COMMISSIONER TRADE TAX Vs. INDUSTRIAL GAS COMPANY

JUDGEMENT

(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:

(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.