1 2025:CGHC:18326-DB AFR HIGH COURT OF CHHATTISGARH AT BILASPUR WA No. 303 of 2023 1 - State Of Chhattisgarh Through Secretary, Department Of Commercial Taxes, Mantralaya, Mahanadi Bhavan, Nawa Raipur, Atal Nagar, Raipur, District - Raipur, Chhattisgarh. 2 - The Commissioner Of Commercial Tax, Vanijyik Kar Bhavan, Civil Lines, Raipur District - Raipur, Chhattisgarh. 3 - The Additional Commissioner, Commercial Tax, Raipur, District Raipur, Chhattisgarh. 4 - The Divisional Deputy Commissioner Of Commercial Tax, Raipur, District Raipur, Chhattisgarh. ... Appellants versus 1 - M/s Ultratech Cement Limited A Company Duly Incorporated Under The Companies Act, 1956 Having Its Registered Office At B Wing, Ahura Centre, 2nd Floor, Mahakali - Caves Road, Andheri-East, Mumbai - 400093 And Office At Ravinagar, Raipur 492001 Chhattisgarh. Through Its Authorized Signatory Of The Company Shri Anil Purohit, S/o. Shri Suraj Prakash Purohit, Aged About 32 Years, Resident Of Hirmi Cement Works (Township), Hirmi, District - Baloda Bazar Bhatapara, (CG) . ... Respondent(s) For Appellant(s) : Shri Rahul Tamaskar, Govt. Advocate. For Respondent(s) : Shri Neelabh Dubey with Ms. Smiti Sharma, Advocates. KRISHNA KUMAR BARVE Digitally signed by KRISHNA KUMAR BARVE Date: 2025.05.02 18:36:19 +0530 2 Hon'ble Shri Sanjay K. Agrawal & Hon'ble Shri Deepak Kumar Tiwari, JJ Judgment on Board (23/04/2025) Sanjay K. Agrawal, J 1. Invoking jurisdiction of this Court under Section 2 (1) of the Chhattisgarh High Court (Appeal to Division Bench) Act, 2006, the appellant herein has preferred this Appeal challenging the legality, validity and correctness of the order passed by the learned Single Judge in WPT No.128/2015 on 7.12.2022 whereby the learned Single Judge has set-aside/quashed the order dated 30.5.2015 passed by the Revisional Authority as also the order dated 22.12.2014 passed by the Assessing Officer. 2. The aforesaid challenge has been made on the following factual backdrop:- (i) The then South Eastern Railway had floated a scheme known as “Own Your Wagon Scheme” to which the writ petitioner i.e. M/s Ultratech Cement Limited expressed their interest in getting the wagons on lease. Accordingly, necessary proposal was approved. In respect of the said approval of the proposal made by the writ petitioner, two contracts under the said Scheme were entered into between the President of India through the Chief Marketing and Sales Manager, South Eastern Railways and the petitioner company earlier known as M/s Larsen & Turbo Limited. The 3 said contracts were signed in Kolkata in the year 1996. As per the contracts, the wagons proposed to be purchased by the petitioner company were to be manufactured by two different companies approved by the Government of India, Ministry of Railways namely, M/s Texmaco Limited, Kolkata and M/s CIMMCO Birla Limited, Bharatpur (Rajasthan). As per the said contracts, the wagons manufactured on behalf of the petitioner company were to be directly handed over to the Railway authorities. M/s CIMMCO Birla Limited handed over their manufactured wagons to the Station Superintendent, Bharatpur Railway Station (Rajasthan) (Western Railways). As regards the wagons manufactured at M/s Texmaco Limited, the same were to be handed over to the Station Master, Belgharia Railway Station (West Bengal) under the then South Eastern Railways. After the wagons were manufactured and handed over to the Indian Railways at Bharatpur (Rajasthan) and Belgharia (West Bengal), the petitioner company started getting lease rent from the railways and the lessee i.e. the Government of India was to pay @ 16% per annum of the original procurement price on the wagons transferred to the Railways for the first 10 years and then 1% per annum on the original procurement price for the next 10 years. Thereafter on the same day i.e. 14th March, 1996, an agreement was executed between the South Eastern Railways and the petitioner company. The period of lease was 20 years. The lessee was required to pay @ 16% per annum on the current cost (original procurement price) of the wagon leased to the Railways and for the secondary period of 10 years, the lessee was required to pay @ 1% per annum of the current cost (original procurement price) of the wagon. As per the agreement, the South Eastern Railways continued 4 to pay lease rent charges to the petitioner company. Subsequently after formation of the new State of Chhattisgarh on 1.11.2000, a new division was constituted in the name of ‘South Eastern Central Railways’ in the year 2002. Accordingly, the lease rent was subjected to the provisions of Chhattisgarh Commercial Tax Act/Value Added Tax Act, 2005. In the present case, the petitioner company challenged the assessment year 2009-10 for which the lease rent of Rs.29,20,347/- at the rate of 18% which came to Rs.4,08,849/- which was assessed by the Assessing Officer in Revision, but the Revisional Authority has dismissed the Revision, which led to filing of the Writ Petition before this Court. The learned Single Judge has granted the writ petition following the judgment of the Supreme Court in the matter of 20th Century Finance Corpn. Ltd and Another Vs. State of Maharashtra1 holding that the writ petitioner is not liable to pay under the CG Commercial Tax Act/VAT Act. Accordingly, the orders passed by the Revisional Authority and the Assessing Officer were set aside/quashed. Feeling aggrieved by the order passed by the learned Single Judge, the State of Chhattisgarh has preferred this Writ Appeal. 