C.N. Ramachandran Nair, J.
1. The petitioner-assessee, a company with head office at Chennai, has operations all over India including in the State of Kerala. It is engaged in leasing of equipments on rental basis and it is also selling goods under hire-purchase scheme. The assessing officer, under the Kerala General Sales Tax Act, 1963 hereinafter called the 'the KGST Act', assessed lease rentals and hire charges received by the petitioner in Kerala for sales tax. Even though the petitioner filed successive appeals, assessments were confirmed by the appellate authorities, including the Sales Tax Appellate Tribunal. These tax revision cases are filed in this court against the final orders of the Sales Tax Appellate Tribunal upholding the levy.
2. The assessments involved are for the years 1989-90 to 1991-92 and from 1994-95 to 1997-98. The revisions for the first three years are reaching this court a second round. In the first round of revisions against orders of Tribunal upholding assessments, this court remanded the case back to the Tribunal once again for considering the issues raised after verifying the facts pertaining to delivery of goods and based on later decisions. We have heard counsel appearing for the petitioner, Special Government Pleader appearing for the respondents, and have gone through the impugned orders of the Tribunal and the judgments relied on by both sides, particularly the two direct decisions; one of the Supreme Court in 20th Century Finance Corporation Ltd. v. State of Maharashtra [2000] 119 STC 182 and the other that of the division Bench of this court in Madras Credit & Investments Ltd. v. State of Kerala [2004] 134 STC 264 : [2002] 10 KTR 678.
3. At the outset we are constrained to take note of the finding of the Tribunal that on the same issue the petitioner has taken diametrically opposite position in Tamil Nadu in Writ Petition (Civil) No. 489 of 2001 filed before the Supreme Court and in Kerala before the sales tax authorities, including Appellate Tribunal, and later before us in these tax revision cases. The Tribunal after referring to the case filed by the petitioner before the Supreme Court quoted grounds L and M as follows:
L. That the respondents for the State of Tamil Nadu have no jurisdiction to proceed to assess, demand tax or penalty invoking Section 3-A of the TNGST Act, 1959 in cases where although agreements were entered into in the State of Tamil Nadu, the goods were not in existence on that date and therefore only the State in which the goods were delivered for use by the lessees which could bring to tax such transactions and which States have also done so.
M. That the respondents for the State of Tamil Nadu have no jurisdiction to proceed to assess, demand tax or penalty invoking Section 3-A of the TNGST Act, 1959 in respect of same transactions which have been assessed to tax by various other respondent-States other than the State of Tamil Nadu and in respect of which the petitioners have also paid the appropriate lease taxes.
4. In view of the above grounds admitting liability for sales tax on these transactions in States like Kerala raised by the petitioner before the Supreme Court while challenging assessments made in Tamil Nadu, we feel there is no bona fides in the petitioner's case before the sales tax authorities in Kerala that they are not liable to pay sales tax on lease rentals or hire charges in Kerala. On the other hand, after taking the above stand before the Supreme Court while challenging Tamil Nadu assessments, the case of the petitioner before the sales tax authorities in Kerala including the Tribunal and before us in these tax revision cases is that tax if any payable is in Chennai or outside Kerala where lease/hire-purchase agreements are executed and wherefrom the goods are consigned to lessees or the hirers. The Supreme Court in paragraph 96 of the judgment above referred, while disposing of a batch cases, held that tax evasion should not be equated with tax planning. It is an admitted fact that Sales Tax Acts in all the States including Tamil Nadu and Kerala, are amended in tune with the Constitution (46th Amendment) Act, providing for levy of sales tax among other things on leasing transactions and on hire-purchase transactions treating them as deemed sales for the purpose of levy of sales tax. After the amendments are carried out in these States, assessees, including the petitioner, are bound to pay sales tax on lease rentals and hire charges in appropriate State. However, it is clear that instead of remitting the tax in the appropriate State, petitioner claims in one State that tax is payable in the other State and when tax is demanded in the latter State they take the defence that tax is not payable anywhere. Even though we do not find any bona fides on the part of the petitioner in declining to pay tax on the transactions in any State in India, which is obviously defeating the statutory amendments authorised by Constitutional amendment, we are bound to decide questions of law raised in the tax revision cases. However, since the Supreme Court has comprehensively dealt with the scope of levy of tax on leasing transactions in the decision referred above what remains is only to apply the decision on the factual situation. So far as challenge against levy of tax for hire charges, the issue is covered against the petitioner by the decision of this court referred above, which is stated to be confirmed by the Supreme Court.
5. Before proceeding to consider the issues raised we have to first refer to the nature of transactions carried on by the petitioner. In order to avoid confusion on factual situation, we extract below the nature of transaction admitted by the petitioner in their argument note submitted before the Tribunal which is extracted by them in their order:
1. The appellants are financial lessors who have no expertise in identifying a manufacturer/vendor of an asset. The appellants are not in the business of effecting purchases of assets and then look for prospective lessees.
