Bombay High Court
Aurobindo Highway Service vs The State Of Maharashtra on 1 August, 2023
Bench: K.R. Shriram, Firdosh Phiroze Pooniwalla
2023:BHC-OS:7690-DB
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
MAHARASHTRA VALUE ADDED TAX APPEAL NO.8 OF 2015
Aurobindo Highway Services )
At post Nandani Takali, )
Taluka South Solapur, Solapur ) ....Appellant
V/s.
The State of Maharashtra )
(through Commissioner of Sales Tax), 8th Floor, )
Vikrikar Bhavan, Mazgaon, Mumbai - 400 010 ) ....Respondent
WITH
MAHARASHTRA VALUE ADDED TAX APPEAL NO.9 OF 2015
Vaishnavi Highway Services )
At post 41/43, Near Basav Nagar, )
Tera Mile, Taluka South Solapur, Solapur ) ....Appellant
V/s.
The State of Maharashtra )
(through Commissioner of Sales Tax), 8th Floor, )
Vikrikar Bhavan, Mazgaon, Mumbai - 400 010 ) ....Respondent
WITH
MAHARASHTRA VALUE ADDED TAX APPEAL NO.11 OF 2015
S.N. Bavi Highway Services )
Hyderabad Road, At post Doddi, )
Taluka South Solapur, Solapur ) ....Appellant
V/s.
The State of Maharashtra )
(through Commissioner of Sales Tax), 8th Floor, )
Vikrikar Bhavan, Mazgaon, Mumbai - 400 010 ) ....Respondent
WITH
MAHARASHTRA VALUE ADDED TAX APPEAL NO.12 OF 2015
Aurobindo Highway Services )
At post Nandani Takali, )
Taluka South Solapur, Solapur ) ....Appellant
V/s.
The State of Maharashtra )
(through Commissioner of Sales Tax), 8th Floor, )
Vikrikar Bhavan, Mazgaon, Mumbai - 400 010 ) ....Respondent
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WITH
MAHARASHTRA VALUE ADDED TAX APPEAL NO.13 OF 2015
Bhagwat and Brothers )
At post 3-A, Murarji Peth, Solapur ) ....Appellant
V/s.
The State of Maharashtra )
(through Commissioner of Sales Tax), 8th Floor, )
Vikrikar Bhavan, Mazgaon, Mumbai - 400 010 ) ....Respondent
WITH
MAHARASHTRA VALUE ADDED TAX APPEAL NO.15 OF 2016
Aurobindo Highway Services )
At post Nandani Takali, )
Taluka South Solapur, Solapur ) ....Appellant
V/s.
The State of Maharashtra )
(through Commissioner of Sales Tax), 8th Floor, )
Vikrikar Bhavan, Mazgaon, Mumbai - 400 010 ) ....Respondent
WITH
MAHARASHTRA VALUE ADDED TAX APPEAL NO.29 OF 2015
Aurobindo Highway Services )
At post Nandani Takali, )
Taluka South Solapur, Solapur ) ....Appellant
V/s.
The State of Maharashtra )
(through Commissioner of Sales Tax), 8th Floor, )
Vikrikar Bhavan, Mazgaon, Mumbai - 400 010 ) ....Respondent
WITH
MAHARASHTRA VALUE ADDED TAX APPEAL NO.30 OF 2015
Vaishnavi Highway Services )
At post 41/43, Near Basav Nagar, )
Tera Mile, Taluka South Solapur, Solapur ) ....Appellant
V/s.
The State of Maharashtra )
(through Commissioner of Sales Tax), 8th Floor, )
Vikrikar Bhavan, Mazgaon, Mumbai - 400 010 ) ....Respondent
WITH
MAHARASHTRA VALUE ADDED TAX APPEAL NO.31 OF 2015
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Vaishnavi Highway Services )
At post 41/43, Near Basav Nagar, )
Tera Mile, Taluka South Solapur, Solapur ) ....Appellant
V/s.
The State of Maharashtra )
(through Commissioner of Sales Tax), 8th Floor, )
Vikrikar Bhavan, Mazgaon, Mumbai - 400 010 ) ....Respondent
----
Mr. C.B. Thakar for appellant in all appeals.
Mr. V.A. Sonpal, Special Counsel a/w. Mr. Himanshu Takke, AGP and
Ms. Uma Palsuledesai, AGP for respondent - State in all appeals.
----
CORAM : K. R. SHRIRAM AND
FIRDOSH P. POONIWALLA, JJ.
RESERVED ON : 14th JULY 2023
PRONOUNCED ON : 1st AUGUST 2023
JUDGMENT : (PER K.R. SHRIRAM, J.) :
1 These appeals filed under Section 27 of the Maharashtra Value
Added Tax Act, 2002 (hereinafter referred to as "MVAT Act") impugn
orders passed by the Maharashtra Sales Tax Tribunal (hereinafter referred
to as "the Tribunal") by which appellants were held liable to pay MVAT.
Each appellant received various demands.
For convenience, we are taking the facts in MVAT Appeal No.8
of 2015.
2 Appellant in MVAT Appeal No.8 of 2015, Aurobindo Highway
Services (hereinafter referred to as "AHS"), is a sole proprietory business of
one Jirankalgi. AHS runs a petrol pump and also owns tank trucks
(hereinafter referred to as "Tankers"). The tankers were registered with the
Regional Transport Authority (RTO) in the name of appellant. AHS also
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holds Goods Carriage Permit under the Motor Vehicles Act. AHS renders
services to oil companies like Hindustan Petroleum Corporation Limited
(hereinafter referred to as "HPCL") by giving on hire these tankers. AHS has
filed four appeals being MVXA/8/2015, MVXA/12/2015, MVXA/29/2015
and MVXA/15/2015 pertaining to Financial Year 2006-2007, 2008-2009,
2005-2006 and 2007-2008, respectively. MVXA/15/2015 filed by AHS is
not listed but by consent is also taken up for final hearing. Facts are
identical in as much as issue is the same and agreement was with HPCL on
same terms and conditions. Also, common questions of law has been
framed in MVXA/8/2015, MVXA/9/2015, MVXA/11/2015, MVXA/12/2015
and MVXA/13/2015.
3 HPCL had issued a notice inviting tender for transportation of
bulk petroleum products (white oil) by road Ex Pakni Depot - Tender
No.WZ/IND/MH/POL/BULK/2005-08. AHS had submitted a bid and by a
work order dated 5th May 2006, AHS was awarded the contract for
transportation of bulk petroleum products by road Ex Pakni Depot from the
point at Pakni. The contract was from 1 st September 2005 for a period of
two years with a provision to extend by one more year as per the terms and
conditions of the agreement at the sole discretion of HPCL. The rates
applicable were (a) local delivery within 39 kms Return to Depot
(hereinafter referred to as "RTD") Rs.90.77 per KL per KM, (b) outstation
delivery beyond 39 kms RTD within State Rs.116.98 paise per KL per KM,
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(c) delivery to adjoining States Rs.116.98 paise per KL per KM and
(d) delivery to other than adjoining States Rs.118.98 paise per KL per KM.
