In the High Court of Judicature at Madras Dated : 29.04.2009 Coram :- The Honourable Mr.Justice K.RAVIRAJA PANDIAN and The Honourable Mr.Justice M.M.SUNDRESH Tax Case (Revision) Nos.432, 433, 435, 436, 464, 519, 530, 537 and 587 of 2006 M/s.Asiatic Oxygen Limited, Padi, Chennai – 600 050. ... Petitioner in all Revisions Vs. The State of Tamil Nadu represented by the Commercial Tax Officer Ambattur Assessment Circle Chennai. .. Respondent in all Revisions TAX CASE (Revisions) in T.C.(R) Nos.432, 433, 435, 436, 464, 519, 530, 537 and 587 of 2006 are filed under Section 38 of the Tamil Nadu General Sales Tax Act against the order of the Sales Tax Appellate Tribunal (Main Bench), Chennai dated 29.8.2002 made in S.T.A.Nos.759 of 2000, 534 of 2000, 1027 of 1999, 1011 of 1999, 757 of 2000, 1010 of 1999, 1243 of 1999, 1012 of 1999 and 1083 of 2000 relating to the assessment years 1993-94, 1994-95, 1991-92, 1989-90, 1995-96, 1988-89, 1996-97, 1990-91 and 1996-97 respectively against Appeal Nos.199/98 dated 5.5.2009, 431/97 dated 5.5.2009; 796/96 dated 7.4.98; 794 of 1996 dated 7.4.98; 191/98 dated 5.5.2009; 793/96 dated 7.4.98; 376/98 dated 27.7.99; 795/96 dated 7.4.98 and 376/98 dated 27.7.99 respectively on the file of the Appellate Assistant Commissioner(CT) I,V,VI, and VII, VI Floor, Kuralgam Annexe, Chennai-108 against TNGST/142008/93-94; 94-95,91- 92,89-90,95-96,88-89,TNGST/1320002/96-97, TNGST/142008/90-91 and TNGST/1320002/96-97 respectively dated 12.3.97, 19.3.97, 31.12.93,31.12.93,24.4.98, 31.12.93, 31.7.98,31.12.93 and 31.7.98 respectively on the file of the Commercial Tax Officer,(DG) Ambattur Assessment Circle, 5, High Court Colony, Villivakkam-49. For Petitioner : Mr.V.Ramachandran Senior Counsel for M/s.Anita Sumanth For Respondent : Mr.Haja Naziruddin, Spl.G.P.(Taxes) https://hcservices.ecourts.gov.in/hcservices/ COMMON ORDER (Order of the Court was delivered by K.RAVIRAJA PANDIAN,J.) Not satisfied with the common order of the Sales Tax Appellate Tribunal (Main Bench), Chennai dated 29.8.2002 made in S.T.A.Nos.759 of 2000, 534 of 2000, 1027 of 1999, 1011 of 1999, 757 of 2000, 1010 of 1999, 1243 of 1999, 1012 of 1999 and 1083 of 2000 relating to the assessment years 1993-94, 1994-95, 1991-92, 1989- 90, 1995-96, 1988-89, 1996-97, 1990-91 and 1996-97 respectively bringing the so called demurrage charges or cylinder holding charges for taxation under Section 3-A of the Tamil Nadu General Sales Tax Act (hereinafter referred to as "TNGST Act"), the present revisions in T.C.Nos.432, 433, 435, 436, 464, 519, 530, 537 and 587 of 2006 have been filed under Section 38 of the TNGST Act. 2. The only question for consideration before us in these cases is, "Whether the amount received by the assessee, which is termed as "demurrage or cylinder holding charges" is exigible to tax under Section 3-A of the TNGST Act?" 3. As the point to be resolved in these cases is one and the same and the argument advanced is common by the parties, for the purpose of narration of facts, T.C.No.519 of 2006 is taken up as a typical case. The assessees are manufacturers and dealers of industrial gas and medical oxygen by filling in cylinders. After use of the gas, the empty cylinders were to be returned to the assessee. A period is specified for return of the empty cylinder. If the cylinder were not returned within the specified period, for the extra period of retention of the cylinders, additional charges were levied, which were termed as "cylinder holding charges or demurrage charges" by the assessee. The assessing officer has taken the view that the container i.e., cylinder is part of the sale of gas and the extra amount paid by the purchaser of gas for retention of the cylinder beyond the specified period has to be regarded as the price paid for the gas purchased. Thus the extra amount charged was taken as increase in the sale price of gas by the assessing officer and the turnover of demurrage charges was brought to tax. On appeal, the first appellate authority modified the turnover relating to demurrage charges among other turnovers. The assessee carried the matter on further appeal to the Sales Tax Appellate Tribunal and contended that the Orissa High Court in its sister concern's case i.e., Asiatic Gases Limited Vs. State of Orissa and another reported in 121 STC 405 considered an identical issue with reference to the identical terms of the agreement and held that "possession and custody of the cylinders by the customers for 14 days was permissible but beyond 14 days was without authority for which the assessee was charging certain amount. In https://hcservices.ecourts.gov.in/hcservices/ other words, after 14 days, there was no permission for keeping in possession and custody of the cylinder. Therefore, the consideration received was by way of penalty. The term "transfer of the right to use" denotes an agreement between two parties. Here, there was an agreement of transfer of right to use the cylinders for the first 14 days only. Beyond 14 days, the detention was without authority or in total disregard of the terms of the contract and inasmuch as there was no transfer of right to use the cylinders beyond the free loan period of 14 days. The amount received by the assessee on account of the delay in return of cylinders by the purchaser could not be held to be taxable." However, the Tribunal found that the cylinder holding charges collected by the assessee was nothing but hire charges and the hire charges are liable to tax under Section 3-A of the TNGST Act and held the issue against the assessee. Hence, the revision is filed by the assessee. 