held that under the terms and conditions of the agreement, there was no transfer of right to use the machinery in favour of the contractor. Although it cannot be said that the appellant was estopped from contending otherwise in regard to Assessment Year 1988-89, it is an additional factor and circumstance, which supports the stand of the respondent." 35. The sheet anchor of the challenge which the appellants raised was based on the decision of this Court in Hari Durga Travels. Hari Durga Travels was concerned with an agreement between the appellant and the Delhi Transport Corporation and in terms of which it had provided two deluxe busses on hire for being plied as per the requirements of the latter. The taxing authorities appear to have taken the position that the same would be exigible to tax in light of Section 2 (zc) (vi) of the DVAT Act. Negating that contention, our Court in Hari Du....
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.... toll tax, Adda tax, city entry fee, etc. 27. The contract also stipulated that the owner shall be obliged to keep the bus in neat, clean and presentable condition and for purposes of upkeep, make the necessary arrangements with service centres/dealers/repair shops, etc., on the routes where they were deployed as per schedule decided upon by the DTC. In terms of the contract, it is the owner who would arrange fuel (on reimbursable basis), lubricant, tubes, spare parts, etc. 28. The consideration for the registered owner of the vehicle under the contract is hire charges as per ASRTU contract (subject to deduction of tax liability at source), payable against fortnightly billing cycles besides reimbursement of the cost of fuel, for calculating which detailed provisions are made including maintenance of a proper log book. Penalties and their rates are specified for defaults on the part of the registered owner or the driver and extent of their respective obligation. 29. The owner is obliged by the contractual terms to take prior permission before the vehicles are sent for repairs with obligation to indicate in advance the period of non-availability of the vehi....
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....s not free to make use of the machinery for the works other than the project work of the respondent.. ." 33. This court is unconvinced by the Revenue's submissions that the facts of the present case are distinguishable from those in International Travel House [2009] 25 VST 653 (Delhi); (2009) 8 AD (Delhi) 13. That DTC has control over ticket collections or absolutely collects all the revenues or that bus maintenance and repair is subject to its prior approval, are ipso facto not decisive either by themselves or cumulatively in concluding that there was a transfer of the right to use the vehicles. Both the majority and concurring opinion in Bharat Sanchar Nigam Ltd. [2006] 3 VST 95 (S.C.); [2006] 145 STC 91 (S.C.); [2006] 282 ITR 273 (S.C.); (2006) 6 RC 276; (2006) 3 SCC 1 emphasize that the goods should be "ultimately delivered", for the transaction to constitute a "sale" within the extended meaning, defined by article 366 (29A) of the Constitution of India. Rashtriya Ispat Nigam Ltd. [2002] 126 STC 114 (S.C.); (2002) 3 SCC 214 spells out that where even access or physical control of machinery or such like goods are made over, such a transaction by itself would not be tran....
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....ng with the provision of off shore drilling equipment. We deem it apposite to take note of the following exposition of the legal position which stands reflected in paragraphs 42 to 47 and 49 of that judgment: "42. From the above, it is clear that the petitioner was obliged to provide on charter hire basis (i) drilling rig, and (ii) operating personnel and also take up the responsibility of carrying out the operations. Therefore, there was never any transfer of the right to use, either in favour of the contractor (Transocean Drilling Services (India) Private Limited) or in favour of the operator (ONGC). 43. It must be pointed out at this juncture that the expression "charter hire" has significance in maritime or admiralty law. A charter is defined as a specific contract by which the owner of a ship lets the whole or part of the ship to another person for the conveyance of goods or passengers on a particular voyage or until the expiration of a specified time. In simple terms, "charter party" is the mere hiring of a ship. 44. Under the maritime law, charter parties are standardised and grouped into 3 main classifications, namely, (i) voyage charters, (ii) ti....
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....ous stipulations appearing and forming part of the agreement cannot possibly be interpreted as incorporating or evidencing a transfer of a right to use goods. This Mr. Gulati submitted becomes manifest from the following aspects which emerge upon a consideration of those contractual stipulations: "(a) Neither the goods are identified nor there is any delivery of goods to a third party in the present case. Instead it is the Appellant who uses the goods to provide services to its customers. (b) There is no consensus ad idem on the identity of the goods. (c) There is no consensus ad idem for any particular helicopter that may be identified, and the Appellant is free to provide any helicopter, as per the agreed terms which meets the specification provided in the Agreement. (d) It is not a disputed fact that all the licenses and regulatory compliances are in the name of the Appellant and such right is never transferred to the customer. (e) There is no transfer of any right to use any goods at all as the Appellant has merely agreed to provide services for a limited number of hours by the use of the helicopters. The helicopter remains in the po....
