Vehicles supplied at different hire charges on the basis of verbal agreement, whether it amount to be treated as transfer of right to use goods and attract Sales or VAT? Hon’ble Guhati HC held, that the question of transfer of right to use any goods is essentially question of fact which has to be determined, in each case, having regard to the terms of the contract entered into by the parties. In the said case there is no materials made available to conclude whether it is lease or not, the HC remanded the case and making it clear to respondent that they shall find out and informed as to how the transactions, in connection with giving of vehicles by petitioner, on hire, to the respondent amounted to transfer of right to use the vehicles from the end of the petitioner to respondent.
Reaching to conclusion HC has referred various decisions, ALPHA CLAYS (2004) 135 STC 107; RASHTRIYA ISPAT NIGAM LTD. (2002) 126 114 SC; AGGRWAL BROTHERS (113 STC 317 SC; BSNL 3 VST 95 SC and (2006) 145 STC 91; 20th CENTURY FINANCE CORP. LTD. (2000) 119 STC 182 SC.
HC explaining the BSNL case its earlier decision in 20th CENTURY, the apex court pointed out that while determining the situs of transfer of the right to use goods, the court have not observed, in 20th CENTURY that the delivery of goods was essential condition for the purpose of completing the process of transfer of right to use; rather, the Constitution Bench held, points out the SC, in BSNL, that the goods must be available, when the transfer of right to use the goods takes place, and that the Constitution Bench also recognized that for oral contracts, the situs of transfer may be the place, where the goods are delivered.
HC further stated that, apex court held, in BSNL, that the delivery of the goods may not take place simultaneously with the transfer of the right the goods, but the goods must be in existence, deliverable, when the right is sought to be transferred, and must, at some stage, be delivered.
In view of above it is clear that, in order to constitute a transfer of right to use goods, there must be parting with possession of the goods for the limited period of its use in favour of the lessee by lessor is must. The effective control must not remain with the owner, but must transfer to the lessee for use by the latter at his sweet will and it is this transfer of the effective control of the goods, which attract tax. GVAT Tribunal in ROOPERA TRANSPORT – S.A.NO. 330 of 2001 decision dt. 11.04.2008 has taken the same view and allowed the appeal in favour appellant. Source - MAHESH TRAVELS (P) LTD. v. ONGC (2009) 22 VST 103.