High Court · 2013

5. An affidavit has been filed on behalf of the Revenue in WP(C) No . 3406/2010 in reply to the prayer for interim relief. The same has been adopte d by learned counsel for the Revenue as stand of the Revenue in all the cases. A ccording to the Revenue, business of the assesse is of lease of vehicles, equipm ent, machinery, spares to its customers engaged in construction related activiti es which falls within the meaning of deemed sale under Article 366(29A)(b) of th e Constitution. The agreement in question dated 23.2.2009 annexed to the writ pe tition shows that the petitioner transferred the right to use the equipments for construction. Clauses 4.2,11, 14 ad 15.5 show that the petitioner did not reta in possession and effective control over the equipments. Irrespective of the lev y of service tax, transfer of right to use attracted VAT/ Sales Tax.

6. cord, particularly the agreement (Annexure-A). We have heard learned counsel for the parties and perused the re

7. At this stage, we may make a brief reference to the agreement. T Security Deposit and Advance Payment of Rental : he recital in the agreement is to the effect that the owner was carrying on busi ness of providing equipments on rent. The customer has to deposit security and p ay rental in advance in the form of post-dated cheques. The customer is liable t o pay VAT/ Sales Tax in respect of equipments rental. The terms and conditions i nter alia are: (cid:28)4. 4.1 The Customer shall pay Security deposit to the Owner as mentioned at ser ial number 8 of Schedule-I to this Agreement to ensure due compliance of terms a nd conditions of this Agreement. 4.2 Advance payment of Rental as mentioned at serial number 9 of Schedule I of this Agreement, shall be paid by the Customer to the Owner in the form of Pos t dated cheques (PDC). The Owner shall present the PDC on due dates without any notice to the Customer. The Advance amount shall be interest free and be adjuste d/ appropriated against the final invoice and/or any other amount due from the C ustomer. 4.3 The Customer shall not absolve the liability to pay the said sums hereun der until all the cheques are duly realized. The cheques/ PDC/ Draft shall be c rossed (cid:28)A/C Payee (cid:29) favouring (cid:28)Quippo Construction Equipment Limited (cid:29), payable at par at New Delhi or at any such other place as may be advised by the Owner from time to time.

6. Equipment Availability and Usage: 6.1 The Customer shall pay Rentals for the availability of each Equipment for 9/ 54/112.5/225 hours per day/ week/ fortnight/ month respectively on single shift basis. 6.2 Equipment availability period implies, operation of the Equipment on the bas is of 9/54/112.5/225 hours per day/ week/ fortnight/ month respectively, subject to the conditions mentioned under this Agreement.

6.3 Overtime beyond stipulated hours shall be payable extra on pro-rate basis. 6.4 In the event where the Equipment was available, but was not utilized by the Customer, the Customer will be billed for the available hours. 6.5 Where the Equipment was used for the available hours or beyond, no deduction on account of breakdown shall be made or considered.

6.6 The breakdown hours shall be limited to maximum of 9 hours per day (Subject to Downtime/ Breakdown standards mentioned in Item 24 of Annexure I of this Agre ement). 6.7 Equipment shall not be utilized on any other place/ site other than as menti oned at serial number 6 of Schedule I of this Agreement without prior written ap proval of the Owner. 6.8 Equipment shall only be operated by the operators/ supervisors provided by t he Owner. SCHEDULE I Equipment Details 3. Rentals per month per machine Rs 90000.00 plus service tax :

4. Tenure of the Agreement : 12 months The Owner shall provide one set of Crew/ Operator/ Supervisor. Any addit ANNEXURE--I GENERAL TERMS & CONDITIONS 9.1 ional crew/ operator/ supervisor shall be on chargeable basis (@ 15000 pm). 9.2 The Customer shall bear the cost of accommodation at site for the crew/ operators/ supervisors etc. if any, deployed as per the provisions of the agreem ent for operating and maintaining the Equipment at Customer’s site. The Customer shall at its cost ensure Security and Safety and Medical Facility of the person nel such as crew/ operator/ supervisor etc.. deployed by the Owner. 10. Tools and Tackles : The required machinery, tools and tackles, manpower and the necessary assistance for the assembly and dismantling of Equipment at s ite shall be provided by the Customer free of cost. 13. Tenure of Agreement (Unscheduled Cancellation and Extension) : The Owne r shall provide the Equipment on rent for a fixed period as maybe agreed upon be tween the Customer and the Owner as per the provisions of the Agreement. Custome r shall not terminate the same, at any time prior to expiry of the stipulated te nure as mentioned in serial number 4 of schedule I to the agreement. However, in the event the Customer decides to terminate the agreement prior to the tenure a s mentioned above, a notice of thirty (30) days in writing shall be required to be given by the Customer to the Owner, failing which the Customer shall be liabl e to pay additional rentals for the shortfall of in notice period. The Customer shall bear, all mobilization and demobilization expenses of the Equipment. Extension : In the event the Customer desires to extend the period beyond the ag reed tenure, the Customer shall make a written request in this regard to the Own er at least fifteen (15) days prior to the expiry of the tenure of the agreement . The request of the Customer for extension of tenure of the agreement shall be considered and would be informed in writing within seven (7) days from the date of receipt of such request. 14. Right of Inspection : The Owner and/or its authorized representatives an d/or Company’s, Banker’s and Financial Institutions shall, at all times at the c ost of the customer, have the right, without notice, to examine the state and co ndition of the Equipment. Joint inspection shall be carried out in case of renti ng without operator, both at the time of providing and taking back of the Equipm ent. (cid:29).

8. Main contention raised on behalf of the assessee is that the tra nsaction in question did not involve (cid:28)transfer of right to use (cid:29). According to le arned counsel for the assessee, the transaction was of hiring and not of lease a s defined in Section 2(27) of the Act. Effective and dominant control of the hir ed equipments was retained by the assesse. Right to use can be transferred only when dominant control is abdicated to the customer. The assessee was already ass essed to service tax and there could not be simultaneous demand of sales tax. In support of above submissions, reliance has been placed on the following decisio