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....y specified that the helicopters would be placed in position exclusively for the use of the Charterer during the lease term and thus there being a complete transfer of the equipment and right of exclusive use in the hands of the lessee. 40. It was further submitted by Mr. Aggarwal that Clause 8.1 is yet another contractual stipulation which would have a bearing on the question of a "transfer of right to use" since it clearly placed the appellant under the obligation to ensure that the helicopter and its crew is available and fully operational for the Charterer's use during an operational day. Clause 8.1 is extracted hereinbelow: "8. OPERATIONAL DAY 8.1 The helicopter and its crew shall be available and fully operational for use by the Lessee during an operational day. The Lessee's Representative may vary from time to time the commencing and ending times of the operational day of the helicopter by giving Lessor written notice of atleast 24 hours before the Operational Day commence." 41. Similar is the position, according to Mr. Aggarwal, which would emerge from a reading of Clauses 5.3.1 to 5.3.6 and which read as under: "5.3.1 The Lessor shall be al....
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....all on demand from Lessee endeavour to replace, subject to availability at its expense the helicopter with an identical helicopter acceptable to Lessee. 5.3.6 The Lessor shall notify to the Charterer immediately when a helicopter is grounded or when it is again fully operational and shall keep complete and accurate records of all groundings which the Lessee at its discretion may inspect at any reasonable time." 42. The submission in essence was that effective control over the helicopter stood transferred to the Charterer and thus both Section 2 (g) (vi) of the CST Act as well as Section 2 (zc) (vi) of the DVAT Act having rightly been found to be applicable in the facts of the present case. In order to buttress his submissions, Mr. Aggarwal also placed reliance upon the decisions in Great Eastern Shipping Co. Ltd. vs. State of Karnataka (2020) 3 SCC 354, Aggarwal Bros. vs. State of Haryana (1999) 9 SCC 182 and CST vs. Quick Heal Technologies Ltd. (2023) 5 SCC 469. However, we propose to deal with the applicability and significance of those judgments in the latter parts of this decision. 43. Before proceeding to evaluate the correctness of the rival submissions which w....
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.... held continued to be in the name of the appellant and were never transferred or made over to the A & N Administration. The latter was not entitled to substitute crew or maintenance staff and who were to be those provided by the appellant. All costs towards maintenance and upkeep of the aircraft, as well as the salaries of the pilots and supportive crew, were to be met by the appellant. 46. Tested cumulatively it becomes evident that there was no transfer of dominion or control of the helicopter to the A & N Administration. This was essentially an agreement in terms of which the A & N Administration acquired an exclusive medium of transportation as opposed to an absolute right over an aircraft, helicopter or means of conveyance which could be said to be under its dedicated and undivided control. 47. The Tribunal, we find, had formulated the following test for the purpose of defining "transfer of right to use": "The essence of transfer is passage of control over the economic benefits of property which results in terminating rights and other relations in one entity and creating them in another." 48. The Tribunal has thus understood the concept of "transfer of right ....
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....erred the right to use the goods during the period for which it is to be transferred, the owner cannot again transfer the same rights to others." xxxx xxxx xxxx 22. The interplay between Article 366 (29-A) and the provisions of the Act was succinctly explained by the Supreme Court in a recent decision rendered in Commissioner of Service Tax vs. Adani Gas Ltd. Adani Gas was a decision which was directly concerned with Section 65 (105) (zzzzj). While ruling upon the scope and ambit of that provision as contained in the Act, the Supreme Court rendered the following pertinent observations: "16. The test laid down in Bharat Sanchar Nigam Ltd.* has been applied by courts to determine whether a transaction involves the "transfer of the right to use any goods" under article 366 (29A) (d). In doing so, the courts have analysed the terms of the agreement underlying the transaction to ascertain whether effective control and possession has been transferred by the supplier to the recipient of the goods. Recently, this court in Great Eastern Shipping Co. Ltd. v. State of Karnataka considered whether the transfer of a vessel under a charter party agreement was a "deemed....
