JUDGMENT
Rajes Kumar, J.
1. These three revisions under Section 11 of U.P. Trade Tax Act (hereinafter referred to as “Act”) are directed against the order of Tribunal dated 26.02.19968 relating to the assessment years 1989-90, 1990-91 and 1991-92.
2. On the basis of the information that the assessee opposite party (hereinafter referred to as “the assessee”) has received certain amount from M/S Glaxo India Ltd, Aligarh, towards hire charges, assessment proceedings have been initiated. During the course of assessment proceeding, it was explained by the assessee that in pursuance of the agreement dated 1.3.1989. Bus was provided to M/S Glaxo India Ltd, Aligarh for the transportation of their employees from one place to another place and per trip payment was stipulated. It was also submitted that the possession of the vehicle was with it and the entire expenses, namely, diesel charges, salary of driver/conductor, road tax, passenger tax etc have been borne by it. It was claimed that at no stage, the right has been transferred to M/S Glaxo India Ltd, Aligarh to use the bus and thus, the assessee was not liable to tax under Section 3-F of the Act. It was also submitted that the contract was only upto April, 1991 and the payment received in the year 1991-92 was relating to earlier year. However, the assessing authority has not accepted the plea of the assessee. Aggrieved by the assessment order, assessee filed appeals before the Assistant Commissioner (Judicial) Trade Tax, which were allowed. The Commissioner of Trade Tax filed appeals before the Tribunal, which were rejected by the impugned order.
3. Heard learned Standing Counsel.
4. Learned Standing Counsel submitted that the order of the first appellate authority and the Tribunal are erroneous. He submitted that before the assessing authority year wise detail of the expenses incurred by the assessee towards diesel charges, salary of driver/conductor, road tax, passenger tax etc have been furnished but no proof in this regard were filed. He submitted that the amount received from M/S Glaxo India Ltd. was hire charges and, therefore, liable to tax under Section 3-F of the Act.
5. I have perused the order of the Tribunal and the authorities below.
6. I do not find any force in the argument of the learned Standing Counsel.
7. The assessing authority has not made out any case that at any point of time, there was transfer of right to use the bus to M/S Glaxo India Ltd. As per the contract, which is considered by the first appellate authority and by the Tribunal, the assessee had only provided the bus for the transportation of employees of M/S Glaxo India Ltd and the payment per trip wise was stipulated. The entire expenses towards diesel charges, salary of driver/conductor, road tax, passenger tax etc, have been incurred by the assessee, the possession and control of the bus was always with the assessee. Therefore, on these facts, it has been rightly held that at no stage right to use the bus was transferred by the assessee to M/S Glaxo India Ltd, Aligarh. Section 3-F of the Act reads as follows.
“Section 3-F. Rate of tax on the right to use any goods or goods involved in the execution of a works contract.
Notwithstanding anything contained in Section 3-A, or Section 3-AAA or Section 3-D, the turnover relating to the business of transfer of the right to use any goods for any purpose or of transfer of the property in goods involved in the execution of a works contract shall be determined in the manner prescribed and shall be liable to tax at such rate not exceeding fifteen percent, as the State Government may, by notification, declare, and different rates may be declared for different goods or different classes of dealers.”
8. The bare perusal of Section 3-F of the Act shows that the provision of Section 3-F is applicable only in cases where there is transfer of right to use the goods.
9. Similar question came up for consideration in Kando Transport and Ors. v. S.T.O. Assessment Unit, Barbil and Ors. (1992) 43 STL 67 Orissa In this case also the petitioner entered into a contract with M/s Minerals & Metals Trading Corporation of India Ltd. For transportation work including loading, unloading and stacking. The contention of the transporter was that there was no transaction of sale and that the contract was for purely labour and service. The department, however, contended that “hire charges” received by the transporter come within the definition of “sale price” Considering the enlarged definition of ‘sale’ in view of the Constitutional amendment, the Orissa High Court held as follows:
“In order to decide whether a transaction is of ‘sale’, the determiantive factor is whether transfer of right of user is involved. By way of illustration we may indicate that if ‘A’ allows his vehicle to be used by ‘B’ for a consideration, and the vehicle is placed at the control, custody and possession of ‘B’ it may be a case of transfer of the right to use the vehicle for any purpose. Where, however, the control, custody, and possession over the vehicle remains with ‘A’, notwithstanding the fact that certain amounts were received as hire charges, no transfer of the right to use is involved.”