2. On the contrary, prospective lessees identify a vendor, then approach the appellants, enter into a lease agreement, and require the appellants to place purchase orders on the vendors identified by the lessees. Accordingly, the appellants first of all enter into lease agreements, thereafter place purchase orders on the vendors identified by the lessees, make disbursement of the purchase price and direct the vendors to directly despatch the assets to the lessees in the State of Kerala. In fact the appellants did not have any place of business in the State of Kerala during the years in question and were thus nonresident dealers.
6. From the above factual position admitted by the petitioners, it is clear that lease agreements are first entered into between the petitioner and lessees and after executing such lease agreements only, the petitioner places purchase orders for equipments based on information furnished by the lessees. Even though there is admission of factual situation by the petitioner in the above manner, the Tribunal has gone into terms of a specific case of lease and they have noted that in respect of a lease agreement executed by the petitioner with a hotel company at Ernakulam on September 28, 1993, the purchase order was placed on the supplier of goods only on October 16, 1993 and goods were sold by the suppliers on November 17, 1993. In other words, the purchase of goods outside and delivery to lessees is made in Kerala after two months from the date of execution of lease agreement. The pattern of business is admittedly the same and therefore lease agreements executed by the petitioner were in respect of leasing of equipments which were not in existence at that time, or at least not purchased or possessed by the petitioner, and therefore lease agreements were for leasing of future goods to be acquired by the lessors. Now we refer to the law declared by the Supreme Court in 20th Century Finance Corporation Ltd. v. State of Maharashtra [2000] 119 STC 182 on this factual situation. While concluding the Supreme Court in paragraph 35(d) held as follows:
35(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.
7. From the above it is clear that lease transactions pursuant to lease agreements executed by the petitioner without acquiring the goods to be leased out, operate only on delivery of goods to the lessee. Admittedly much after lease agreements goods are purchased and delivered by the petitioner to the lessees and lease charges except advance are payable only after delivery of goods for use by the lessees. We find from the order of the Tribunal that the Tribunal has exhaustively considered the contentions raised by the petitioner and applied the decision of the Supreme Court on the proved facts of the case. However, the petitioner has relied on the decision of the Andhra Pradesh High Court in I.T.C. Classic Finance and Services v. Commissioner of Commercial Taxes [1995] 97 STC 330 and that of the Supreme Court in State of A.P. v. National Thermal Power Corporation Ltd. [2002] 127 STC 280 and the decision reported in Bayyana Bhimayya & Sukhdevi Rathi v. Government of Andhra Pradesh : [1961]3SCR267 and contended that the lease and hire-purchase transactions are inter-State in nature because in terms of the request by the petitioner suppliers have delivered the goods to public carriers for ultimate delivery to lessees or hirers. We are unable to uphold this contention of the petitioner, because petitioner itself has no case that public carriers are arranged by lessees or hirers to take delivery of the goods from manufacturers/suppliers arranged by the petitioner. In fact after entering into lease agreements, the petitioner has admittedly undertaken the responsibility to purchase and deliver the goods to the lessees or hirers even though the goods so manufactured are identified by the lessees or hirers. As held by this court in the decision in Madras Credit & Investments Ltd.'s case [2004] 134 STC 264 : [2002] 10 KTR 678, there are two transactions in the deal, one is the agreement between the petitioner and the customer for lease or hire and the other is purchase and delivery of goods by the petitioner to the customer. The so-called inter-State movement of goods after purchase of goods by the petitioner makes the sale between the manufacturer/supplier to the petitioner as an inter-State sale. However, those inter-State movements have no connection with the separate lease transactions between the petitioner and the customer which according to the decision of the Supreme Court takes place only on delivery. It is clear from the Tribunal's order and that of all the lower authorities that whenever the petitioner purchased goods within Kerala and leased out or hired to customers under lease agreement or hire-purchase agreement, the petitioner's transactions have been granted exemption because such deemed sales in the course of lease or hire-purchase was accepted as second sales. The position is the same so far as inter-State purchase of goods by the petitioner for lease or for delivery under hire-purchase scheme. The fact that such purchases by the petitioner are inter-State sales at the hands of the manufacturer/seller of goods does not mean that transaction between the petitioner and the customer is anything different from the lease or hire-purchase. It is admitted that in all cases for lease or hire-purchase, lease or hire-purchase agreements are first entered into by the petitioner with the customers and thereafter only goods are purchased and delivered to the customers for use by them under lease agreement or hire-purchase agreements, as the case may be. Since we have already found that there are two transactions in the deal, namely, execution of lease or hire-purchase agreements, and the subsequent purchases and delivery, we do not think the nature of transaction, that is lease or hire-purchase is affected, when goods are sourced from a State other than in the State in which it is given for lease or hire. In the circumstances, we are unable to uphold the contention of the petitioner that transactions are inter-State lease or inter-State hire-purchase and hence not liable to pay tax.
8. We therefore uphold the orders of the Tribunal and dismiss the tax revision cases.