These revisions which arise out of the common order dated 06.09.2013 involve common questions of law.
The revisionist has come up before this Court challenging the order of the Commissioner Tax Tribunal dated 06.09.2013. The revisionist is a Company engaged in the business of Leasing and Hire Purchase particularly leasing of the equipment, huge machinery, fleet of automobiles, office equipment. The revisionist is a financial lessor. 14 lease agreements were entered into by the revisionist company for the supply of equipment. Copy of the two agreements, one executed at Bombay dated 27.03.1995 between the revisionist-lessor and M/s. Rajiender Steels Ltd, and another agreement dated 18.09.1995 entered into between the revisionist-lessor and M/s. Sakura Seimitsu India Ltd. at Delhi, have been filed as Annexure-1 and Annexure-2 to the supplementary affidavit filed by the revisionist.
An assessment was made by the Assessing Officer for the first time on 28.06.2000 against the petitioner. The matter was carried in appeal before the the appellate authority and finally to the Trade Tax Tribunal and the Tribunal taking into consideration the decision of the Supreme Court in (2000) 6 SCC 12, 20th Century Finance Corporation Ltd and Another Vs. State of Maharashtra remanded the matter back to the authority for fresh adjudication. On fresh assessment, the assessing authority by his order dated 26.04.2006 has rejected the claim of non-taxability of the revisionist holding that at the time when the contract was entered into by the revisionist, the goods were not in a possession of the lessor and therefore, the situs of sales would be the place where the goods were actually transferred to the customer i.e. within the State of U.P.
Aggrieved, the revisionist preferred an appeal before the Joint Commissioner (Appeals) Trade Tax, Lucknow. The appellate authority has also rejected the appeal of the revisionist by order dated 21.12.2009 against which the revisionist preferred the second appeal before the Commercial Tax Tribunal. The Tribunal by the impugned order dated 06.09.2013 has partly allowed the appeal and remitted the matter to the Assessing Authority for determining the matter as regards whether the goods have been sent out of the State and whether the transaction would result in an inter-state sale and therefore, no sales tax could have been levied in the State of U.P.
I have heard Sri Bharat Ji Agarwal, learned Senior Counsel assisted by Sri Mudit Agarwal, learned counsel for the revisionist and Sri Sanjeev Shankhdhar, learned counsel for the respondents.
Sri Bharat Ji Agarwal has referred to the two lease agreements, one executed at Bombay and the other executed at Delhi in order to show that the agreements had been executed outside the state of U.P. He further submitted that an examination of the Schedule to the agreement executed between the revisionist and M/s. Sakura Seimitsu India Ltd. at Delhi, Annexure-1 to the supplementary affidavit would show that the location of the goods was shown as A-36 Sector VII and B-110, Sector V, NOIDA 201301 U.P. He has also referred to Clause 6.3 of the agreement to show that the lessee had inspected and selected the equipment and had signed the agreement relying on his own judgment.
The second agreement executed between the revisionist and Rajinder Steels Ltd has been filed as Annexure-2 to the supplementary affidavit and the schedule thereto also goes to show that the location of the equipment was Rajinder Steels Ltd, 23rd KM. Stone, Kalpi Road, Kanpur and that the manufacture/supplier was R.M. Machine (p) Ltd. Taneja Bhawan 78/284, Latouche Road, Kanpur. In this agreement also para 6.3 mentions that the lessee has inspected and selected the equipment and that the lessee has signed the agreement relying entirely on the lessee's own judgment. Thus, the submission of the learned counsel is two fold, namely:-
1. Both the agreements were executed by the revisionist outside the State of U.P. And therefore the situs of sale (deemed sale) would be outside the State of U.P. and therefore, would not be liable to levy of Trade Tax in the State of U.P.
