The applicant contended that it had only provided service to GPPL by way of supply of power and that there was no intention of providing any equipment on hire. Thus the transaction was not for giving possession of goods to lessee and therefore was not a lease transaction.

The applicant submitted that there was no delivery of possession of generators. The applicant was only supplying power by operating generators and no control of operating the same was given to GPPL.

Further, as per the agreement, the consideration payable was fixed on the basis of supply of electricity. If there was no supply in a particular month, no bill was raised.

The agreement was for supply of uninterrupted power. Alternatively, the applicant also submitted that the whole system of distribution network and cabling of electricity supply was like any another electrical installation done in a factory and the same being immovable property, the Lease Act was not applicable.

The applicant requested for grant of prospective effect to the determination order, if the transaction was held liable to tax.

The Commissioner summarized the applicant’s arguments as follows:

1. The essence of the contract was for supply of uninterrupted power.
    

2. It was a sale of electricity generated by using generators.
    

3. No particular number of generators was intended to be given on hire.
    

4. The agreement was for providing power and not leasing of any equipment.

However, the Commissioner relied on the judgment in the case of M/s. Bharat Sanchar Nigam Ltd. [145 STC 91 (SC)] wherein it has been laid down that the transaction in order to constitute the transfer of right to use goods must have the following attributes.

1. There must be goods available for delivery.

2. There must be a consensus ad idem as to the identity of the goods.

3. The transferee should have a legal right to use the goods.

4. For the period during which the transferee has such legal right, it has to be to the exclusion of the transferor.

5. Having transferred the right to use the goods, the owner cannot again transfer the same rights to others.

The Commissioner looked to the relevant clauses of the agreement, which defined the scope of work.

As per the scope of work, the supply of electricity was the responsibility of GPPL only and not the applicant contractor. It was the responsibility of GPPL to provide power in pursuance of which GPPL had contracted for leasing of diesel electric generators belonging to the applicant contractor.

The agreement also provided for all the equipments necessary for executing the contract to be approved by GPPL and the technicians to be approved by GPPL.

The various clauses of the contract satisfied the attributes as laid down by the Supreme Court in BSNL judgment as regards goods available for delivery and consensus ad idem as to the identity of the goods. Also the clauses on sub-letting and termination of the contract satisfied the other attributes as regards the transferee having a legal right to the exclusion of the transferee and the owner not having the right to transfer the same rights to others.

Thus the contract was for lease of generators sets. The consideration received by the applicant formed the sale price in respect of right to use the diesel electric generator sets.

In this case, the movement of goods was from Maharashtra to Gujarat, therefore the transaction was an inter-State lease transaction governed by the provisions of CST Act, 1956.

As regards the request for grant of prospective effect, it could be seen that the transaction involving lease was settled by the Supreme Court judgment in BSNL and thus there being no statutory misguidance, the request was rejected.

The applicant is a manufacturer of ‘interlocking paver blocks’ and has entered into an annual contract with M/s. Bharat Petroleum Corporation Ltd. (BPCL), Mumbai for supplying and laying of C.C. Paver Block at approach roads and courtyards of petrol pumps owned by BPCL.

The applicant does not wish to opt for composition schemes as per section 42 of MVAT Act, 2002. Therefore the turnover of sales for levy of tax has to be determined under Rule 58 of MVAT Rules, 2005.

The applicant submitted that the impugned product was a kind of brick. The Paver Blocks provide a cement concrete pavement, which has water permeability and water holding properties, and also serves the purpose for which the asphalt or concrete pavement is being made.

The applicant contended that there was a specific entry C-II-60 under the BST Act, 1959 which covered blocks made of cement and fly ash. Under the MVAT Act, 2002, there is no specific entry for Paver Blocks. However, these blocks are made from cement and fly ash and are in the nature of bricks, covered by entry C-3 of MVAT Act, 2002, liable to tax at 4%.

The applicant submitted that the contract was for civil work and Rule 58(1) of MVAT Rules, 2005 became applicable. The applicant was thus entitled to a deduction of 30% from full contract consideration and the balance turnover was liable to tax at 4%, since all the goods in which the property was transferred were taxable at 4% being covered by schedule ‘C’ of MVAT Act, 2002.

