JUDGMENT Prakash Krishna, J.
1. The dealer opp.party carried on the business of purchase and sale of industrial gas. For the assessment year 1987-88 the claim of the dealer opp.party that a sum of Rs. 1,66,700-60 was received by way of penalty from the customers for late return of cylinders and not by way of rent for transfer of cylinder with right to use it, was not accepted by the Sales Tax Officer. This order was confirmed in appeal but has been set aside by the Tribunal in second appeal No.320 of 1996 on the ground that there was no transfer of right to use cylinder. Aggrieved against the aforesaid order dated 9th of September, 1995, the present revision has been filed and the following point of law has been raised therein:-
"Whether on the facts and in the circumstances of the case, Trade Tax Tribunal was legally justified to set aside the tax imposed on the rent of cylinder on account of transfer of right to use the goods under Section 3F of the Act by the assessing authority and first appellate authority despite the fact that incriminating evidences on record indicate otherwise."
2. The case of the dealer is that the gas is supplied to customers in cylinders. The customers are entitled to retain cylinders for ten days. If a cylinder is retained for more than ten days, the customer is liable to pay a specified sum per day per cylinder as penalty. The disputed sum Rs.1,66,700/- represents this amount.
3. Heard the counsel for the parties and perused the record. The learned standing counsel submitted that the applicant has realized a sum of Rs. 1,66,700-60 towards the transfer of right to use the cylinder from its customers and the same is liable to be taxed after 1st of May, 1987 under Section 3 F of the U.P Trade Tax Act. In contra, the learned counsel for the dealer opp.party supported the order of the Tribunal and submitted that provision for rent is only to ensure timely return of empty cylinders. The learned standing counsel in support of his submission has placed reliance upon a judgment of Punjab Haryana High Court in Harbansh Lal and Anr. v. State of Harvana (1993) Vol. 88 STC 357. In this case the legality and constitutional validity of the various provisions of the Haryana General Sales Tax Act and the 46th Amendment of the Constitution was challenged. The constitutional validity of the provisions was upheld. It also considered the question of transfer of right to use the gas cylinder. The dealer was manufacturing and selling bone dry purified acetylene gas. The gas manufactured by the dealer was sold to the customers in the cylienders. The gas cylinders were permitted to be detained by the customers for a period 7-10 days depending upon the distance from the plant. One of the conditions was that the customer would render itself liable to pay damages or penal charges at the rate of Rs.l/- per cylinder per day. In this factual background it was held that the gas was supplied to the customers with the cylinders and the price for right to use the cylinder is included in the total amount which is charged from the customers for supply of gas which would fall within the definition of word "goods" which is supplied under the agreement of contract of sale. The contract of payment of Rs.l/- per cylinder per day for detaining the cylinder after the specified date would, it was held therein, be in continuation of sale and any money, thus, charged shall be included within the turnover of the petitioner. It was held that the sale of gas with cylinder as container and the detaining of cylinder beyond a particular period shall fall within the definition of "goods". As it involved the transfer of right to use the goods, any charges made thereupon shall be included in the turnover of the petitioner. This case no doubt supports the contention of the learned standing counsel. He pointed out that the aforesaid judgment has been confirmed by the Supreme Court in the case of Agrawal Brothers v. State of Harvana and Anr. (1999) 113 STC 317. From the report of the case it appears that the decision of Punjab and Haryana High Court in the case of Harbansh Lal (Supra) was challenged before the Supreme Court in the above case and the Supreme Court dismissed the appeal. It may be noted here that the Punjab and Haryana High Court has decided a number of writ petitions through the judgment delivered in the case of Harbansh Lal v. State of Haryana. The appeal before the Supreme Court was filed by those assessees who were dealers of hiring shuttering to builders and contractors who used it in the course of construction of buildings. The dealers of industrial gas and cylinders were not appellants before the Supreme Court. Therefore, the controversy before the Supreme Court was confined and limited to the extent of transfer of right to use shuttering materials to the builders and contractors. The Supreme Court therein rejected the submission of the appellant that there must be legal transfer of goods or that the transaction must be like a lease to deem the transfer as sale. It has come to the conclusion where there is transfer of right to use the goods for consideration the requirement of law is satisfied and there is a deemed sale. It was held that transfer of shuttering for consideration to builders and building contractors for use in the construction of buildings is a deemed sale.
4. The Andhra Pradesh High Court in Industrial Oxygen Company Pvt. Limited v. State of Andhra Pradesh (1992) 86 STC 539 has held that a manufacturer of industrial gases filled the gases produced by it in cylinder and sold them to customers, the gas cylinders in which the gas was sold were permitted to be detained by the customer for a limited period. After that stipulated period hire charges per cylinder per day were charged by the manufacturer. It was held that the hire charges so recovered were liable to be taxed as transfer of right to use the cylinders. In this case the High Court found that the manufacturer itself described the charges that were collected by it from the customers as 'hire charges'. The rent charges were for the use of the cylinders beyond the stipulated period and as such were taxable.