4. Mr.V.Ramachandran, learned Senior Counsel appearing for the assessee reiterates the argument, which was focussed before the Tribunal. 5. On the other hand, the learned Government Pleader argued to sustain the order passed by the Tribunal. 6. Of course, it is true that the Orissa High Court in respect of the assessee's sister concern i.e., Asiatic Gases Limited Vs. State of Orissa (2001) 121 STC 405, referred to above, by giving reasons, which are extracted in the previous paragraphs has held that the demurrage charges or cylinder holding charges received by the assessee can partake the character of the penalty levied for illegal retention beyond the agreed period. Such amount could not be held to be taxable. But the subsequent development is that the said decision in 121STC 405 was carried on appeal to the Apex Court by the State of Orissa in the case of STATE OF ORISSA AND ANOTHER VS. ASIATIC GASES LTD., (2007) 7 VST 531, wherein the Apex Court had upset the decision of the High Court by holding that "the medical-oxygen/industrial gases could not be sold without the containers. The property in goods (oxygen/gas) could not be passed to the customers without such containers. Therefore, containers constituted an integral part of the medial oxygen and industrial gases. Section 2(g)(iv) of the Orissa Sales Tax Act provided that the sale shall mean any transfer of property in goods for cash or defer payment or for any other valuable consideration and that it shall include transfer of the right to use such goods for any purpose, whether or not for specified period for cash, deferred payment or any other valuable consideration. Hence the amount collected by the assessee would come within the purview of sale price, in particular, towards transfer of right to use the goods, which is the second limb of Section 2(g)(iv), as such taxable. 7. The facts of the present case are identical as that of the assessee's sister concern case considered by the Supreme Court https://hcservices.ecourts.gov.in/hcservices/ in the above judgment. The only variance is that in regard to the Orissa Sales Tax Act, the definition of sale in Section 2g)(iv) included in itself the transfer of right to use the goods. However, in Tamil Nadu Sales Tax Act, a separate provision Section 3-A of the TNGST Act has been incorporated pursuant to the 46th amendment to the Constitution of India whereby Article 366(29A) has been amended and deemed sale concept has been introduced and one of the deemed sales is transfer of right to use the goods. The cylinder is a goods. The amount received by the assessee as cylinder holding charges or demurrage charges towards user of the cylinders is nothing but the amount collected for transfer of right to use. It is useful to refer the last few sentences of the Supreme Court in (2007) 7 VST 531 thus: "In the present case as stated above the cylinders filled with medical oxygen/industrial gas were loaned to the customers. The loan was free from payment of charges for 14 days. The over- retention charges were levied after 14 days. In the circumstances the levy was on the transfer of the right to use the goods for consideration." 8. For the foregoing reasons and in the light of the law enunciated by the Supreme Court in the above said judgment, which has also taken into consideration the other judgment of the Supreme Court in the case of AGGARWAL BROTHERS VS. STATE OF HARYANA (1999) 113 STC 317, the issue has to be decided that the so called cylinder holding charges collected by the assessee are exigible to tax under Section 3-A of the TNGST Act, which is a charging provision for levy of tax for the transfer of right to use the goods for consideration. Therefore, the revisions are dismissed. Sd/- Asst. Registrar /True Copy/ Sub Asst.Registrar To 1.The Secretary, Sales Tax Appellate Tribunal, (Main Bench) Chennai 2.The Appellate Assistant Commissioner, (CT) V, VI Floor, Kuralagam Annexe, Chennai-108. 3.The Appellate Asst.Commissioner(CT) I, VI Floor, Kuralagam Annexe, Chennai-108 https://hcservices.ecourts.gov.in/hcservices/ 4.The Appellate Assistant Commissioner(CT) VI, VI Floor, Kuralagam Annexe, Chennai-108 5.The Appellate Assistant Commissioner (CT) VII, VI Floor,Kuralagam Annexe, Chennai-108. 6.The Commercial Tax Officer(DG) Ambattur Assessment Circle, 5, High Court Colony, Villivakkam-49 + 9 ccs to Mrs.Dr.Anitha Sumanth, Advocate, SR.Nos 18975 to 18983 + 1 Ccs to the Special Government Pleader, SR.No.19086 to 19090 T.C.(R).No.432 of 2006 bk(co) pmk.9.6.2009. https://hcservices.ecourts.gov.in/hcservices/