Escalation on account of increase in retail price of high speed diesel
(hereinafter referred to as "HSD") was also provided for. AHS was to
provide and allot three tankers and also furnish security deposit of
Rs.1 lakh per tanker subject to a maximum of Rs.5 lakhs. This was
furnished. AHS was told to sign a contract on accepting the work order.
AHS accepted the work order and signed an agreement dated 26 th June
2006 with HPCL.
4 In all the appeals heard today it was this agreement dated
26th June 2006 and work order dated 5 th May 2006, which were under
consideration, though appellants in some appeals are different. Respondent
has not raised any grievance and, therefore, we accept the statement of
Mr. Thakar that all agreements and work orders for hire of tankers are
identically worded and were with HPCL. It so appears even from the
substantial questions of law framed as later reproduced.
5 AHS was assessed for the year 2006-2007 under the MVAT Act
by the Sales Tax Officer, Refund Audit, Solapur (hereinafter referred to
"STO"). The STO raised an issue that the receipts (revenue earned) towards
oil transportation by use of tankers owned by appellant are towards
"Transfer of Right to use goods" and hence, they are receipts from "Sale"
under the MVAT Act. AHS replied denying that there was any transfer of
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right to use goods. AHS stated that there was no delivery of tankers nor
possession has been parted with and the effective control was still with
AHS. It was clarified that the receipts were towards transport services and
not towards sale by way of transfer of right to use goods. In addition, it was
also submitted that AHS was not a "dealer" in view of Exception III in the
definition of dealer in Section 2(8) of the MVAT Act because Exception III
provides that a transporter holding permit for transport vehicles (including
cranes) granted under the Motor Vehicles Act, 1988 which are used or
adopted to be used for hire or reward shall not be deemed to be a dealer in
respect of sale or purchase of such transport vehicles or parts, components
or accessories thereof. AHS's submissions were rejected and the STO levied
tax on the receipts.
6 Being aggrieved, AHS preferred an appeal before the Deputy
Commissioner of Sales Tax, Solapur. The appeal was dismissed against
which AHS preferred an appeal before the Maharashtra Sales Tax Tribunal
at Mumbai (Tribunal). Four appeals were filed by AHS for Financial Year
2005-2006, 2006-2007, 2007-2008 and 2008-2009. The appeals of AHS
were dismissed by the Tribunal vide Order dated 9 th February 2015. The
Tribunal confirmed the action of the STO and the First Appellate Authority.
It is against this order of the Tribunal passed on 9 th February 2015 the
present appeal(s) have been filed. All other appeals were also dismissed
based on this impugned order dated 9th February 2015.
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7 On 25th August 2015 the following appeals were admitted and
substantial questions of law were framed :
MAHARASHTRA VALUE ADDED TAX APPEAL NO.8 OF 2015
IN
VAT SECOND APPEAL NO.165 OF 2013
M/s Aurobindo Highway Services ... Appellant
v/s
The State of Maharashtra ... Respondent
WITH
MAHARASHTRA VALUE ADDED TAX APPEAL NO.9 OF 2015
IN
VAT SECOND APPEAL NO.152 OF 2013
Vaishnavi Highway Services ... Appellant
v/s
The State of Maharashtra ... Respondent
WITH
MAHARASHTRA VALUE ADDED TAX APPEAL NO.11 OF 2015
IN
VAT SECOND APPEAL NO.228 OF 2013
S.N. Bavi Highway Services ... Appellant
v/s
The State of Maharashtra ... Respondent
WITH
MAHARASHTRA VALUE ADDED TAX APPEAL NO.12 OF 2015
IN
VAT SECOND APPEAL NO.167 OF 2013
Aurobindo Highway Services ... Appellant
v/s
The State of Maharashtra ... Respondent
WITH
MAHARASHTRA VALUE ADDED TAX APPEAL NO.13 OF 2015
IN
VAT SECOND APPEAL NO.652 OF 2013
Bhagwat and Brothers ... Appellant
v/s
The State of Maharashtra ... Respondent
SUBSTANTIAL QUESTIONS OF LAW
1) On the facts and circumstances of the case whether Hon'ble
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Tribunal is justified in holding that the transportation job with
the use of tank trucks as per agreement with HPCL dated
26.6.2006, amounts to transfer of right to use goods and hence
covered by definition of 'sale' under MVAT Act 2002?
2) On the facts and circumstances of the case, when the Hon'ble
Tribunal has held the transaction of use of tank trucks in the
transportation job as sale by transfer of right to use goods
whether Tribunal is justified in holding that Exception III to
definition of 'dealer' in section 2(8) of the MVAT Act is not
applicable to the appellant in respect of such transaction?
8 Section 3 of the MVAT Act provides for incidence of tax and it
reads as under :
3. Incidence of Tax
(1) Every dealer 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 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 the 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 either of all sales or, as the case may be, purchases]
made, during the year commencing on the appointed day or any
year subsequent thereto, first exceeds the relevant limit,
specified in sub-section (4), shall, until such liability ceases
under sub-section (3), be liable to pay tax under this Act with
effect from the 1st day of April of the said respective year :
Provided that, a dealer shall not be liable to pay tax in respect
of [such sales and purchases] as take place during the period
commencing on the 1st day of April of the said respective year
upto the time when his [turnover of sales or turnover of
purchases], as computed from the 1st day of April of the said
respective year, does not exceed the relevant limit applicable to
him under sub-section (4).
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(3) Every dealer who has become liable to pay tax under this
Act, shall continue to be so liable until his registration is duly
cancelled; and upon such cancellation his liability to pay tax,
other than tax already levied or leviable, shall remain ceased
until his [turnover of sales or turnover of purchases] again first
exceeds the relevant limit specified in sub-section (4) or, as the
case may be, until he becomes liable to pay tax under [sub-
section] (8) or (9).
(4) For the purposes of this section, the limits of [turnover]
shall be as follows :
(a) Limit of [turnover] in the case of a dealer, who is an
Rs.1,00,000. - importer, and the value of taxable
goods sold or purchased by him
during the year is not less than
Rs.10,000.
(b) [Limit of turnover in any other case, where the value
Rs.[10,00,000] - of taxable goods sold or purchased
by him during the year is not less
than Rs.10,000.
