The central legal point established in the judgment is that the determination of a 'sale' under the Maharashtra Value Added Tax Act, 2002 depends on the effective control and possession of the goods, as evidenced by the terms and conditions of the contract.

JUDGMENT :

NEELA GOKHALE, J.

1. The present Appeal is filed under Section 27 of the Maharashtra Value Added Tax Act, 2002 (the Act) impugning the judgment and order dated 25th September 2020 passed by the Maharashtra Sales Tax Tribunal, Pune at Pune (the Tribunal) in VAT Appeal Nos. 376 and 377 of 2017.

2. By order dated 15th July 2022, the Appeal was admitted by formulating the following question of law:

“Whether the Sales Tax Tribunal on the true and proper construction of Section 2(24) of Maharashtra Value Added Tax Act, 2002, was justified in holding that the transaction entered into by the Respondent with its customers with specific reference to the discernible and distinguishing contract clauses does not amount to “sale” under the Maharashtra Value Added Tax Act, 2002?”

3. The facts giving rise to the present Appeal are that:

Respondent company is engaged in the supply of tangible goods and services and liable for service tax under the Finance Act and is also registered under the Act and the Central Sales Tax Act, 1956 (CST Act). It owns a fleet of 370 cranes of different capacities which are used for erection of industrial plans, refineries, petrochemical complexes, windmills, etc. Respondent lets out its cranes as per work order issued by its client to be deployed at the client’s location with the help of skilled employees comprising of crane operators and riggers of Respondent.

4. In pursuance of a work order dated 1st April 2008, Respondent gave on hire and deployed few cranes to its client namely Suzlon Infrastructure Services Ltd. (SISL) on certain terms and conditions. It is the case of Respondent that on 3rd September 2013 the Investigation Officer of Appellant visited place of business of Respondent and a notice in F-603 followed calling for production of records. Respondent produced all the necessary documents but the Investigating officer formed an opinion that the business activity of Respondent of giving cranes on hire was covered within the definition of ‘sale’ under the Act and thus Respondent was liable to pay Value Added Tax (“VAT”). Respondent failed to file the revised return leading to issuance of a notice in F-302 and initiation of proceedings under Section 23(6) of the Act. Respondent filed its reply dated 23rd February 2015 and the Investigating Officer proceeded to issue an order of assessment under the Act. Aggrieved by the assessment order dated 31st March 2015 and consequent notice of demand, Respondent preferred an Appeal before the First Appellate Authority-Deputy Commissioner of Sales Tax, Appeals-2, Pune Division, Pune. The Appeal came to be dismissed by order dated 31st January 2017. Aggrieved, Respondent preferred the VAT Appeals bearing Nos. 376 and 377 of 2017 before the Tribunal raising a main ground, amongst others, that under the works contract only services were rendered and hence the order impugned was unsustainable. By a judgment and order dated 25th September 2020, the Tribunal allowed the Appeals holding that the cranes were merely hired by Respondent to SISL under the work order and there was no ‘transfer of right to use’ within the definition of ‘sale’ under the Act, and only a service was given. Hence no VAT was payable. It is this order which is impugned by Appellant by way of the present Appeal.

5. Before dealing with the submissions of contesting parties, it is necessary to advert to the provisions of the Act and the interplay between the legal position and the terms and conditions of the contract. Section 2(24) of the Act defines ‘sale’ as under:

“2(24) “sale” means a sale of goods made within the State for cash or deferred payment or other valuable consideration, but does not include a mortgage, hypothecation, charge or pledge; and the words “sell” or “buy” and “purchase” with all their grammatical variations and cognate expressions, shall be construed accordingly.

Explanation - For the purposes of this clause:

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(iv) the transfer of the right to use