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....consumption of services, which are economically similar to consumption of goods, in as much as they both satisfy human needs.** This court, in Association of Leasing and Financial Services Companies v. Union of India had noted : "38. Today with technological advancement there is a very thin line which divides a 'sale' from 'service'. That, applying the principle of equivalence, there is no difference between production or manufacture of saleable goods and production of marketable/saleable services in the form of an activity undertaken by the service provider for consideration, which correspondingly stands consumed by the service receiver. It is this principle of equivalence which is inbuilt into the concept of service tax under the Finance Act, 1994. That service tax is, therefore, a tax on an activity. That, service tax is a value added tax. The value addition is on account of the activity which provides value addition... Thus, service tax is imposed every time service is rendered to the customer/client,. .. Thus, the taxable event is each exercise/activity undertaken by the service provider and each time service tax gets attracted." (emphasis supplied) 18. The i....
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....urts and tribunals. In the Bombay High Court decision in Indian National Shipowners' Association v. Union of India ("Shipowners"), the petitioners were engaged in providing services to major exploration and production operators by supplying their various vessels including offshore drilling rigs, offshore support vessels, harbour tugs, and construction barges. The question before the Bombay High Court was whether, prior to the introduction of section 65 (105) (zzzzj) in 2008, the petitioner could be taxed on its services in relation to mining of mineral, oil, or gas under section 65 (105) (zzzy). In the present matter, we are not concerned with the merits of Shipowners'*, which was affirmed on appeal by this court in Union of India v. Indian National Shipowners' Association**. This court explicitly restricted itself to the interpretation of section 65 (105) (zzz) while leaving the other observations on interpretation of the law, "open to be considered at length at an appropriate stage". We note however, the analysis of section 65 (105) (zzzzj) of the Bombay High Court, where the High Court observed# : "38. Entry (zzzzj) is entirely a new entry. Whereas entry (zzzy) covers s....
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....ent-is for the use of the purchaser. In determining as to whether the provisions of section 65 (105) (zzzzj) are attracted, it is necessary to distinguish between the rights and obligations of the respondent (as the seller of gas) and of their purchasers, from the issue of whether the measurement equipment (SKID equipment) is supplied for the use of the purchaser of gas, without transferring the right of possession and effective control. xxxx xxxx xxxx 26. Under section 65 (105) (zzzzj), the taxable service is provided or to be provided in relation to the supply of tangible goods for the use of another, without transferring the right of possession and effective control. The expression "use" has been defined in Black's Law Dictionary : "Use, n. Act of employing everything, or state of being employed ; application, as the use of a pen, or his machines are in use. Also the fact of being used or employed habitually ; usage, as, the wear and tear resulting from ordinary use. Berry-Kofron Dental Laboratory Co. v. Smith, 345 Mo. 922, 137 S.W. 2d 452, 454, 455, 456. The purpose served ; a purpose, object or end for useful or advantageous nature. Brown v. Kennedy,....
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....e and repair of the measurement equipment is exclusively entrusted to the respondent as the seller. These provisions have been incorporated in the GSA to ensure that a buyer does not calibrate or tinker with the equipment. It is an incident of ownership and control being vested with the respondent. The purpose of the SKID equipment and its utility, lie in its ability to regulate the supply and achieve an accurate verification of that which is supplied ; in the present case the supply of goods by the respondent to its buyers. This enures to the benefit of the seller and the buyer. The seller is concerned with the precise quantification of the gas which is supplied to the buyer. The buyer has an interest in ensuring the safety of its facilities and that the billing is based on the correct quantity of gas supplied and delivered under the GSA. To postulate, as did the Tribunal, that the measurement equipment is only for the benefit of the seller in measuring the quantity of the gas supplied would not be correct. The GSA is an agreement reflecting mutual rights and obligations between the seller and the purchaser. Both have a vital interest in ensuring the correct recording of the quant....