(5) For the purpose of calculating the limit of [turnover of sales]
for liability to tax -
[(a) except as otherwise expressly provided, the turnover of all
sales shall be taken, whether such sales are of taxable goods or
not];
(b) the [turnover of sales] shall include all sales made by the
dealer on his own account, and also on behalf of his principals
whether disclosed or not;
(c) in the case of an auctioneer, in addition to the [turnover of
sales], if any, referred to in clauses (a) and (b), the [turnover of
sales] shall also include the price of the goods auctioned by him
for his principal, whether the offer of the intending purchaser is
accepted by him or by the principal or a nominee of the
principal, if the price of such goods is received by him on behalf
of his principal;
(d) in the case of an agent of a non-resident dealer, in addition
to the [turnover of 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.
[(5A) For the purpose of calculating the limit of turnover of
purchases for liability to tax, the turnover of purchases of the
goods that are liable to purchase tax as specified in sections 6A
and 6B shall be considered. The provisions of sub-section (5) in
respect of sales shall apply mutatis mutandis.]
(6) Notwithstanding anything contained in any contract or any
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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) [xxxxxxxxxxx]
(8) Where a dealer liable to pay tax under this Act is succeeded
in the busines 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 but has been voluntarily registered
under the provisions of this Act shall be liable to pay tax from
the date of effect of the certificate of registration duly granted
to him and accordingly nothing contained in the proviso to
sub-section (2) shall apply to him in any year.
Section 6 of the MVAT Act provides for levy of sales tax on the
goods specified in the schedules and it reads as under :
6. Levy of sales tax on the goods specified in the Schedules
(1) There shall be levied a sales tax on the turnover of sales of
goods specified in column (2) in Schedule B, C, D or, as the case
may be, E, at the rates set out against each of them in column
(3) of the respective Schedule.
(2) Notwithstanding anything contained in sub-section (1),
there shall be levied a sales tax, in addition to the sales tax
leviable under sub-section (1), on the sales of any motor spirits
specified in Schedule D at such rate per litre, if any, as may be
set out from time to time against each of the motor spirits, in
column (3) of the said Schedule.
We were informed by the counsel that the subject matter of this
appeal would be covered by Schedule E, the residual provision which
provides for the rate of tax and the date of it coming into effect for goods
not covered elsewhere for any of the other Schedules.
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Sub-section (8) of Section 2 defines "dealer", sub-section (12)
of Section 2 defines "goods", sub-section (24) of Section 2 defines "sale"
and the same read as under :
Section 2(8) "dealer" means any person who, for the purposes
of or consequential to his engagement in or, in connection with
or incidental to or in the course of, his business buys or sells,
goods in the State whether for commission, remuneration or
otherwise and includes -
(a) a factor, broker, commission agent, del-credere agent or any
other mercantile agent, by whatever name called, who for the
purposes of or consequential to his engagement in or in
connection with or incidental to or in the course of the business,
buys or sells any goods on behalf of any principal or principals
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 or a 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
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 [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;
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(iv) Port Trusts;
(iv-a) Public Charitable Trust;
(v) Railway Administration as defined under the Indian
Railways Act, 1989 (24 of 1989) and Konkan Railway
Corporation Limited,
(vi) Incorporated or unincorporated societies, clubs or other
associations of persons;
(vii) Insurance and Financial Corporations, institutions or
companies Banks included in the Second Schedule to the
Reserve Bank of India Act, 1934 (II of 1934);
(viii) Maharashtra State Road Transport Corporation constituted
under the Road Transport Corporation Act, 1950 (LXIV of
1950);
(ix) Shipping and construction companies, Air Transport
Companies, Airlines and advertising agencies;
(x) any other corporation, company, body or authority owned or
constituted by, or subject to administrative control, of the
Central Government, any State Government or any local
authority :
Exception I. - 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.
Exception II.- An educational institution carrying on the activity
of manufacturing, buying or selling goods, in the performance
of its functions for achieving its objects, shall not be deemed to
be a dealer within the meaning of this clause.
Exception III.- A transporter holding permit for transport
vehicles (including cranes) granted under the Motor Vehicles
Act, 1988 (59 of 1988), which are used or adopted to be used
for hire or reward 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.
xxxxxxxxxxxxxxxxx
Section 2(12) "goods means every kind of movable property not
being newspapers, actionable claims, money, stocks, shares,
securities or lottery tickets and includes livestocks, growing
crop, grass and trees and plants including the produce thereof
including property in such goods attached to or forming part of
the land which are agreed to be severed before sale or under
the contract of sale.
xxxxxxxxxxxxxxxxx
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Section 2(24) "sale" means a sale of goods made within the
State for cash or deferred payment or other valuable
consideration, 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 [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 installments;
(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 human consumption or any drink (whether or not
intoxicating), where such supply or service is made or given for
cash, deferred payment or other valuable consideration;
(vii) xxxxxxxxxxxx
9 It is respondent's case that there has been a sale within the
meaning of Section 2(24) of the MVAT Act because there has been a sale of
goods within the State and the Explanation (iv) below sub-section 24 of
Section 2 provides the transfer of the right to use any goods for any purpose
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(whether or not for a specified period) for cash, deferred payment or other
valuable consideration. It is respondent's case that there has been a deemed
sale by transfer of right to use the tankers by appellant to HPCL and,
therefore, there was a sale of goods and the sales tax on the turnover of sale
as per the Schedule E is attracted.
10 It is settled law that the answers to the substantial questions
framed would depend essentially on the facts and circumstances of each
case.
11 The deemed sale of transfer of right to use any goods for any
purpose came up for consideration before the Apex Court in the case of
Bharat Sanchar Nigam Ltd. and Anr. V/s. Union of India and Ors. 1In the
said judgment, the Apex Court has, in paragraph 76, considered the
judgment of State of Andhra Pradesh V/s. Rashtriya Ispat Nigam Limited 2
and it reads as under :
76. In State of Andhra Pradesh vs. Rashtriya Ispat Nigam Ltd.
(2002) 3 SCC 314, it was claimed by the sales tax authorities
that the transaction by which the owner of certain machinery
had made them available to the contractors was a sale. The
Court rejected the submission saying that :
.... the transaction did not involve transfer of right to use
the machinery in favour of contractors .... The effective
control of the machinery even while the machinery was in
use of the contractor was that of the respondent-company,
the contractor was not free to make use of the machinery
for the works other than the project work of the
respondent..
1 (2006) 145 STC 91 (SC)
2 (2002) 3 SCC 314
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12 In Bharat Sanchar Nigam Ltd. (Supra), the Apex Court, after
considering various judgments, laid down as to what would constitute a
transaction to come within the ambit of the transfer of the right to use the
goods. Paragraph 98 thereof reads as under :
98. To constitute a transaction for the transfer of the right to use
the goods, the transaction must have the following attributes :
(a) There must be goods available for delivery;
(b) There must be a consensus ad idem as to the identity of the
goods;
(c) The 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 to 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.
