The Chhattisgarh High Court has held that Value Added Tax (VAT) on the lease charges paid by the Railways Department to M/s Ultratech Cement Limited, i.e, the Petitioner Company.
The levy of tax was under Section 2(s)(vi) of the VAT Act for the assessment year 2009-10. The Indian Railways had floated a Scheme known as “Own Your Wagon Scheme” to which the Petitioner Company expressed their interest in purchasing Wagons and for which necessary proposal was put forth by them. The proposal was approved by the Railways Board.
In respect of the said approval of the proposal put forth by the Petitioner Company, two Contracts under the “Own Your Wagon Scheme” were entered into between the President of India through the Chief Marketing and Sales Manager, South Eastern Railways and the Petitioner Company and the Petitioner Company started getting lease rent from the Railways. It is the tax i.e. VAT on the said lease rent for the assessment year 2009-10 for which the lease rent on Rs.29,20,347/- at the rate of 18% which came to Rs.4,08,849/- which was assessed by the Assessing Officer treating it to be the lease rent obtained for transfer of right to use under Section 2(s)(vi) of the VAT Act.
Justice P. Sam Koshy relied on various judicial decisions wherein it was held that the taxable event is the transfer of right to use goods and not the right to use goods or the use of goods. Therefore, the right to use goods or the use of goods is not the relevant factor to justify the levy of tax.
Quashing the assessment orders, the Court held that “For all the aforesaid facts and circumstances and also the Judgment of the Hon’ble Supreme Court in the case of “20th Century Finance Corpn. Ltd.” (supra) and the subsequent Judgments of various High Courts including the High Court of Chhattisgarh, this Court is of the opinion that the Orders of the assessment so made by the Assessing Authority and the rejection of the Revision by the Revisional Authority both being in contravention to the provisions of law and also contrary to the Judgments of the Hon’ble Supreme Court, the same thus would not be sustainable and therefore both the Orders deserve to be set-aside/quashed.”
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