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....consumer. The SKID equipment fulfils the description in section 65 (105) (zzzzj) of a taxable service : service in relation "tangible goods" where the recipient of the service has use (without possession or effective control) of the goods." 23. It is thus apparent that it is only 'deemed sales' as contemplated under Article 366 (29-A) of the Constitution, which stands exorcised from Section 65 (105) (zzzzj). Tested on the factors which had been identified by the Supreme Court in BSNL, and relevant for the purposes of evaluating whether a 'right to use' had been transferred, it becomes apparent that no dominion or control over the equipment stood transferred by the writ petitioner. The equipment remained under the regulation and control of the petitioner and was also to be worked upon by personnel deployed by it. It is these factors which appear to have weighed upon the respondent while holding that the transactions would be exigible to tax under Section 65 (105) (zzzzj)." 51. While doing so, we had an occasion to notice a decision of recent vintage rendered by the Supreme Court in Commissioner of Service Tax vs. Adani Gas Ltd. 2020 SCC OnLine SC 682. As the Supreme Cour....
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....to the fact that in Great Eastern, the Supreme Court had on facts held: "32. The charter agreement also provides round the clock services throughout the contract period in Clause 3 at the disposal of the port. The contractor has to pay the expenses for the master and crew. As per Clause 5, the charterer has to provide whilst the vessel is on hire, fuel, lubricants, water, electricity, port charges, and anti-pollutants. As per Clause 7(a), the vessel shall be for all purposes at the disposal of the charterer and under the control of the contractor, and as provided in Clause 7(b) of the charter agreement, the charterer shall have the use of all outfits, equipment, and appliances. No doubt about it that insurance is the liability of the contractor. The indemnification also is the liability of the contractor under the agreement. The whole reach and burthen of a vessel, including lawful deck capacity, is at the disposal of the charterer, reserving proper and sufficient space for the vessel's masters, officers, etc. A performance guarantee has also to be submitted. 33. When we peruse the various terms and conditions of the charter party agreement (Annexure I), Clause 1 ....
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....-C, and definition of "sale" in Section 2 of the KST Act, there is no room for doubt that there is a transfer of right to use the vessel. xxxx xxxx xxxx 37. The charter party agreement qualifies the test laid down by this Court. Applying the substance of the contract and the nominal nature test, the vessel was available when the agreement for the right to use the goods has taken place. The vessel was available at the time of transfer, deliverable, and delivered and was at the exclusive disposal for six months round the clock with the charterer port trust. The use of licence and permission was at the disposal of the charterer and to the exclusion of the contractor/transferor. It was not open to the contractor to permit the use of the vessel by any other person for any other purpose." 57. As was found by the Supreme Court in Great Eastern, effective control over the vessel had been duly transferred in terms of the charter party agreement and it was the charterer which had exclusive control and use of the vessel. In Great Eastern, it was the charterer which was operating the vessel. That is a facet of that charter agreement which is significantly distinct and dist....
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....tation and the application thereof to the facts of the present case. xxxx xxxx xxxx 6. Where there is a transfer of a right to use goods for consideration, the requirement of the above-mentioned provision of the said Act is satisfied and there is deemed to be a sale. In the instant case, the assessees owned shuttering. They transferred the shuttering for consideration to builders and building contractors for use in the construction of buildings. There can, therefore, be no doubt that the requirements of a deemed sale within the meaning of the above-mentioned provision of the said Act are satisfied." 59. As is manifest from the above, the Supreme Court in Aggarwal Bros. had on facts found that there was a complete transfer of shuttering for consideration and the same being exclusively placed in the hands of the hirer to be used and utilized as it thought fit. 60. Quick Heal was a decision where the assessee was engaged in the development of an antivirus software and which was being supplied along with a licence code to be accessed either online or replicated CDs/DVDs to customers in India. While dealing with the question of whether the said transaction would ....
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.... parties would determine the nature of the contract. Such agreement has to be read as a whole to determine the nature of the transaction. If the consensus ad idem as to the identity of the good is shown the transaction is exigible to tax. 53.9. The locus of the deemed sale, by transfer of the right to use goods, is the place where the relevant right to use the goods is transferred. The place where the goods are situated or where the goods are delivered or used is not relevant." 61. As was succinctly explained, Article 366 (29A) (d) is not concerned with delivery of goods for use but envisages the levy of a tax on the transfer of a right to use goods. It proceeded further to explain that clause (d) of Article 366(29A) cannot be placed in the same category as that of bailment where goods are left in the possession of the bailee solely for the purposes of use on a hire basis. Proceeding ahead, the Supreme Court also underlined the importance of a transfer and vesting of effective and general control. This becomes evident from a reading of paragraph 54 of the report and which is reproduced hereinbelow: "54. From the judicial decisions, the settled essential require....