M/s.Asiatic Oxygen Limited v. The State of Tamil Nad

In the High Court of Judicature at MadrasDated : 29.04.2009Coram :-The Honourable Mr.Justice K.RAVIRAJA PANDIANandThe Honourable Mr.Justice M.M.SUNDRESHTax Case (Revision) Nos.432, 433, 435, 436, 464, 519, 530, 537 and587 of 2006M/s.Asiatic Oxygen Limited,Padi, Chennai – 600 050. ...Petitioner in all RevisionsVs.The State of Tamil Nadurepresented by the Commercial Tax OfficerAmbattur Assessment CircleChennai... Respondent in allRevisionsTAX CASE (Revisions) in T.C.(R) Nos.432, 433, 435, 436,464, 519, 530, 537 and 587 of 2006 are filed under Section 38 ofthe Tamil Nadu General Sales Tax Act against the order of the SalesTax Appellate Tribunal (Main Bench), Chennai dated 29.8.2002 madein S.T.A.Nos.759 of 2000, 534 of 2000, 1027 of 1999, 1011 of 1999,757 of 2000, 1010 of 1999, 1243 of 1999, 1012 of 1999 and 1083 of2000 relating to the assessment years 1993-94, 1994-95, 1991-92,1989-90, 1995-96, 1988-89, 1996-97, 1990-91 and 1996-97respectively against Appeal Nos.199/98 dated 5.5.2009, 431/97 dated5.5.2009; 796/96 dated 7.4.98; 794 of 1996 dated 7.4.98; 191/98dated 5.5.2009; 793/96 dated 7.4.98; 376/98 dated 27.7.99; 795/96dated 7.4.98 and 376/98 dated 27.7.99 respectively on the file ofthe Appellate Assistant Commissioner(CT) I,V,VI, and VII, VI Floor,Kuralgam Annexe, Chennai-108 against TNGST/142008/93-94; 94-95,91-92,89-90,95-96,88-89,TNGST/1320002/96-97, TNGST/142008/90-91 andTNGST/1320002/96-97 respectively dated 12.3.97, 19.3.97,31.12.93,31.12.93,24.4.98, 31.12.93, 31.7.98,31.12.93 and 31.7.98respectively on the file of the Commercial Tax Officer,(DG)Ambattur Assessment Circle, 5, High Court Colony, Villivakkam-49. For Petitioner : Mr.V.Ramachandran Senior Counsel for M/s.Anita SumanthFor Respondent : Mr.Haja Naziruddin, Spl.G.P.(Taxes) https://hcservices.ecourts.gov.in/hcservices/ COMMON ORDER (Order of the Court was delivered by K.RAVIRAJA PANDIAN,J.)Not satisfied with the common order of the Sales TaxAppellate Tribunal (Main Bench), Chennai dated 29.8.2002 made inS.T.A.Nos.759 of 2000, 534 of 2000, 1027 of 1999, 1011 of 1999, 757of 2000, 1010 of 1999, 1243 of 1999, 1012 of 1999 and 1083 of 2000relating to the assessment years 1993-94, 1994-95, 1991-92, 1989-90, 1995-96, 1988-89, 1996-97, 1990-91 and 1996-97 respectivelybringing the so called demurrage charges or cylinder holdingcharges for taxation under Section 3-A of the Tamil Nadu GeneralSales Tax Act (hereinafter referred to as "TNGST Act"), the presentrevisions in T.C.Nos.432, 433, 435, 436, 464, 519, 530, 537 and 587of 2006 have been filed under Section 38 of the TNGST Act. 2. The only question for consideration before us in thesecases is, "Whether the amount received by the assessee,which is termed as "demurrage or cylinder holdingcharges" is exigible to tax under Section 3-A of theTNGST Act?"3. As the point to be resolved in these cases is one andthe same and the argument advanced is common by the parties, forthe purpose of narration of facts, T.C.No.519 of 2006 is taken upas a typical case. The assessees are manufacturers and dealers ofindustrial gas and medical oxygen by filling in cylinders. Afteruse of the gas, the empty cylinders were to be returned to theassessee. A period is specified for return of the empty cylinder.If the cylinder were not returned within the specified period, forthe extra period of retention of the cylinders, additional chargeswere levied, which were termed as "cylinder holding charges ordemurrage charges" by the assessee. The assessing officer has takenthe view that the container i.e., cylinder is part of the sale ofgas and the extra amount paid by the purchaser of gas for retentionof the cylinder beyond the specified period has to be regarded asthe price paid for the gas purchased. Thus the extra amountcharged was taken as increase in the sale price of gas by theassessing officer and the turnover of demurrage charges was broughtto tax. On appeal, the first appellate authority modified theturnover relating to demurrage charges among other turnovers. Theassessee carried the matter on further appeal to the Sales TaxAppellate Tribunal and contended that the Orissa High Court in itssister concern's case i.e., Asiatic Gases Limited Vs. State ofOrissa and another reported in 121 STC 405 considered an identicalissue with reference to the identical terms of the agreement andheld that "possession and custody of the cylinders by the customersfor 14 days was permissible but beyond 14 days was withoutauthority for which the assessee was charging certain amount. In https://hcservices.ecourts.gov.in/hcservices/ other words, after 14 days, there was no permission for keeping inpossession and custody of the cylinder. Therefore, theconsideration received was by way of penalty. The term "transfer ofthe right to use" denotes an agreement between two parties. Here,there was an agreement of transfer of right to use the cylindersfor the first 14 days only. Beyond 14 days, the detention waswithout authority or in total disregard of the terms of thecontract and inasmuch as there was no transfer of right to use thecylinders beyond the free loan period of 14 days. The amountreceived by the assessee on account of the delay in return ofcylinders by the purchaser could not be held to be taxable."However, the Tribunal found that the cylinder holding chargescollected by the assessee was nothing but hire charges and the hirecharges are liable to tax under Section 3-A of the TNGST Act andheld the issue against the assessee. Hence, the revision is filedby the assessee. 