13 Therefore, the Apex Court held that to constitute a transaction
for the transfer of the right to use the goods, it is necessary that there must
be a consensus ad idem as to the identity of the goods, the transferee
should have a legal right to use the goods and consequently all legal
consequences of such use including any permissions or licences required
therefor should be available to the transferee and for the period during
which the transferee has such legal right, it has to be to the exclusion of the
transferor. The Apex Court held that this is the necessary concomitant of the
plain language of the statute, viz., a "transfer of the right to use" and not
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merely a licence to use the goods. Another condition was that 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.
Thus, it could be seen that unless all these ingredients are available, the
transaction will not come within the meaning of "transfer of the rights to
use any goods".
14 The Gauhati High Court in the case of Indian Oil Corporation
Ltd. V/s. Commissioner of Taxes, Assam & Ors.3 considered a similar
provision under the Assam General Sales Tax Act. In the said case,
petitioner IOCL, which was engaged in the business of sale and supply of
petroleum products inside as well as outside the State of Assam, had hired
trucks for delivery of petroleum to its dealers and in the course of its
business entered into agreement with contractors as regards hiring of
trucks/tankers. Notice was issued to IOCL directing to deduct tax under
Section 27(a) of the Assam General Sales Tax Act on payment of hire
charges to the contractors who were owners of the vehicles hired by IOCL.
IOCL was also issued subsequent communication and also show cause
notice. IOCL approached the Assam High Court challenging the jurisdiction
to issue notice. The State resisted the petition on the ground that act of
hiring vehicles by IOCL amounted to transfer of the right to use the
vehicles and, therefore, exigible to tax under the Act. It was contended that
the transfer of right to use the vehicle constitute "sale" within the definition
3 (2009) 22 VST 70 (Gauhati)
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of the ambit of "sale" as embodied in Section 2(33) of the Assam Act and,
therefore, assessable to sales tax under the Act. After considering various
judgments of the Apex Court, the Division Bench observed in paragraph 28
that :
It is, therefore, clear that in order to constitute a transfer of
right to use goods, there must be parting with the possession of
the goods for the limited period of its use in favour of the lessee
by the lessor. The effective control of the goods must not remain
with the owner, but must stand transferred to the lessee for the
use by the latter at his will and it is this transfer of the effective
control of the goods, which attracts sales tax.
After taking into consideration the various clauses of contract
entered between the assessee and the owners of the vehicles, the Division
Bench held that there was no transfer of right to use to make it taxable
under the Act. The Court, therefore, found that show cause notice issued
was without jurisdiction and as such, allowed the petition, setting aside the
show cause notice.
15 This subject/issue also came up for consideration in the case of
Commissioner, VAT, Trade and Taxes Department V/s. International Travel
House Ltd.4 where Delhi High Court has considered as to whether the
contract between respondent/assessee and M/s. NDPL for hiring of Maruti
Omni cabs amounted to transfer of right to use any goods so as to come
within the definition of "Sale" as provided under the Delhi Value Added Tax
Act, 2004. After considering the terms and conditions of contract and
considering the judgment of the Apex Court in the case of Bharat Sanchar
4. (2009) 25 VST 653 (Delhi)
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Nigam Ltd. (Supra) the Hon'ble Court has observed thus :
12. That takes us to the question that whether the contract in
question is at all a contract of sale of goods as envisaged in
Article 366(29-A)(d) inasmuch as there is transfer of the right
to use for whatever period by S.T. Appeal No. 10/2009 Page 14
the respondent to NDPL. In order to determine whether there is
a transfer of the right to use goods so as to make contracts one
of sale under Article 366(29-A)(d) on the point of law both the
parties are unanimous that the test is of effective control and
possession with respect to the goods. In this behalf, both the
parties have relied upon the tests of sale as specified by Dr. A.R.
Lakshmanan, J. Appearing in paragraph 97 of the BSNL's case
which reads as under :
97. To constitute a transaction for the transfer of the right
to use the goods, the transaction must have the following
attributes :
(a) there must be goods available for delivery;
(b) there must be a consensus ad idem as to the identity
of the goods;
(c) the transferee should have a legal right to use the
goods - consequently all legal consequences of such use
including any permissions or licences required therefore
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."
Sub-paras (b) and (c) of para 97 are important with
reference to the facts of the case to determine as to
whether or not there is a sale by virtue of transfer of right
to use goods as envisaged in Article 366(29-A)(d). The
S.T. Appeal No. 10/2009 Page 15 admitted position which
emerges is that the transferee, namely NDPL, has not been
made available the legal consequence of the legal right to
use the goods viz. the permissions and licences with
respect to the goods. In the present case, the permissions
and licences with respect to the Cabs are not available to
the transferee and remained in control and possession of
the respondent. It is the Driver of the vehicle who keeps in
his custody and control the permissions and licences with
respect to the Maruti Omni Cabs or the said permissions
and licences remained in possession of the respondent.
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These are never transferred to M/s. NDPL. It, therefore,
cannot be said that there is a sale of goods by transfer of
right to use goods inasmuch a necessary ingredient of the
sale being the transfer of right to use the goods is absent,
namely, ingredient as stated in para 97(c) of the BSNL's
case. The judgments which were cited during the course
of arguments, namely, State of A.P. v. Rashtriya Ispat
Nigam Ltd., (2002) 3 SCC 314 and Aggarwal Bros. V.
State of Haryana, (1999) 9 SCC 182 have been duly
explained by the Supreme Court in BSNL's case. The
crucial factor in this regard differentiating the two cases
was the intention to transfer the right to use. Whereas in
the case of Rashtriya Ispat Nigam Ltd., there was no
intention to transfer the right to use, in the case of
Aggarwal Bros. it was found that there was an intention to
transfer the right to use. In the present case, the judgment
of Aggarwal Bros. does S.T. Appeal No. 10/2009 Page 16
not help the appellant inasmuch as there is no intention to
transfer the right to use the goods because the licences
and permissions with respect to the goods, namely, the
Maruti Omni Cabs remained always in the effective
control and possession of the respondent and not NDPL.
It can thus be seen that in the said judgment, the Court took a
view that since the permissions and licences with respect to the cabs are not
available to the transferee and the cabs remained in control and possession
of respondent/assessee, there was no element of transfer of right to use the
goods.
The Bombay High Court also considered this issue in The
Commissioner of Sales Tax V/s. M/s. General Cranes5.