10. In Rashtriya Ispat Nigam Ltd. v. Commercial Tax Officer, Company Circle, Visakhpatnam (1990) 77 STC 182 Andhra Pradesh, the petitioner which owned the Visakhapatnam Steel Project, for the purpose of the steel project, allotted difference parts of the project work to contractors. To facilitate the execution of work by the contractors with the use of sophisticated machinery, the petitioner had undertaken to supply the machinery to the contractors for the purpose of being used in the execution of the contracted works of the petitioner and received charges for the same. The respondents made a provisional assessment in view of the enlarged definition of ‘sale’. Then the Andhra Pradesh High Court held that under the agreement, the effective control of the machinery, even while the machinery was in the use of the contractor, was that of petitioner company. The contractor was not free to make use of the same for other works or move it out during the period the machinery was in his use. Therefore, the contractor was entitled to make use of the machinery for purpose of execution of the works of the petitioner and there was no transfer of the right to use it as such in favour of the contractor. This is how the court held that the hire charges collected by the petitioner from the contractors were not exigable to sales tax. To come to this conclusion, the Andhra Pradesh High Court relied on Coipus Juris Secondum, Vol. 87 page 892 which emphasised that the essence of transfer is passage of control over the economic benefits of property which results in terminating rights and over relations in one entity and creating them in another. While construing the word “transfer” due regard must be had to the thing to be transferred. A transfer of the right to use the goods necessarily involves delivery of possession by the transferor to the transferee. Delivery of possession of a thing must be distinguished from its custody. It is not uncommon to find the transferee of goods in possession while transferor is having custody.
11. Against the aforesaid decision of the Andhra Pradesh High Court, the State of Andhra Pradesh filed Special Leave Petition before the Apex Court in the case of State of Andhra Pradesh and Anr. v. Rashtriya Ispat Nigam Limited, . Apex Court had affirmed the order of the Andhra Pradesh High Court and held as follows:
“The High Court after scrutiny and close examination of the clauses contained in the agreement and looking to the agreement as a whole, in order to determine the nature of the transaction, concluded that the transactions between the respondent and contractor did not involve transfer of right to use the machinery in favour of the contractors and in the absence of satisfying the essential requirement of Section 5-E of the Act, i.e. transfer of right to use machinery, the hire charges collected by the respondent from the contractors were not exigible to sales tax. On a careful reading and analysis of the various clauses contained in the agreement and in particular, looking to clauses 1, 5, 7, 13 and 14, it becomes clear that the transaction did not involve transfer of right to use the machinery in favour of contractors. The High Court was right in arriving at such a conclusion. In the impugned order, it is stated and rightly so in our opinion, that 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 tree to make use of the machinery for the works other than the project work of the respondent or move it out during the period the machinery was in his use; the condition that the contractor would be responsible for the custody of the machinery while it was on the site, did not militate against respondent’s possession and control of the machinery.”
12. A similar question came up for consideration before the Division Bench of this Court in the case of Ahuja Goods Agency and Anr. v. State of U.P. and Ors. , reported in 1997 NTN (Vol.11), 484. Petitioner received transportation charges from a distillery in connection with the transportation of Indian made Foreign liquor from the distillery to various Government bonded warehouses. Question for consideration was whether the transportation charges was liable to tax under Section 3-F of the Act. The contention of the petitioner was that the transportation charges were paid for service under the agreement and there was no transfer of right to use the vehicle. The Division Bench examined the agreement and held that the truck to be used for carrying the goods will continue to remain in the custody of the drivers employed by the owners of the trucks. The distillery could have used the vehicle only for the purpose specified goods and not for any other purposes. The transit risk was of the petitioner and not of the distillery. It was the duty of the transporter to abide by all the laws relating to the motor vehicle and the excise. From theses factors, it is manifest that there was no transfer of possession even of the vehicle, which were being used for carrying the goods. On these facts Division Bench held that in the absence of transfer of possession of vehicle there was no transfer of right to use the goods and the provisions of Section 3-F of the Act shall not applicable.
13. In this view of the matter, to make Section 3-F of the Act applicable there must be a transfer of right to use the goods, which means the transfer of effective control of the goods. In the present case, the assessing authority failed to prove that there was any transfer of effective control of the vehicle in favour of M/s Glaxo India Limited by the opposite party. Perusal of the agreement shows that the bus was provided for the transportation of the employees and the payment per trip was stipulated and the entire expenses towards diesel charges, salary of driver/conductor, road tax, passenger tax etc. have been incurred by the assessee and the possession and control of the bus was always with the assessee.
14. For the reasons stated above, I do not find any error in the order of the Tribunal.
15. In the result, all the three revisions fail and are accordingly, dismissed.