2. Secondly, it is submitted that the location of the goods in the first agreement being at NOIDA and in the Second Agreement at Kanpur as per the Schedule appended to the agreements would also show that the goods were in existence and had been inspected by the lessee. It is submitted that there were 14 such agreements but the Tribunal has referred to only two agreements and there also it has not recorded any findings of fact regarding the place where the agreement was executed and the factum of existence of the goods even though the agreements had been filed before the Tribunal and therefore the Tribunal ought to have recorded a finding to that effect. Reference has been made by the learned Senior Counsel to the judgment of the Supreme Court reported in (2000) 6 SCC 12, 20th Century Finance Corporation Ltd and Another Vs. State of Maharashtra. So far as first question, namely, that the place where the delivery of goods is made cannot be made a basis of levy of tax on sales of goods, the Supreme Court in para 25 of the judgment has held as follows:
"We, therefore, find that the location or delivery of goods within the state cannot be made a basis for levy of tax on sales of goods. Under general law, merely because the goods are located or delivery of which has been effected for use within the State would not be the situs of deemed sale for levy of tax if the transfer of right to use has taken place in another State. Therefore, if the contention on behalf of the respondents that there would be no completed transfer of right to use goods till the goods are delivered is to prevail, then the respondents are further required to show that the contract of transfer of right to use goods is also entered into in the said State in which the goods are located or delivered for use. The State cannot levy a tax on the basis that one of the events in the chain of events has taken place within the State. The delivery of goods may be one of the elements of transfer of right to use, but the same would not be the condition precedent for a contract of transfer of right to use goods. Where a party has entered into a formal contract and the goods are available for delivery irrespective of the place where they are located the situs of such sale would be where the property in goods passes, namely, where the contract is entered into."
With regard to the second question as to whether the goods were in existence which flows from a factual finding that the goods are in actual existence, the Supreme Court in para 28 of the judgment has held as follows:
"No authority of this Court has been shown on behalf of the respondents that there would be no completed transfer of right to use goods unless the goods are delivered. Thus, the delivery of goods cannot constitute a basis for levy of tax on the transfer of right to use any goods. We are, therefore, of the view that where the goods are in existence, the taxable event on the transfer of the rights to use goods occurs when a contract is executed between the lessor and the lessee and situs of sale of such a deemed sale would be the place where the contract in respect thereof is executed. Thus, where goods to be transferred are available and a written contract is executed between the parties, it is at that point situs of taxable event on the transfer of right to use goods would occur and situs of sale of such a transaction would be the place where the contract is executed."
In para 35 of the judgment the Supreme Court has further emphasized that the right to levy tax on the goods emerges from the right to the use of goods and situs of sale would be the place where the contract is executed and not where the goods are located for use. Paragraph 35 (c) reads as follows:
"As a result of the aforesaid discussion our conclusions are these:
(a) ............................
(c) Where the goods are available for the transfer of right to use the taxable event on the transfer of right to use any goods is on the transfer which results in right to use and the situs of sale would be the place where the contract is executed and not where the goods are located for use.
......................."
From an examination of the judgment of the Tribunal, it is noticed that the Tribunal has not recorded any findings of fact with regard to the existence of the goods although the agreements entered into between the revisionist on one hand and the lessee were before the Tribunal and therefore, if the finding had been recorded by the Tribunal to that effect, the law laid down by the Supreme Court in the case of 20th Century Finance Corporation Ltd. (supra) would have squarely applied to the facts of the present case and the only inference which could have been drawn by the Tribunal would be that the first two agreements between the lessor on one hand and Rajinder Steels and others and the revisionist-lessor on the one hand and M/s. Sakura Seimitsu India Ltd. At Delhi on the other hand had been executed at Bombay and Delhi respectively and in both the cases the Schedule in no unmistakable terms demonstrated that the goods existed at Kanpur and NOIDA respectively and therefore the situs of sale would be outside the State of U.P. and no Trade Tax could have been levied on the goods merely because the goods were in the State of U.P. Even otherwise so far as the existence of the goods within the State of U.P. at Kanpur or at NOIDA is concerned it may be stated that the Tribunal has not recorded any finding of fact although it has noticed the existence of the two agreements entered into between the revisionist and the lessee.
In this view of the matter the impugned order of the Tribunal dated 06.09.2013. cannot survive and is accordingly quashed.
Since from a perusal of the impugned order of the Tribunal, it is noticed that the Tribunal has already remitted several matters to the Assessing Authority with the view of specifically recording his findings on the question of existence of the Hire Purchase Agreement and as to whether any inter-state sale came into existence or not, this matter is also referred to the Assessing Authority for re-determination and re-examination on the various points discussed hereinabove after giving an opportunity of hearing to the revisionist in the light of the observations made above.
With the aforesaid observations, these revisions are allowed.
Order Date- 4.8.2014 N Tiwari