20. Issue: Whether lease tax is payable where possession/
    custody/control of the asset has not parted by lessor?

Held : No

The petitioner company had submitted tender and were awarded work of removal of hard shale and carbonaceous shale with the help of heavy earth moving machinery. The said work was awarded by North Eastern Coal Fields. On clarification issued by the Comm. of Taxes, M/s North Eastern Coal Fields deducted sales tax as it was clarified that petitioner is liable to pay tax on said transaction of operating lease. The stand taken by Commissioner that the petitioner has recovered rent for machinery indirectly and it proves that there was transfer of right to use such machinery and lessee having full control over such machinery during the period of use. Such deduction of tax at source was challenged by the petitioner. It was contended by the petitioner that the control, custody or possession of the heavy earth moving machinery was at any point of time not handed over to lessee or work was not carried out by the lessee with the help of heavy earth moving machinery and, therefore, since effective possession/custody/control was not given to lessee no lease tax is payable. Following the decision in case of M/s Rungta Projects Ltd. vs. State of Bihar (108 STC 234) it was held that looking in to the terms and conditions of the contract and there was no material brought to the notice to show that the control custody or possession was given to lessee, no lease tax was payable and accordingly repetition was allowed and the lessee was directed not to deduct the tax. While dealing with the petition, decision in case of M/s Rashtriya Ispat Nigam Ltd. vs. CTO [77 STC 182) (A.P)], State of Andhra Pradesh vs. Rashtriya Ispat Nigam Ltd. [uphelding 77 STC 182] [126 STC 1149 (SC)] and 20th Century Finance Corp. vs. State of Maharashtra [119 STC 182, (SC)] were referred.

[Saumya Mining Pvt. Ltd. vs. Commissioner of Taxes, Assam & Others (146 STC 343) (Guwahati HC) ]

21. Issue: Diesel generating set. Whether electrical goods or plant and machinery?

Held : Plant and machinery

The appellant was a partnership firm engaged in the business of diesel generating sets. Said diesel generating sets were leased out and were subjected to lease tax by the Sales Tax Authority, treating it as Plant & Machinery. Under the Karnataka Act, lease tax is payable on leasing of plant and machinery. However in view of the appellant, diesel generating sets were not plant and machinery but were electrical goods as diesel generating sets were used to generate electricity and under the Karnataka Act, on electrical goods, when leased out, no lease tax was payable. Dismissing the contention of the appellant, it was held that diesel generating sets were plant and machinery. Ratio as laid down in the case of M/s. Scientific Engg. House Pvt. Ltd. vs. Comm. of Income Tax (157 ITR 86)(SC) applied.
 

[Venkateshwara Engineering Works vs. Addl. Comm. of Commercial Taxes, Zone II, Bangalore (146 STC 681)]

22. Issue: Optional warranty charges, whether form part of ‘sale price’?

Held : No

Respondent i.e,. the dealer was a manufacturer of refrigerators and their parts at its factory at Faridabad and manufactured goods were brought to their sales depot at Ghaziabad. Dealer had collected additional Rs. 300/- to Rs. 385/- per refrigerator, for additional warranty provided for a period of four years, after expiry of period of one year of the warranty. Said optional warranty charges collected were added to the taxable turnover of the dealer and were taxed.
 

In view of the dealer, said warranty charges were optional and therefore it was not part of turnover and not liable to tax. The Appellate Authority and the Tribunal decided the case in favour of dealer. Being aggrieved, the State filed revision petition before the High Court and accordingly following questions of law were framed.

1. Whether the Sales Tax Tribunal was legally justified to hold that warranty charged by the dealer from the customers is not a part of taxable turnover despite the fact that section 2(i) of the U.P Sales Tax Act, 1948, indicates otherwise?
    

2. Whether on the facts and in the circumstances of the case, the Sales Tax Tribunal was legally justified to hold that warranty charged by the opposite party dealer from the customers is not a part of taxable turnover ignoring the fact that in the case of Commissioner of Sales Tax, Delhi Administration vs. Prem Nath Motors (P) Ltd. [1979] 43 STC 52 (Delhi); STI 1979 Delhi 1, such charges were held to be a part of sale price?

While dealing with the matter, it was observed that both: the appellate as well as Tribunal confirmed, that amount realized at Rs. 300/- to Rs. 385/- per refrigerator were the service charges after one year of sale of refrigerator and said service contract was quite optional. Decision in the case of CTO vs. Kelvinator of India Ltd. (90 STC 336) & CTO vs. Weston Electronics Ltd. (87 STC 522) were referred to wherein it was held that if the dealer is charging one sale price irrespective of warranty for second and subsequent years then the position may be different, but if it is optional to the purchaser to avail the benefit of warranty or not to avail in the second and subsequent years, for which separate payment is made in addition to sale price, then separate payment cannot be included in sale price. In view of above petition filed by State was dismissed.
 