The Commissioner observed that under the MVAT Act, 2002, Schedule Entry C-3 read as "all kinds of bricks including fly ash bricks and refractory bricks and monolithic, asphalting roofing tiles, earthen roofing tiles". The applicant had contended that this was similar to the contents of Interlocking Paver Blocks,

The Commissioner examined the product literature submitted by the applicant and the extracts from the internet and concluded that ‘fly ash bricks’ would cover ‘blocks made from cement and fly ash’.

Thus the product ‘Interlocking Paver Blocks’ which was nothing but fly ash concrete blocks would be covered by Schedule Entry C-3, attracting rate of tax at 4%.

The Commissioner further observed that the nature of contract of the applicant being a civil contract, the applicant was entitled to claim a deduction of 30% which is meant for ‘civil works like construction of buildings, bridges, roads, etc. specified in rule 58(1) of MVAT Rules, 2005.

After taking the deduction u/rule 58(1), the applicant had to levy tax on the balance amount at the rates applicable for the materials in which the property was transferred as per the Schedule appended to the MVAT Act, 2002.

The applicant is a company limited by guarantee and not having a share capital. It is registered as a Copyright Society under the Copyright Act.

The objects of the company as laid down in its Memorandum of Association include carrying on business in India and abroad of issuing or granting licence for the public performance of gramophone records, for recording of literary musical works on behalf of the copyright owners, to purchase from manufacturers of records and owners of copyrights any of the rights or remedies of the proprietors under the Copyright Act, 1957, to distribute the money received by the company after deducting expenses amongst its members.

The applicant contended that it was not a dealer under the MVAT Act, 2002 on account of the following reasons:

1. The applicant was not a society engaged in the business of buying and selling of goods on behalf of the members. It only granted licences to a third party and remitted the consideration received from the third party to its members.

2. The applicant did not work in the capacity of an agent. It only granted licences to perform the music belonging to the music owners. The applicant was not the owner of the copyright nor was he an agent of the music company.

3. The applicant did not grant license after taking the delivery of the property or after the copyright owner transferred the copyright to the society. Since there was no delivery of property, there was no principal agent relationship. The applicant merely acted as a facilitator for collective management of copyrights.

4. The applicant was not receiving any consideration from its members or from the third party for carrying out the functioning or granting or issuing of licences but was only entitled to deduct expenses while distributing the fees amongst its members.

The applicant further prayed that, if it was held as a dealer, then the determination may be given a prospective effect.

Case Laws relied upon

1. State of Gujarat vs. Vivekanand Mills [19 STC 103(SC)]

2. Deputy Commissioner of Agricultural Income Tax & Sales Tax, Quilon vs. Travancore Rubber & Tea Co. [20 STC 520(SC)]

3. State of Gujarat vs. Raipur Manufacturing Co. [19 STC 1 (SC)]

4. Deputy Commissioner of Agricultural Income Tax & Sales Tax, Quilon vs. Midland Rubber and Produce Co. Ltd.[25 STC 57(SC)].

5. State of Madras vs. Gannon Dunkerley Co. (Madras) Ltd. [9 STC 353].

6. Madurai K.J.U. Sangam Ltd. vs. State of Tamil Nadu [45 STC 473(Mad)].

7. Khedut Sahakari Ginning and Pressing Society Ltd. vs. State of Gujarat [29 STC 105(SC)]

8. Anand Taluka Co-op. Cottonseed Ginning and Pressing Society Ltd. [87 STC 180 (Guj)].

9. M/s. Sahakari Khand Udyog [95 STC 572 (SC)].

The Commissioner observed that the applicant had entered into an agreement with a party in Delhi. Since the applicant resided in Maharashtra, the intangible good; i.e., ‘Copyright’ resided in Maharashtra and the sale was an inter-State sale under the CST Act, 1956.

As for the request for grant of prospective effect, it could be seen that there existed no ambiguity regarding the provisions of law. There being no statutory misguidance, the commissioner rejected the applicant’s prayer for prospective effect.