3. Mr. Rahul Tamaskar, learned counsel for the appellant would submit that the learned Single Judge has failed to appreciate that on 14.3.1996, when the agreement was entered into between the South Eastern Railways and Larsen and Toubro Limited (for short L&T), the headquarter of South Eastern Railways was at Kolkata and the headquarter of L&T was at Mumbai and, therefore, the agreement was executed at West Bengal. However, in the year 2002, a 1 (2000) 6 SCC 12 5 Railway Division namely, South Eastern Central Railway was formed with its headquarters at Bilapur. The office of the writ petitioner is also located in the State of Chhattisgarh and, therefore, the initial place of execution of agreement being Kolkata has no connection with the subject agreement. Further original parties to the agreement i.e. South Eastern Railways and L&T have nothing to do with the said agreement. Hence reliance placed by the learned Single Judge in the matter of 20th Century Finance Corpn. Ltd (Supra) is of no help to the writ petitioner. Therefore, the order passed by the learned Single Judge may be set aside and the orders passed by the Revisional Authority as well as the Assessing Officer may be restored. 4. Per contra, Shri Neelabh Dubey, learned counsel appearing on behalf of the writ petitioner would submit that admittedly, the agreement between the South East Central Railway and L&T has been executed on 14.3.1996 at Kolkata i.e. outside the territory of the State of Chhattisgarh and secondly, the wagons for which the petitioner company is not liable being the subject matter of State of Chhattisgarh. 125 wagons were delivered at Rajasthan and Kolkata. Further lease rent charges cannot be taken as taxable income in view of the provision contained under Section 2(s)(vi) of the Act, 2005. The learned Single Judge has rightly granted the writ petition following the judgment of the Supreme Court in the matter of 20th 6 Century Finance Corpn. Ltd (Supra) and as such, the Writ Appeal deserves to be dismissed. 5. We have heard learned counsel for parties, considered their rival submissions made herein-above and also gone through the records with utmost circumspection. 6. A short question that arises for consideration is whether the Assessing Officer was justified in levying the VAT Act, 2005 on the lease rent received by the writ petitioner by virtue of Section 2(s) (vi) read with Section 22 of the Act, 2005 and further the Revisional Authority was justified in affirming the same? 7. To consider the said question, it would be apt to reproduce the provisions contained under Section 2(s)(vi) of the Act, 2005:- “2(s). Sale with all its grammatical variations and cognate expressions means any transfer of property in goods for cash or deferred payment or for other valuable consideration and includes - xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx (vi) a transfer of the right to use any goods including leasing thereof for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration.” 8. It is also profitable to refer and reproduce Section 22 of the Act, 2005, which deals with assessment/reassessment of tax in certain circumstances:- “22. Assessment/reassessment of tax in certain circumstances.-(1)Where an assessment or re- assessment of a dealer has been made under this Act or 7 the Act repealed by this Act and for any reason any sale or purchase of goods liable to tax under this Act or the Act repealed by this Act during any period,- (a)has been under assessed or has escaped assessment; or (b)has been assessed at a lower rate, or (c)any wrong deduction has been made while making the assessment, or (d)a rebate of input tax has incorrectly been allowed while making the assessment, (e)is rendered erroneous and prejudicial to the interest of revenue consequent to or in the light of any judgment or order of any Court or [Tribunal], which has become final, the Commissioner may, at any time within a period of [five calendar years]from the date of order of assessment, [or from the date of judgment or order of any Court or Tribunal], proceed in such manner as may be prescribed, to assess or re-assess, as the case may be, the tax payable by such dealer after making such enquiry as he considers necessary, and assess or re- assess to tax. (2)The Commissioner shall, where the omission leading to assessment or re-assessment made under sub-section (1) is attributable to the dealer, [in addition to interest at the rate specified in sub-clause (iii) of clause (a) of sub-section (4) of Section 19, impose upon him a penalty not exceeding twice the amount of tax so assessed or re-assessed but not less than one and half times of the amount of tax assessed]. (3)The assessment or re-assessment under sub-section (1) shall be made within a period of two calendar years from the date of commencement of the proceedings under the said sub-section.” 9. The provision contained under Section 2(s)(vi) of the Act, 2005 is pari materia to the constitutional provision under Article 366 (29- A)(d) of the Constitution of India. Article 366 (29-A) (d) deals with 8 tax on the sale or purchase of goods which includes 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, which reads thus:- “366. Definitions.- xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx (29A) “tax on the sale or purchase of goods” includes- xxxx xxxx xxxx xxxx xxxx xxxx (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.” 10. The provisions contained under Article 366 (29-A)(d) of the Constitution of India came for consideration before the Constitution Bench of the Supreme Court in the matter of 20th Century Finance Corpn. Ltd (Supra), wherein their Lordships have held in paragraphs 27 & 28 as under:- (27) Article 366 (29A)(d) further shows that levy of tax is not on use of goods but on the transfer of the right to use goods. The right to use goods accrues only on account of the transfer of right. In other words, right to use arises only on the transfer of such a right and unless there is transfer of right, the right to use does not arise. Therefore, it is the transfer which is sine qua non for the right to use any goods. If the goods are available, the transfer of the right to use takes place when the contract in respect thereof is executed. As soon as the contract is executed, the right is vested in the lessee. Thus, the situs of taxable event of such a tax would be the transfer which legally transfers the right to use goods. In other words, if the goods are available 9 irrespective of the fact where the goods are located and a written contract is entered into between the parties, the taxable event on such a deemed sale would be the execution of the contract for the transfer of right to use goods. But in case of an oral or implied transfer of the right to use goods it may be effected by the delivery of the goods. (28) No authority of this Court has been shown on behalf of respondents that there would be no completed transfer of right to use goods unless the goods are delivered. Thus, the delivery of goods cannot constitute a basis for levy of tax on the transfer of right to use any goods. We are, therefore, of the view that where the goods are in existence, the taxable event on the transfer of the right to use goods occurs when a contract is executed between the lessor and the lessee and situs of sale of such a deemed sale would be the place where the contract in respect thereof is executed. Thus, where goods to be transferred are available and a written contract is executed between the parties, it is at that point situs of taxable event on the transfer of right to use goods would occur and situs of sale of such a transaction would be the place where the contract is executed.” 11. Finally, their Lordships concluded in para-35 thus:- (35) As a result of the aforesaid discussion our conclusions are these: xxx xxx xxx (b) The appropriate legislature by creating legal fiction can fix situs of sale. In the absence of any such legal fiction the situs of sale in case of the transaction of transfer of right to use any goods would be the place where the property in goods passes, i.e. where the written agreement transferring the right to use is executed. (c) Where the goods are available for the transfer of right to use the taxable event on the transfer of right to use any goods is on the transfer which results in right to use and the situs of sale would be the place where the contract is executed and not where the goods are located for use. 10 (d) In cases where goods are not in existence or where there is an oral or implied transfer of the right to use goods, such transactions may be effected by the delivery of the goods. In such cases the taxable event would be on the delivery of goods. (e) The transaction of transfer of right to use goods cannot be termed as contract of bailment as it is deemed sale within the meaning of legal fiction engrafted in clause (29A) (d) of Article 366 of the Constitution wherein the location or delivery of goods to put to use is immaterial.” 12. The principle of law laid down in the matter of 20th Century Finance Corpn. Ltd (Supra) has been followed by their Lordships of the Supreme Court in the matter of Great Eastern Shipping Company Limited Vs. State of Karnataka and Others2. In the said matter, their Lordships have considered the transfer of the right to use the goods regardless of when or whether the goods are delivered for use for the purpose of levy of tax under Article 366 (29-A)(d) of the Constitution. It was held that the location of the delivery of goods cannot be made basis for the levy of tax on the sale of goods. Where a party has entered into a formal contract, and the goods are available for delivery irrespective of the place where they are located, the situs of sale where the property or goods passes, would be at the place where the contract has been entered into. 2 (2020) 3 SCC 354 11 13. Furthermore, the said principle of law has been recently followed in the matter of K.P. Mozika Vs. Oil and Natural Gas Corporation Ltd and Others3 wherein relying upon the aforesaid decisions, their Lordships have held that when the goods are in existence, the taxable event for the transfer of the right to use goods occurs when a contract is executed between the lessor and the lessee, and the situs of sale of such a deemed sale would be where the agreement in respect thereof is executed. It would be profitable to reproduce para-29 of the said judgment:- “29. This Court has interpreted sub-clause (d) of Clause (29A) in various decisions. The first important decision on this aspect is a decision of the Constitution Bench in the case of 20th