A transfer of the right to use goods necessarily involves delivery of possession by the transferor to the transferee.

This petition raises a ticklish but an interesting question for consideration whether transportation charges received by the petitioner - a transporter - from respondent No. 3 - a distillery - engaged in the business of manufacture of Indian made foreign liquor in connection with the transportation of India made foreign liquor from the distillery to various Government bonded warehouses, are liable to tax under section 3-F of the U. P. Trade Tax Act, 1948 (briefly, "the Act" ).

2. Article 366 of the Constitution of India came to be amended by the Constitution (Forty-sixth Amendment) Act, 1982. By the Amending Act, 1982, clause (29a) was inserted in article 366. Clause (29a), sub-clause (d) of article 366, which is relevant for the purpose of this case runs as under :

" (29a) tax on the sale or purchase of goods includes -

(a) to (c ). . . . . . . . .

(d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. "

3. Prior to the insertion of clause (29a) in article 366, trade tax which was formerly known as sales tax was chargeable on sale or purchase of goods but by clause (29a) the definition of the expression "sale or purchase" was made inclusive. In view of the constitutional amendment, consequential amendment was made in the Act. Section 3-F was inserted by U. P. Act No. 25 of 1985 with effect from September 13, 1985 which provides that the turnover relating to the business of transfer of right to use any goods for any purpose shall be liable to tax. Clause (h) in section 2 of the Act defining the word "sale" was substituted by U. P. Act No. 25 of 1985 with effect from February 2, 1983. Section 2, clause (h), sub-clause (iv) which is germane for this case, runs as follows :

" (h) sale, with its grammatical variations and cognate expressions, means any transfer of property in goods (otherwise than by way of a mortgage, hypothecation, charge or pledge) for cash or deferred payment or other valuable consideration, and includes -

(i) to (iii ). . . . . . . .

(iv) a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. "

4. The petitioner entered into an agreement with the distillery (respondent No. 3) vide agreements deed dated July 25, 1987, annexures 1 and 2 to the writ petition. Under the said agreements, the petitioner transported Indian-made foreign liquor produced by respondent No. 3 to various Government bonded warehouses and received transportation charges therefor. The assessing officer initiated assessment proceedings for the assessment years 1987 to 1991 against the petitioner in view of section 3-F of the Act bringing the transportation charges received by the petitioner from respondent No. 3 to tax taking the view that the petitioner transferred the right to use of its vehicles to respondent No. 3 for consideration and, therefore, that amounted to sale under section 2, clause (h) of sub-clause (iv) of the Act. Such stand of the department is seriously contested by the petitioner.

5. The contention of the petitioner is that transportation charges were being paid by respondent No. 3 for service under the agreements deed and that there was no transfer of the right to use the vehicles of the petitioner. It is contended that the petitioner does not have any vehicle of its own and that to fulfill the agreements it arranged vehicles from the open market for the use of respondent No. 3 and that since the petitioner has no vehicle of its own it could not have transferred the right to use of any vehicle to respondent No. 3

6. The question for consideration is whether on the facts and circumstances of the case transportation charges received by the petitioner from respondent No. 3, are liable to tax under section 3-F of the Act. To answer this question it is to be found whether there is transfer of the right to

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