16 Mr. Thakar submitted that the effective control and possession
of the tankers was with AHS. The tankers were registered with RTO in the
name of AHS, the permits and licenses including license to carry hazardous
goods were in the name of AHS, the cost of running of tankers like salary of
crew, taxes, fuel, repair etc. were responsibility of AHS, risk of carriage was
5. Judgment dated 21.4.2015 in STR No.5 of 2009 in RA No.72 of 2005 (unreported)
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on AHS, parking was at AHS's risk, no minimum billing was guaranteed,
AHS had to give security deposit of Rs.1 lakh per tanker, HPCL could not
sub-let and most importantly the intention to transfer the right to use was
absent. Mr. Thakar said AHS only provided the services of the tanker with
driver and cleaner for hire to HPCL.
17 Mr. Sonpal submitted that :
(a) the goods provided to lessee must be in control of use by
the lessee;
(b) delivery is not a condition precedent to treat a transaction
as transfer of right to use goods;
(c) it is immaterial if the employees of the lessor are paid
salaries by the lessor or the lessor pays for fuel for operating equipment or
the lessor pays for getting the maintenance work done and it is immaterial
if the lessor assumes physical possession of goods during the period of
contract;
(d) there can be no issue on the legal proposition as laid down
by the three judgments mentioned above but the key to the matter is
effective control as held in Rashtriya Ispat Nigam Limited (Supra). The
effective control of the tankers was with HPCL and the owner was not free
to make use of the tankers for the works other than the project work of
respondent or for his own use. That would mean there was a deemed sale;
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(e) Bramhaputra Vally Construction and Suppliers V/s. ONGC ,6
is clear on the proposition that where a party has effective control and
dominion over the goods during the subsistence of the contract, though the
physical possession may be with the owner, there will be a deemed transfer
of right;
(f) In Waltor Buthello of Mumbai V/s. The Commissioner of
Sales Tax7, where the facts were similar, the Bombay High Court had held
that there was an effective transfer. Even in the case of Waltor Buthello of
Mumbai (Supra), the driver with uniform was to be provided by the lessor
at his cost, the wages had to be paid by the lessor, the fuel and maintenance
was to be provided by the lessor and the damages were to be borne by the
lessor. The driver was obliged to follow instructions of the authorities of
PMT (lessee). The agreement also provided that in no circumstances a hired
bus will be diverted by contractor for personal use or gain of any other
business and the lessor has to ply on the routes exclusively determined by
the PMT. Still the Court held that the buses were deemed to be in effective
control of PMT and hence, there was a deemed sale;
(g) Twentieth Century Finance Corporation Limited and Anr.
V/s. State of Maharashtra8 says handing over of physical possession is not
required to decide transfer of right to use;
6. (2012) 53 VST 401
7. Unreported judgment dated 7.2.2017 in MVA No.33 of 2016
8. (2000) 6 SCC 12
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(h) In the case of Deepak Nath V/s. ONGC9, the Court
concluded that the mere fact that after the operation of the crane is over on
any given day the crane may come back to the owner/contractor will hardly
be material to decide as to who has dominion over the crane. Temporary
physical possession of the contractor, the Court held, would be hardly
relevant;
(i) G.S. Lamba and Sons V/s. State of Andhra Pradesh 10 says to
determine the nature of the transaction one has to consider the agreement
and having considered the agreement between appellant and HPCL, there
can be no doubt that there was a transfer of right to use;
(j) The following facts emerge from the agreement between
appellant and HPCL :
(i) The tankers are identified by registration number and are
attached to particular loading location.
(ii) Tankers are in exclusive use of Company for transportation
of petroleum products to customers and other loading stations.
(iii) AHS is not entitled to use the tank truck contracted by oil
company for any other product and would operate only for the
oil company with whom the agreement is entered into.
(iv) AHS cannot assign the rights under the contract, title and
interest in tankers during the period of agreement.
(v) The tankers are available to oil company at its call at all the
times during the period of agreement.
(vi) The oil company has full authority to change the base
loading location, resitement, as per oil company's own
operational convenience/requirement for delivery of petroleum
products.
(vii) Crew is under control of oil company as they have to
follow the route approved by oil company and obey the
9 (2010) 31 VST 337 (Gauhati)
10. (2011) 43 VST (AP)
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instructions of delivery and collect cheques and return the
documents to Company.
(k) The clauses in the agreement reveal that oil company is in
exclusive possession and use of the tankers to transport its petroleum
products and have full control over the tankers and crew for transportation
and delivery of petroleum products to customers/other locations. The
agreement in clear terms provides for transfer of right to use the trucks for
transportation of petroleum products of oil company.
18 Let us examine what does the agreement dated 26 th June 2006
and the work order/LOI dated 5 th May 2006 between appellant and HPCL
say. The agreement dated 26th June 2006 reads as under :
This agreement made 26th day of June 2006 between Hindustan
Petroleum company registered under Indian Companies Act,
1913/1956 having registered office at 17, J. Tata Road, Mumbai
hereinafter called "THE COMPANY" (which expression unless
repugnant to the context shall include its successors and
assigns) of the ONE PART and M/s. Aurobindo Highway Station
a Proprietorship firm Private Limited / Limited Company having
registered office / place of business at Takli (Dist. Solapur)
hereinafter called "THE CARRIER" or Carrier (which expression
shall be deemed to include legal heirs and executors of the
present constituents in case of firm or official liquidator in case
of Company) of the OTHER PART.
WHEREAS the company is engaged in refining Crude oil and
storing, distributing and selling of the petroleum products and
for this purpose require Tank Trucks for Road transportation of
bulk petroleum products from their various storage points to
customers / other storage points.
WHEREAS the Carrier is engaged in the business of operating
Tank Trucks and is interested in above transportation job of the
Company.
Now therefore, it is agreed between the parties as follows :-
1. The Carrier will provide the Company with 3 no. of Tank
Trucks for transporting petroleum products as per LOI/Work
Order issued by the Oil Company. Carrier has certified that it is
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the owner and/or sufficiently entitled to operate these Tank
Trucks throughout the Agreement period and these Tank Trucks
are not under Agreement with any other party. Further, these
Tank Trucks shall remain under exclusive use with the Company
throughout the Contract period.
2(a). Each of the Tank Truck would be attached to a particular
loading location / storage point of the Company as per LOI/
Work Order issued by the Oil Company. The Tank Truck would
be required to carry bulk petroleum products from the
particular loading location (Pakani) to Company's Retail Outlets
/ Consumers / other storage points as would be instructed by
the Company from time to time.
(b) In the event of resitement / change of loading location of
the Company, Tank Trucks attached to the old loading location
would get automatically attached to the resited / changed
loading location and rate and other terms applicable to the old
loading location shall apply to the new loading location.
(c) In case of exigency, Company would be entitled to utilise
any Tank Truck attached to a particular loading location for
bringing the petroleum products (bridging) from another
loading location to the base loading location, where the Tank
Truck is contracted. In such event, the rate as detailed in LOI /
Work Order issued to the Carrier at the base loading location
shall be applicable. In case of any disputes arising out of such
movements, the terms and conditions including Arbitration
Clause of this Agreement would be applicable.