Century Finance Corporation Ltd, (Supra). This was a case where the appellant had entered into a master-lease agreement with the lessee. The lessee was a party that desired to take equipment for use on hire. Under the agreement, the appellant agreed to give diverse machinery/equipment listed in the schedule to the master-lease agreement. The master-lease agreement provided that the appellants would place the orders for individual equipment on the request made by the lessee, and the equipment to be leased would be dispatched by the manufacturer or supplier concerned to the location specified in the lease agreement. At the instance of the lessee, the appellant used to place purchase orders to the suppliers or manufacturers for the supply of individual items or equipment. After the equipment was delivered and put to use, the lessee used to execute supplementary lease schedules acknowledging the receipt of the leased equipment. Such supplementary lease agreements used to form an integral part of the master-lease agreements. The controversy arose because some States started levying tax merely because the goods were found 3 2024 SCC OnLine SC 28 12 to be located in their States at the time of executing the master contract. The States where the goods were delivered started levying taxes on the said goods. In particular, the challenge was to the validity of legislations of various States on the ground that one transaction of transfer of the right to use goods was subjected to tax in different States. In the facts of the case, the issue considered by the Constitution Bench was “Where is the situs of the taxable event on the transfer of right to use goods under Article 366(29A)(d) of the Constitution.” In paragraph 27 of the aforesaid decision, the Constitution Bench held that the levy of tax in accordance with Clause 29A(d) is not on the use of goods but on the transfer of the right to use goods. In other words, it was held that the right to use goods accrues only because of the transfer of the right to use goods. It was held that the transfer is sine qua non for the right to use any goods. It was held that if the goods are available, the transfer of the right to use goods occurs when the contract for the goods is executed. In other words, if the goods are available, irrespective of whether the goods are delivered and the written agreement is entered into between the parties, a taxable event on such a deemed sale would be executing a contract to transfer the right to use goods. However, when there is no written agreement but an oral or implied transfer of the right to use goods, it may be effected by the delivery of goods. Only in such cases the taxable event would be the delivery of goods. In this context, in paragraph 28, the Constitution Bench held that it cannot be said that there would be no complete transfer of the right to use goods unless the goods are delivered. When the goods are in existence, the taxable event for the transfer of the right to use goods occurs when a contract is executed between the lessor and the lessee, and the situs of sale of such a deemed sale would be where the agreement in respect thereof is executed.” 14. Reverting back to the facts of the present case, in the light of principle of law laid down by the Supreme Court in the matter of 20 th Century Finance Corpn. Ltd (Supra), followed in the matter 13 of Great Eastern Shipping Company Limited (Supra) and recently followed in the matter of K.P. Mozika (Supra), it is quite vivid that in the present case, wagons were manufactured by the two companies namely, M/s Texmaco Limited, Kolkata (West Bengal) and M/s CIMMCO Birla Limited, Bharatpur (Rajasthan). On 14.3.1996, an agreement was entered into between the South Eastern Railways and the writ petitioner (company) at Kolkata for payment of lease rent. Therefore, the transfer of right to use the goods i.e. wagons for the purpose of Section 2(s)(vi) read with Section 22 of the Act, 2005 has taken place at Kolkata. Thus, the situs of such sale would be at Kolkata (West Bengal). Merely because in 2003, a new division namely, South Eastern Central Railway has been constituted with its headquarter at Bilaspur, the taxable event could not be at Bilaspur (i.e. the State of Chhattisgarh) as the transfer of right to use the goods did not take place in Chhattisgarh and the agreement has been entered into at Kolkata, in view of principles of law laid down by their Lordships of the Supreme Court in the aforesaid cited judgments (supra). 15. Moreover, Section 38 (1)(i) of the Act, 2005 also mandates that notwithstanding anything contained in the said Act, a tax on the sale or purchase of goods shall not be imposed under this Act where such sale or purchase takes place outside the State of Chhattisgarh. Furthermore, Article 286 deals with restriction as to imposition of 14 tax on the sale or purchase of goods. As per clause (1) (a), no law of a State shall impose, or authorize the imposition of, a tax on the supply of goods or of services or both, where such supply takes place outside the State. 16. In that view of the matter, we are of the opinion that the learned Single Judge is absolutely justified in granting the writ petition. 17. In the result, we do not find any merit in this Appeal, the same deserves to be and is hereby dismissed. Sd/- Sd/- (Sanjay K. Agrawal) Deepak Kumar Tiwari) Judge Judge Barve