4. Mr.V.Ramachandran, learned Senior Counsel appearing forthe assessee reiterates the argument, which was focussed before theTribunal. 5. On the other hand, the learned Government Pleader arguedto sustain the order passed by the Tribunal.6. Of course, it is true that the Orissa High Court inrespect of the assessee's sister concern i.e., Asiatic GasesLimited Vs. State of Orissa (2001) 121 STC 405, referred to above,by giving reasons, which are extracted in the previous paragraphshas held that the demurrage charges or cylinder holding chargesreceived by the assessee can partake the character of the penaltylevied for illegal retention beyond the agreed period. Such amountcould not be held to be taxable. But the subsequent development isthat the said decision in 121STC 405 was carried on appeal to theApex Court by the State of Orissa in the case of STATE OF ORISSAAND ANOTHER VS. ASIATIC GASES LTD., (2007) 7 VST 531, wherein theApex Court had upset the decision of the High Court by holding that"the medical-oxygen/industrial gases could not be sold without thecontainers. The property in goods (oxygen/gas) could not be passedto the customers without such containers. Therefore, containersconstituted an integral part of the medial oxygen and industrialgases. Section 2(g)(iv) of the Orissa Sales Tax Act provided thatthe sale shall mean any transfer of property in goods for cash ordefer payment or for any other valuable consideration and that itshall include transfer of the right to use such goods for anypurpose, whether or not for specified period for cash, deferredpayment or any other valuable consideration. Hence the amountcollected by the assessee would come within the purview of saleprice, in particular, towards transfer of right to use the goods,which is the second limb of Section 2(g)(iv), as such taxable.7. The facts of the present case are identical as that ofthe assessee's sister concern case considered by the Supreme Court https://hcservices.ecourts.gov.in/hcservices/ in the above judgment. The only variance is that in regard to theOrissa Sales Tax Act, the definition of sale in Section 2g)(iv)included in itself the transfer of right to use the goods. However,in Tamil Nadu Sales Tax Act, a separate provision Section 3-A ofthe TNGST Act has been incorporated pursuant to the 46th amendmentto the Constitution of India whereby Article 366(29A) has beenamended and deemed sale concept has been introduced and one of thedeemed sales is transfer of right to use the goods. The cylinder isa goods. The amount received by the assessee as cylinder holdingcharges or demurrage charges towards user of the cylinders isnothing but the amount collected for transfer of right to use. Itis useful to refer the last few sentences of the Supreme Court in(2007) 7 VST 531 thus:"In the present case as stated above thecylinders filled with medical oxygen/industrial gaswere loaned to the customers. The loan was freefrom payment of charges for 14 days. The over-retention charges were levied after 14 days. In thecircumstances the levy was on the transfer of theright to use the goods for consideration."8. For the foregoing reasons and in the light of the lawenunciated by the Supreme Court in the above said judgment, whichhas also taken into consideration the other judgment of the SupremeCourt in the case of AGGARWAL BROTHERS VS. STATE OF HARYANA (1999)113 STC 317, the issue has to be decided that the so calledcylinder holding charges collected by the assessee are exigible totax under Section 3-A of the TNGST Act, which is a chargingprovision for levy of tax for the transfer of right to use thegoods for consideration. Therefore, the revisions are dismissed. Sd/- Asst. Registrar /True Copy/ Sub Asst.Registrar To1.The Secretary, Sales Tax Appellate Tribunal, (Main Bench)Chennai2.The Appellate Assistant Commissioner, (CT) V, VI Floor, Kuralagam Annexe, Chennai-108.3.The Appellate Asst.Commissioner(CT) I, VI Floor, Kuralagam Annexe, Chennai-108 https://hcservices.ecourts.gov.in/hcservices/

4.The Appellate Assistant Commissioner(CT) VI,VI Floor, Kuralagam Annexe, Chennai-1085.The Appellate Assistant Commissioner (CT) VII, VI Floor,Kuralagam Annexe, Chennai-108.6.The Commercial Tax Officer(DG)Ambattur Assessment Circle, 5, High Court Colony, Villivakkam-49+ 9 ccs to Mrs.Dr.Anitha Sumanth, Advocate, SR.Nos 18975 to 18983+ 1 Ccs to the Special Government Pleader, SR.No.19086 to 19090 T.C.(R).No.432 of 2006 bk(co)pmk.9.6.2009.