(d) xxxxxxxxxxxxxxxxxx
(e) xxxxxxxxxxxxxxxxxx
(f) Company shall be free to engage one or more additional
Carriers, either to run concurrently or separately, for
transportation jobs from the same loading location.
3. Carrier will ensure that Tank Trucks listed in the LOI / Work
Order are always :
(a) Maintained in sound mechanical conditions and having all
the fittings up to the standards laid down by the Company from
time to time.
(b) Meeting requirement of the Company as regards safety and
operational norms, e.g., Company may require that Tank Trucks
are painted in particular specifications, epicoated and / or
chambers are cleaned periodically, additional declarations are
made in Emergency Information Panel, colour code band, logos
and advertisement of the specified Brand names as directed by
Oil Company from time to time, etc. is painted, at the cost of
Carrier. The Carrier will ensure that panels are provided on the
Tank Truck for display of Oil Company Brands as specified by
Oil Company on regular basis.
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(c) Conform to the statutory regulations like Indian Petroleum
Act, Petroleum Rules, Motor Vehicle Act etc. as applicable from
time to time.
(d) Properly calibrated / stamped under the Weights &
Measures Act. These shall be calibrated for single capacity up to
maximum permitted under Motor Vehicles Act. Company would
be entitled for insisting for calibration at Company's premises at
the cost of Carrier.
(e) Have adequately trained Crew (driver and cleaner) for
efficient operations. The driving licence of the drivers should be
endorsed for transportation of hazardous goods.
(f) Have the Crew wearing uniforms, safety shoes and safety
helmets.
(g) Be equipped with sufficient number of rubber hoses having
suitable couplings at both ends, bonding / earthing with heavy-
duty crocodile clips and dip-rods duly certified by Weights &
Measures Department.
(h) Covered by Insurance Policy.
The officials of the Company would be entitled to inspect at any
time, the Tank Trucks and / or the documents of the Carrier / its
crew is liable to carry under any statute / regulation or this
Agreement. Further, Carrier shall submit to the Company
certified true copies of calibration certificate and Explosive
Licence and their renewals for every Tank Truck.
4(a) The Tank Trucks listed in the LOI / Work Order will be
made available to the Company at all times during the
Agreement period at the loading location.
(b) In case any of the Tank Trucks is not made available by the
Carrier on any day, Company would be free to use the services
of any other Tank Truck and recover the difference in
transportation charges from the Carrier.
(c) In the event of breakdown or major repair of any of the Tank
Truck, Company at its sole discretion, may accept any other
Tank Truck of the Carrier for the period of break-down / major
repair. Further, in the event Carrier request for the replacement
of Tank Truck/s, Company at its sole discretion may accept the
same.
(d) xxxxxxxxxxxxxxxxxx
5(a) Carrier will be responsible for all taxes, levies and other
costs of running the Tank Trucks / transportation business,
which shall also include -
i) Salary, wages and other benefits and claims of Crew of Tank
Trucks and all members of carrier's staff;
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ii) Payment of road tax, insurance and any other fees like
permit, route fee etc., levied by statutory authorities;
iii) Cost of fuel, lubricants, tyres, repair etc;
iv) Calibration fees and other fee payable to Weights &
Measures Department;
v) Compensation or any other benefit payable to Tank Truck
Crew and it's other staff or third party under any statute or
regulation both under regular working and arising from
accident etc;
b) Carrier shall keep Company indemnified in respect of above.
In case, Company is made liable to pay any part of above cost,
the same shall be recovered from the Cartier. The Company
shall not be obliged to contest any claim made upon it for
payment.
c) It is agreed that the Tank Trucks covered by this agreement
shall operate at the sole risk of the Carrier. In no case, Company
would be held responsible for any loss or damage done to / by
the Tank Truck while on the Company's work or parked in their
premises or anywhere else.
d) Carrier shall make their own arrangement for parking of
their vehicle overnight and / or during holidays.
e) The Carrier shall comply with all statutory provisions relating
to his trade / business / profession including his own employees
or employees engaged by the Carrier and Oil Company shall not
be responsible for his omission or commission.
6(a) xxxxxxxxxxxxxxxxxx
(b) xxxxxxxxxxxxxxxxxx
(c)(i) Octroi charges levied on the product would be reimbursed
by the Company against production of original receipts.
(ii) Entry / Transit / Bridge / Toll (Pathkar) taxes paid by the
Carrier for their Tank Trucks while transporting petroleum
products under this Contract would be reimbursed by the
Company on round-trip basis subject to production of original
receipts for payment. Company's decision whether any charge is
reimbursable or not would be final and binding on the Carrier.
(d) The transport charges payable under this Agreement are
based on shortest route approved by the Company on the round
trip basis (called RTKM). A list of current RTKMS applicable to
storage points where subject Tank Trucks are based are
available with concerned storage point. Company would,
however, be entitled to revise these RTKMS from time to time,
including retrospectively, which would be binding on the
Carrier. Difference in transportation charges arising out of this
revision will be recoverable / payable from the date of
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Agreement or effective date of such revision, whichever is later.
(e) .......................
(f) .......................
(g) The Company has not guaranteed any minimum billings /
mileage or loads for any period whatsoever. Hence, Company
will not be responsible for their inability in offering any load on
any day or during any particular period and no idle charges etc.
would be payable.
(h) The company will endeavor to arrange unloading of the
Tank Trucks within reasonable time. However, no detention
charges etc. are payable if, for any reason, such unloading is
delayed at the receiving location.
7(a) The Carrier shall deposit a sum of Rs.50,000/- as Security
Deposit for due fulfillment of terms of this Agreement. This sum
shall not bear any interest. Further, Company would accept
bank guarantee of the balance amount (Rs.50000/- as DD and
balance as Bank Guarantee) valid till 6 months after the expiry
of the Agreement as part of Security Deposit.
(b) ..............
8(a) The Carriers will be responsible for loading and
discharging of the Tank Trucks. All the instructions of the
Company with regard to the same would be binding on the
Carrier.
(b) Only the Crew of the Tank Truck and authorized
representative of the Carrier shall be allowed entry inside the
Company's loading / unloading locations.
9(a) The Carrier shall be responsible for quantity and quality of
the products received by him for transportation.
Acknowledgment by any member of Crew of the Tank Truck or
by any other authorized person of the Carrier by way of signing
on the Challan or any other Dispatch Document would be
sufficient proof of acceptance of product quantity and quality by
the Carrier.
(b) The Carrier will comply with and give full cooperation to
the Company in meeting the requirement of prevailing
'Marketing Discipline Guidelines - 2001' as applicable to them.