[Comm. of Sales Tax vs. Kelvinator of India Ltd. (146 STC 651) (Allahabad High Court)]

23. Issue: For claiming deduction u/s 5(3) of the CST Act, mere filing of Form ‘H’ sufficient?

Held : No

For claim u/s 5(3) of the CST Act, the appellant only produced declaration in Form ‘H’. Assessing Officer declined to accept the appellant’s claim based solely on Form ‘H’ and disallowed the claim of appellant u/s 5(3) of the CST Act. While passing the assessment order, it was observed by the Assessing Officer that in absence of bill of lading, the agreement or an order of foreign buyer and certificate of export, the claim for exemption was not granted.
 

Since, appellant had filed writ against said the order and are now having all relevant documents in support of their claim, court directed them in the interest of justice to file an appeal against said order of assessment in a stipulated time. The court disposed of the said writ based upon earlier decided writ petition of the same Court on the similar issue (W.A. No. 458 of 1997 decided on 3rd Oct. 2001), wherein it was held that mere filing of Form ‘H’ alone to claim exemption u/s 5(3) of the CST Act would not be sufficient and it was open to the Assessing Officer, to conduct a detailed enquiry to find out whether particulars contained in Form ‘H’ are true or not.
 

[Gentlemen Exports & Another vs. State of Tamil Nadu & Others (146 STC 298) (Madras High Court)]

24. Issue: Meaning of ‘Due’ and 'recoverable'

State of Madhya Pradesh pronounced Kar Vivad Samadhan Yojana, 2002 for liquidating the arrears of tax under Local Act as well as CST Act. The Appellant had availed the benefit of Deferment of Payment of Tax Rules, 1994, whereby appellant was allowed to pay the deferred tax at the future date. According to appellant the amount of deferred liability on cut off date (date fixed under the scheme was 31st March, 2001) as per Kar Vivad Scheme be treated as tax ‘due’ and are entitled to claim benefit of said Kar Vivad Scheme, but said claim was denied by the department. Therefore writ was filed where the appellant agitated precisely whether the amount of liability of tax which was determined but had been ‘deferred’ to a future date, can be said to be a tax ‘due’ to the extent benefit determined for the purpose of Kar Vivad Scheme.
 

The appellant was assessed and as per deferment scheme, taxes were deferred and demand notice was issued, but was made with reference to a future date to which liability had been deferred (herein this case, liability deferment was beyond the period of cut off date; i.e., 31st March, 2001). Based on this fact it was observed that though the liability was determined and deferred but was deferred after 31st March, 2001 (i.e., cut off date for scheme) it could not be said in the context of scheme that amount of deferred tax was ‘due’ for payment as on 1st April, 2001. The demand notice clearly indicated that tax which was deferred was due for payment after 1st April, 2001. When the amount of tax liability had been deferred to a date subsequent to date of 1st April, 2001, it was payable on the date on which it was declared payable and not at the time when it was declared payable; i.e., the date of assessment order. In short amount was not recoverable before 1st April, 2001. As per Kar Vivad Scheme the amount of tax should be ‘due’ and recoverable. In the present case the amount was due but not recoverable on cut off date, accordingly plea of the appellant was not accepted and writ was rejected.
 

[GEI Engg. Ltd. & Another vs. Addl. Comm., Commercial Tax, Bhopal & Others (146 STC 177) (Madhya Pradesh High Court)]

25. Issue: Can ‘Dry ice’ be treated as consumable stores?

Held : Yes

Respondent assessee carrying on business of manufacturing Ice-cream, claimed set off in respect of tax paid on dry ice contending that the same was an item of consumable stores. Assessing Officer disallowed the set off on same holding that dry ice was purchased to facilitate transportation of manufactured goods and did not form an item of consumable stores. The Tribunal following unreported decision of a Gujarat High Court, in the case of M/s. S.L.M. Maneklal Industries Ltd. vs. State of Gujarat, S.T. Reference No. 8 of 1978 allowed the set off by holding that the activity of manufacture must include everything done up to the stage of making manufactured product available for sale as manufactured; i.e., as ice-cream at the selling centres. Being aggrieved by the order of Tribunal, State filed reference before the High Court. The following question of law was framed.
 

"Whether on the facts and in the circumstances of the case, the Gujarat Sales Tax Tribunal was justified in law in allowing set-off under rule 42 of the Gujarat Sales Tax Rules, 1970, on the purchase of dry-ice made by the opponent?"
 

Following the principles of commercial expediency it was held that ‘Dry ice’ is ‘consumable stores’. Ratio as laid down in case of M/s. J. K. Cotton Spinning & Weaving Mills Co. Ltd. vs. Sales Tax Officer (16 STC 563)(SC) & Vasuki Carborundum Works vs. State of Gujarat (43 STC 294) (Guj.) was applied in present case. The cases cited above have elaborately discussed term ‘consumable stores’. Accordingly, High Court upheld the decision of Tribunal.
 

[Comm. of Sales Tax vs. Vadilal Dairy Frozen Food Industries (146 STC 9) (Gujarat High Court)]