5. The learned counsel for the dealer opp.party has placed reliance upon a judgment of Kerala High Court in West Coast Industrial Gases Limited v. State of Kerala 2003 NTN (Vol.23) 964. In this case the dealer was engaged in the business of sale of industrial gases which are filled in cylinders. The purchasers were required to return the empty cylinders within ten days failing which they were required to pay certain charges by way of penalty. In this fact situation it has been held that the dealer had only sold the industrial gas in cylinders and provision for payment of rent provided on the reverse of the sale bill was only to ensure that the cylinders are returned promptly by the customers. In para 6 it has been held that "the incidental receipt of certain amount by way of rent for the delayed return of the cylinders by the customers will not fall within the meaning of expressions " transfer of right to use any goods". In that case a judgment of Orissa High Court in Asiatic Gases Limited v. State of Orissa (2003) 121 STC 405 was also cited. The Kerala High Court preferred to accept the view taken by the Orissa High Court. The relevant portion of the judgment is extracted below:-
"On a consideration of the decisions of the Andhra Pradesh and Orissa High Courts, we are inclined to accept the view taken by the Orissa High Court wherein it is clearly stated that the term 'transfer of the right to use' denotes and agreement of transfer of the right to use the cylinders for the first 14 days only and beyond that period the detention was without authority or in total disregard of the terms of the contract and as such there was no transfer of the right to use the cylinders beyond the free loan period of 14 days and the rent charged can only be treated as penalty. The Andhra Pradesh High Court in fact has not set out any principle or logic behind the conclusion reached by them to the effect that the consideration received by the assessee will amount to consideration for transfer of the right to use the goods. The High Court also assumed that mere possession of the cylinders with the customers will amount to transfer of goods."
6. There appears to be divergence of opinion among the various High Courts on the present issue. The Kerala and Orissa High Courts have held that in such circumstances there is no transfer of right to use the cyilinders to the customers by the dealer. The Andhra Pradesh, Punjab and Haryana High Courts have taken a different view. I am broadly in agreement with the view taken by the Kerala and Orissa High Court. In my view the main object of the business is to sell gas. Gas cannot be sold except in a container. Probably the value of gas container is more than the value of gas contained therein. The stipulation to return the gas cylinder within a specified period failing to which the customer has to pay certain sum by way of rent or penalty is for the prompt return of the gas cylinders to the dealer. There is no intention on the part of the dealer to transfer the possession of the cylinder for use. The idea of charging certain sum per day per cylinder as penal charges, or whatever may be the nomenclature is to ensure prompt return of the empty cylinders. The receipt of such amount is incidental receipt and not towards the receipt of charges for the use of cylinder. The judgment in the case of Punjab and Haryana High Court in the case of Harbansh lal is of little help to the department. In that case the gas was supplied to the customers and it was argued that the amount which is charged from the customers for the supply of the gas would not fall within the definition of word "goods". This contention was repelled. By way of passing remark it has been observed that the detention of the cylinder beyond particular period shall fall within the definition of "goods". Precisely the point that the sum charged for detention of the cylinder beyond the stipulated period would amount the right of transfer to use the cylinder or not was not raised therein. Similarly in the case of Industrial Oxygene Company Pvt. Limited (Supra) the High Court observed that the dealer itself treated the receipt as rent charges which were collected by it from the customers as hire charges.
7. The observation of the Supreme Court though made in a different context in the case of State of Andhra Pradesh v. Rashtriya Spat Nigam Limited 2002 UPTC 273 has some bearing to the facts of the present case. The dealer supplied certain machinery to the contractors and collected hire charges. The High Court on the basis of the terms and conditions in the agreement came to the conclusion that the transaction did not involve the transfer of right to use machinery in favour of the contractor. The judgment of the High Court was confirmed by the Supreme Court on the finding that the contractor was not free to make the use of machinery for the works other than the project work of the dealer and as such there was no transfer of right to use the machinery. Although the contractor was made responsible for the custody of the machinery while it was on the site but it did not militate against the dealer's possession and control of the machinery. In the present case also though the possession of the gas cylinder was transferred by the dealer to the customer but the said cylinder was to be used only for a limited period to take out the gas from it.
8. The charges realized by the dealer for late return of the cylinder is in the nature of detention charges and it is akin to the damages for not performing the contract within the stipulated time. It is made clear that whether such charges shall be the part of the sale price or not, being not involved in the present revision, is left undecided.
9. In view of the above discussion I am of the opinion that there was no transfer of right to use cylinder. There is no legal error in the order of the Tribunal. The revision is dismissed.