(c) .............
(i) .............
(a) ....................
(b) ....................
(c) ....................
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(ii) ...................
(a) ...................
(b) Carrier will allow representative of Company and the party,
to whom the products are being sent, to travel with him.
(10) Carrier will be responsible for ensuring that :
(a) ...............
(b) ...............
(c) ...............
(d) ...............
(e) Any position tracking system (for eg. Global Tracking
System) decided by the Company to tract the movement of the
Tank Truck will be unconditionally accepted by the Carrier and
install the same in the Tank Truck. Cost of modification /
modifications of fittings if any on TT will be borne by the
Carrier. Carrier shall be responsible for safety / maintenance of
the equipment and in case the equipment is lost / damaged due
to any reason, the carrier shall replace the same at their own
cost.
(f) ................
(g) ................
(h) ................
(i) ................
(j) ................
(k) Wherever required by Company, collect cheques / draft /
bank-slips etc. from the recipient after ensuring that remittances
are correctly drawn.
(l) ................
(m) ................
11. In case any of the Tank trucks meets with an accident while
it is loaded with Company's product, the Carrier shall :
(a) Arrange conveying of information to dispatch storage points
as also nearest police station;
(b) Guard the Tank Truck and product till arrival of rescue
agencies;
(c) Arrange another fit Tank Truck to salvage the product from
Accident Tank Truck;
(d) Bring such transshipped / salvaged product to Dispatch
Storage Point or other location as directed by the Company at
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Carrier's cost;
(e) Be responsible and liable for loss / claims as determined by
the Company;
12(a) Carrier shall be responsible for any damage or loss caused
to the Company's product or property by negligence or default
of it's crew, authorized representative or Tank Truck. This will
also include confiscation of Company's product delivered to the
Carriers by any statutory authorities.
(b) ................
13(a) The Carrier shall not be entitled to assign, subrogate,
sublet or part with it's right, title and interest under this
Agreement for any reason whatsoever, or change the ownership
of / their right of the Tank Trucks.
(b) .................
14 .................
15 .................
Notwithstanding anything to the contrary contained
hereinabove, Company reserves the right to terminate this
Agreement forthwith upon or at any time after happening of
any of the following :-
(a) ............
(b) ............
(c) If road permits or statutory licenses / permissions granted to
Carrier / it's Tank Trucks by transport or any statutory
authorities is cancelled or revoked.
(d) .............
(e) .............
(f) .............
(g) ..............
(h) ..............
16 .................
17 .................
18 .................
19 .................
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The work order dated 5th May 2006 provides :
AWARD OF CONTRACT : TRANSPORTION OF BULK
PETROLEUM PRODUCTS (WHITE OIL) BY ROAD EX PAKNI
DEPOT. TENDER NO.WZ/IND/MH/POL/BULK/2005-08.
This has reference to your response to the subject Tender. We
are pleased to award the contract for transportation of bulk
petroleum products by road Ex our storage point at Pakni.
CONTRACT PERIOD
This contract will be valid from 1.09.2005 for a period of
2 years, with a provision to extend by one more year, as per the
terms and condition of the agreement, at the sole discretion of
HPCL.
RATE SCHEDULE
The rates applicable w.ef. 1-9-2005 after providing escalation
towards increase in RSP of HSD after 6-6-2005 (Due date of the
tender) will be as follows :-
Sector White Oil
Local delivery within 39 kms RTD 90.77
In Rupees per KL
Outstation delivery beyond 39 kms RTD 116.98
within state
in Paise per KL per KM
Delivery to adjoining states 116.98
in Paise per KL per KM
Delivery to other than adjoining states 118.98
in Paise per KL per KM
Escalation on account of increase in RSP of HSD after 1-9-2005
will be granted to you from time to time as per the terms and
conditions outlined in the Tender Document.
NUMBER OF TANK TRUCK/S ALLOCATED: 3 (THREE ONLY)
You are requested to submit xerox copy of RC Book, Explosive
Licence, Calibration Certificate etc. and get original documents
verified at Pune Retail Region for tank trucks offered by you.
xxxxxxxxxxxxxx
SECURITY DEPOSIT
As per the terms and conditions of the contract you are required
to furnish the security deposit as under :-
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1. @Rs.100000/- per tank lorry subject to a maximum of
Rs.5 lakhs.
2. Minimum Rs.50,000/- shall be paid in the form of Demand
Draft drawn on any nationalised bank in favour of M/s.
Hindustan Petroleum Corporation Limited and payable at Pune.
Balance may be tendered in the form of Bank Guarantee strictly
in specified proforma, valid upto 31-3-2009.
3. For existing dealers/distributors of the Corporation, the
Security Deposit will be Rs.50000/- per contract irrespective of
number of tank trucks offered.
xxxxxxxxxxxxxxxxxxxxx
19 The agreement read with the work order therefore, indicates,
inter alia, that :
(i) HPCL was interested in hiring the tankers for transportation
of its petroleum products;
(ii) the cost of running the tankers like taxes, salary of staff,
fuel and repair was responsibility of AHS;
(iii) the risk of the carrier and transportation was on AHS;
(iv) parking was to be done by AHS at his own risk;
(v) the charges/hire were on trip basis and should be for
shortest route;
(vi) no minimum billing was guaranteed;
(vii) AHS was to give deposit of Rs.1 lakh per tanker;
(viii) AHS was responsible for quality and quantity and
responsible for making good shortages;
(ix) HPCL had no right of subletting;
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(x) the licenses and permits of the tankers are with AHS and
not transferred to HPCL;
(xi) AHS was in the business of operating tankers and was
interested in the transportation job of HPCL to move bulk petroleum
products;
(xii) AHS was to operate these tankers;
(xiii) the tankers were required by HPCL to carry bulk
petroleum products from the particular loading location to HPCL's retail
outlets;
(xiv) AHS was to ensure that the tankers were always
maintained in sound mechanical condition, meeting all safety requirements
and operation norms as per the instructions of HPCL. This was required
because AHS was carrying hazardous goods;
(xv) AHS was to conform to the statutory regulations like
Indian Petroleum Act, Petroleum Rules, Motor Vehicle Act as applicable
from time to time;
(xvi) AHS was to ensure that the tankers were properly
calibrated/stamped under the Weights and Measures Act;
(xvii) AHS shall have adequately trained crew (driver and
cleaner) and the driving licence should be endorsed for transportation of
hazardous goods;
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(xviii) AHS shall ensure the tankers are covered by insurance
policy;
(xix) the officials of HPCL would be entitled to inspect at any
time the tankers or the documents of the tankers or the crew, which right
need not be reserved if there was transfer of right to use the tankers for
any purpose;
(xx) HPCL would be free to use the services of any other tanker
if AHS's tankers were not available and HPCL had the right to recover the
difference in transportation charges from AHS;
(xxi) in the case of breakdown or major repair of any of the
tankers, AHS was to provide a replacement and failure to provide the
replacement would invite action;
(xxii) AHS was responsible for all taxes and levies and other
costs of running the tankers/transportation business which would include
salary, wages and other benefits and claims of crew of tankers, payment of
road tax, insurance and any other fees like permit, route fee etc. levied by
statutory authorities, cost of fuel, lubricants, tyres, repair etc., calibration
fees and other fees payable to weights and measures department,
compensation or any other benefit payable to tanker crew and its other staff
or third party under any statute or regulation both under regular working
and arising from accident etc. and for this, AHS shall keep HPCL
indemnified and if HPCL is made liable to pay the same to be recovered
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from AHS;
(xxiii) the tankers shall operate at the sole risk of AHS and in
no case, HPCL will be responsible for any loss or damage done to/by the
tankers while on HPCL's work or parked in their premises or anywhere else;
(xxiv) AHS was to make its own arrangement for parking of its
vehicles overnight and/or during holidays;
(xxv) AHS was to comply with all statutory provisions relating
to his trade/business/profession including his own employees or employees
engaged by AHS and HPCL shall not be responsible for AHS's omission or
commission;
(xxvi) octroi charges levied on the product would be
reimbursed by HPCL against production of original receipts. So also
entry/transit/bridge/toll etc. to be paid by AHS for the tankers while
transporting HPCL's products and claim reimbursements;
(xxvii) AHS was to allow representative of HPCL and the party,
to whom the products are being sent, to travel with him.
20 All these indicate that the effective control and possession was
always with AHS. What was being provided to HPCL was only a
transportation service on hire. The Tribunal instead of applying the law as
laid down by the judgments in the case of Bharat Sanchar Nigam Ltd.
(Supra), Indian Oil Corporation Ltd. (Supra), International Travel House
Ltd. (Supra) and M/s. General Cranes (Supra) etc., has read the agreement
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in bits and pieces and referred to only certain clauses which were in place
to ensure commitment for uninterrupted efficient transportation service.
The Tribunal has referred to the clauses which provides that the tankers are
not under agreement with any other party, AHS not to assign right in the
tankers or the tankers should not be used for products other than oil of
HPCL, HPCL has right to change the loading location etc. The Tribunal has
failed to appreciate that these clauses referred to and provided for in the
agreement with HPCL were only to ensure uninterrupted transportation
services by AHS to HPCL. The right to use of tankers does not get
transferred because of these clauses. The possession and effective control
was always with AHS and HPCL had no right to direct AHS for any other
work or any other area than agreed. There is no provision that HPCL could
even sublet. The Tribunal has failed to appreciate that the services for the
tankers were provided with man power and road tax, insurance, permit,
salary and wages of staff, cost of fuel, lubricants, tyres, repair etc., were
being paid by AHS. The agreement entered into between AHS and HPCL
shows that not only possession but also effective control of the tankers
remained with AHS and did not get transferred to HPCL. The agreement
demonstrated that the intention of the parties was that AHS would carry
the petroleum and petroleum products from one place to another and such
carriage would ordinarily be in those vehicles, which had been accepted by
HPCL, but, in unavoidable circumstances, AHS may provide for alternative
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tankers. Thus, when the custody and effective control of the vehicles
remained with AHS, it would be incorrect to contend that there was
transfer of the right to use the vehicles. Further AHS has to bear the entire
operational cost of the vehicle which included salary and other emoluments
of the driver and cleaner, cost of fuel and lubricating oil, maintenance of
vehicles, payment of road tax, insurance etc. It was also the responsibility of
AHS to pay such fines as might be imposed for non compliance of any of the
rules, which might be applicable to the carriage of petroleum and
petroleum products by the tankers. The requirement that the tankers must
conform to the design and fittings as might be specified by HPCL or that
HPCL had right to change the loading station or tankers cannot be used for
carrying other products than oil of HPCL could not be stretched to mean
that the right to use the tankers would stand vested in HPCL and/or the
effective custody and control of tankers would stand transferred to HPCL
because of the fact that petroleum and petroleum products, being highly
inflammable substances could be carried safely and securely only in vehicles
with specified designs and fittings. AHS was also liable for contamination of
the goods due to negligence of its staff and also if there was short delivery
of substance at the destinations. AHS would be entitled to receive payment
provided it operated the tankers in accordance with the requirement of
HPCL as stipulated in the agreement on per KM basis. These provisions
were demonstrative of the fact that AHS retained the possession and
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effective control of tankers. Merely because of the fact that certain clauses
were provided in the agreement in view of the nature of the cargo to be
carried and to ensure that the transportation of their products do not get
disrupted, it did not necessarily mean that the right to use the tankers stood
transferred in favour of HPCL by AHS, more so, when the agreement
provided for substitution of the vehicles.
21 The judgments relied upon by Mr. Sonpal are of no assistance
to him in as much as, as held in Rashtriya Ispat Nigam Limited (Supra) the
effective control was with AHS. In Bramhaputra Vally Construction and
Suppliers (Supra) also the Gauhati High Court has held that it is the
features of the contract which are material and to be looked into. As
regards Waltor Buthello of Mumbai (Supra), the facts were entirely
different in as much as in that case the buses were handed over by the
contractor to PMT and the buses, which were handed over to PMT, were
registered with the RTO, Pune in the name of PMT as a lessee. In that case,
even the conductor of the bus was provided by PMT and not the owner of
the bus. It was the conductor of PMT who was to collect the fare from the
passengers. The contractor was also permitted to employ other surplus
drivers employed with PMT where the post of drivers has become surplus
on PMT's establishment. Those were the factors which weighed in the mind
of the Court which is not the case in the appeal at hand. As regards
Twentieth Century Finance Corporation Limited and Anr. (Supra) it only
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states that handing over the possession was not required but certainly it
also states that the entire agreement has to be seen. G.S. Lamba and Sons
(Supra) relied upon by Mr. Sonpal also was a case where there was a lease
which is not the case here.
22 In the circumstances, in our view, by no stretch of imagination
can we hold that there was any transfer of right to use goods. Therefore, we
answer the first substantial question in negative. The Tribunal was not
justified in holding that the transportation job with the use of tank trucks
(tankers) as per the agreement with HPCL dated 26 th June 2006 amounted
to transfer of right to use goods and hence, covered by definition of sale
under the MVAT Act.
23 In view of our answer to substantial question no.1, we see no
requirement to answer substantial question no.2.
24 Appeals allowed and accordingly stand disposed. In the facts
and circumstances of the case, there will be no order as to costs.
(FIRDOSH P. POONIWALLA, J.) (K. R. SHRIRAM, J.)
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